A Guide To High Dividend Paying ETFs

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The hunt for high dividends in the equity market is always on, irrespective of how the market behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty, global growth worries, and a geopolitical crisis, the allure of dividend investing will only increase.

Investors should note that not all dividend stocks serve the same purpose, however. While the high-yield ones are known for offering hefty incomes, stocks with dividend growth often point to quality investing — a prerequisite to making money in this volatile environment. Notably, the last few years were a bit difficult for dividend investing due to the corporate cash crunch and announcements of dividend cuts.

But things have been changing. S&P Dow Jones Indices announced in early January that indicated dividend gain in 2021 was $69.8 billion compared to 2020's decline of $40.8 billion. U.S. common dividend increases were $78.6 billion in 2021, up 89.7% year-over-year, as decreases in dividends fell 89.3% to $8.8 billion in 2021 from the massive $82.2 billion in 2020.

Meanwhile, the rise in interest rates is now common across the globe. Vaccine rollouts and higher inflationary expectations led to the rise in rates. A hawkish Fed in 2022 is also responsible for the rise, which has cast a pall on Wall Street.

U.S. Treasury yields soared to this year’s high of 2.05% on Feb. 15. Inflation in the Eurozone is no different, having hit a new record high. It is no wonder that central banks in developed economies have been tightening policies.

Why to Pick High-Dividend Securities

As economies are likely to rebound this year on widespread vaccination and inflation rates are likely to pace up, bond yields should soar further. In such a scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.

Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all. Therefore, we have zeroed in on some high-dividend ETFs to look at.

Global X SuperDividend ETF (SDIV - Free Report)

The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world.

The index provider applies certain dividend stability filters. Financials (29%) and Real Estate (26.3%) are the top two sectors of the fund. The 101-stock ETF charges 59 bps in fees and yields 9.12% annually.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report)

The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield.

Financials (17.83%), Utilities (16.99%), Real Estate (13.38%), and Energy (13.05%) have a double-digit weight in the fund. The fund yields 7 bps in fees and yields 3.62% annually.

Vanguard High Dividend Yield ETF (VYM - Free Report)

The underlying FTSE High Dividend Yield Index consists of common stocks of companies that generally pay higher-than-average dividends. The fund charges 6 bps in fees and yields 2.81% annually.

Johnson & Johnson (JNJ) (3.23%), JPMorgan Chase & Co. (JPM) (3.11%), and Home Depot (HD) (2.78%) are the top three stocks of the fund.

Global X SuperDividend U.S. ETF (DIV - Free Report)  

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 yields 5.32% annually and charges 45 bps in fees. Bp Midstream Partners (BPMP) (2.77%), SpartanNash (SPTN) (2.70%), and Public Storage (PSA) (2.67%) hold top three positions in the fund DIV.

iShares Core High Dividend ETF (HDV - Free Report)

The underlying Morningstar Dividend Yield Focus Index offers exposure to high-quality U.S. domiciled companies that have had strong financial health and the ability to sustain above-average dividend payouts.

The fund is heavy on the healthcare sector (24.07%), followed by energy (19.53%), and consumer staples (18.75%). The fund HDV charges 8 bps in fees and yields 3.42% annually.

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

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