5 High-Dividend ETFs That Beat S&P 500 Past Month

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While the stock market has recorded an incredible rally in 2023, exceeding all expectations, there are valid reasons to approach the current situation with caution. The excitement for AI, the concentration of stocks in a few firms and still-present inflationary pressure indicate potential bubbles.

There are growing concerns among analysts that this bullish run might be at risk as the market approaches new highs. JPMorgan's top quant strategist, Marko Kolanovic, has raised concerns about the hype surrounding artificial intelligence which is likely to take longer time to get materialized, per various sources. Investors should be cautious about the risks posed by an AI-fueled bubble, as it could be vulnerable to headwinds.

Moreover, although inflation has cooled from its highs last year, there is still a significant risk that it could rebound due to lingering economic pressures, such as rising oil prices on geopolitical concerns and still-strong labor market. If inflation rises again and interest rates increase, the sectors that have been driving the current stock market rally might experience pullbacks.

If this was not enough, Moody's recent credit rating downgrade of some smaller U.S. banks has sent ripples through the broader market. The downgrade comes as these financial institutions grapple with a complex mix of challenges, from interest rate volatility to asset-liability management risks. In any case, failure of three regional banks in early 2023 has brought the crisis forward this year.


Why High-Dividend ETFs Are Good Bets

High dividend ETFs can be a good investment during times of economic uncertainty, as they provide a steady source of income regardless of market conditions. These types of stocks and ETFs typically pay out a higher percentage of their profits as dividends than other stocks, which means that they can make up for the capital losses, if there is any.


ETFs in Focus

Against this backdrop, below we highlight a few high-dividend ETFs that yields higher than the benchmark U.S. treasury yield (4.16%) as of Aug 11, 2023. These funds outperformed the S&P 500 index (down 0.9%).


Invesco High Yield Equity Dividend Achievers ETF (PEY) – Yield 4.22%; One Month Gain: Up 7.00%

The underlying NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 52 bps in fees.


Invesco KBW High Dividend Yield Financial ETF (KBWD) – Yield 11.11%; One Month Gain: Up 3.0%

The underlying KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. The expense ratio of the fund is 3.84%.


Global X SuperDividend U.S. ETF (DIV) – Yield 7.30%; One Month Gain: Up 2.2%

The underlying INDXX SuperDividend U.S. Low Volatility Index tracks the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend yielding equity securities in the United States. The fund charges 45 bps in fees.


First Trust Morningstar Dividend Leaders ETF (FDL) – Yield 4.45%; One Month Gain: Up 2.6%

The underlying Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability. The fund charges 45 bps in fees.


Invesco BulletShares 2024 High Yield Corporate Bond ETF (BSJO) – Yield 5.84%; One Month Gain: Up 0.8%

The underlying Nasdaq Bulletshares USD High Yield Corporate Bond 2024 Index represents the performance of a held-to-maturity portfolio of US dollar-denominated, high yield corporate bonds with effective maturities in 2024. The fund charges 42 bps in fees.

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