The third quarter was another treat for investors, with the S&P 500 adding about 5% in the time frame. This continues the solid run for the market so far in 2013, as the broad benchmark has now cleared the 20% gain hurdle YTD.
However, with Halloween upon us, some investors might be afraid of how to allocate their portfolios in the tail end of the year. After all, last year’s Q4 was pretty rocky, and though markets finished in the green for the three month period, investors definitely saw heavy levels of volatility (see 3 Top Ranked ETFs from Red Hot Sectors).
While the same situation doesn’t look to happen this year—since fiscal cliff issues and debt ceiling problems shouldn’t be an issue this holiday season—there is still reason for concern. The Fed’s plans remain an area to focus on, while sluggish data in some key corners of the market is also troubling.
Thanks to this, a look to dividend ETFs might be a way to take some fear out of portfolios, but still remain invested in the markets. Below, we highlight four ETFs with scary-good yields that could help investors accomplish this task for the final quarter of the year:
Quality Dividend Defensive Index Fund (QDEF) - 3% 30 Day SEC Yield
For a low risk play, investors may want to consider QDEF in the dividend ETF space. The product tracks the Northern Trust Quality Dividend Defensive Index, holding roughly 190 companies in its basket, with a focus on lower beta names.
Financials take the top spot in the fund at 17.7%, followed by technology (14.7%), and staples (12.2%). Top individual holdings include XOM, PFE, and JPM, though the three combine to take up less than 12% of the total assets.
The product could be an interesting choice for those seeking a moderate dividend play with a focus on the American market. However, growth will be hard to come by in this fund, while volatility levels are likely to be low (read FlexShares Debuts 3 Dividend ETFs).
SuperDividend US ETF (DIV) - 6.7% 30 Day SEC Yield
For investors who are looking for more income in their dividend ETFs, consider this Global X product. The fund follows the SuperDividend US Low Volatility Index, holding 50 companies that have among the highest yields in the U.S.
The ETF utilizes an equal weight approach so that no single company dominates the portfolio, while a sector cap of 25% is used to prevent a heavy concentration from that front. Top sectors include utilities (24%), energy (18%), and real estate (14%).
The product looks to be a bit more volatile than QDEF, though the yield is obviously higher. Meanwhile, there is a concern about REITs and utilities here, as these two sectors have been troublesome lately, though the robust yield is likely to soothe many fears in this corner of the market.
iShares Emerging Markets Dividend ETF (DVYE) - 4.9% 30 Day SEC Yield
For investors interested in high growth emerging markets with a dividend focus, DVYE is an intriguing option. The product targets the Dow Jones Emerging Markets Select Dividend Index, holding roughly 100 stocks in its basket (see the Guide to Emerging Market Dividend ETFs).
The ETF has a heavy holding in Taiwan companies (27.6%), while Brazil (15.5%), and South Africa (8.1%) round out the top three. Top sectors include financials (17.5%), materials (17.2%), and utilities (14.7%).
Given that many emerging markets are now back on track, this ETF could be a solid way to tap into the bullish trend, with a lower level of risk. Plus, the fund offers great exposure to many companies—and countries—that most investors have little in allocations to, so it could be a great choice from a diversification perspective.
WisdomTree International SmallCap Dividend ETF (DLS) - 2.9% 30 Day SEC Yield
Although the yield is a little light here, DLS could arguably offer up the best growth prospects of all the funds on the list. The product tracks the WisdomTree International SmallCap Dividend Index, giving investors exposure to over 750 small cap companies that pay dividends from around the developed world.
The ETF uses a dividend weighted approach too, so the firms that pay out the most in dividends take up the biggest weights. Still, no single company accounts for more than 1% of assets, so concentration risks aren’t much of an issue in this fund. From a sector look, industrials (25%), consumer discretionary (20%), and financials (11%), take the top three spots (see all the broad Developed World ETFs).
Small caps around the globe have been pretty strong performers this year, as investors have piled into growth names. And with international markets picking up, this could be a great pick for investors even if it doesn’t pay the highest yield.
There is no need for investors to be afraid this Halloween, so long as they take a closer look at some of the aforementioned ETFs. These dividend funds look to provide some stability to portfolios, while also giving off high rates of income as well.
While any wrinkles from the Fed could definitely hurt some of these ETFs, with the sluggish data as of late, this shouldn’t be too much of a concern for investors. So feel free to capture the high yields from these ETFs and hopefully ride the market to another profitable final quarter of the year.
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