Top-Ranked Dividend ETFs Crushing The Market

Dividend investing is in vogue once again given rounds of weak data across the globe that have renewed global growth concerns. Additionally, a warning from the top American trade negotiator that tariffs on Chinese goods may not be rolled back will weigh on the stock market. Against such a backdrop, investors are becoming defensive and shifting their focus to products that provide stability and safety in a rocky market.

Meanwhile, bond yields have declined sharply boosting demand for dividend-paying stocks. This is because the Fed is not in a hurry to raise interest rates for this year.

Why Dividend Investing?

Even though dividend stocks don’t offer much price appreciation in a rising stock market, they offer a steady stream of income along with the potential of capital gains. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices.

Dividend-paying securities are the major sources of consistent income for investors to create wealth when returns from the equity market are at risk. The companies that pay out dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.

Further, research shows that dividend stocks often outperform their non-dividend paying counterparts over longer periods. According to Chicago-based Greenrock Research, a portfolio with the top 20% of the S&P 500 companies ranked by dividend yield and weighted by market capitalization, outperformed the overall S&P 500 by 2.13 percentage points annually from 1995 to 2018.

How to Play?

While there are several ETFs available in the space, we have highlighted five that are clearly outpacing the broad market indices by wide margins and have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting further outperformance in the months ahead. These have potentially superior weighting methodologies that could allow these to lead the dividend space in the months ahead. Additionally, these funds are popular and liquid enough, making compelling choices for investors seeking a nice momentum play with lower risk.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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