Sun Shines on Dividend ETFs Again

ETF Trends

On Thursday, 51 U.S.-listed exchange traded products hit new all-time highs. Highlighting investors’ thirst for income, preparation efforts for a possible case of the summer doldrums or both, nearly a quarter of the ETFs making new highs yesterday were dividend ETFs.

And that does not include the multitude of MLP and utilities funds that also hit new highs. Investors have also been putting new cash to work with dividend ETFs after pulling money from some payout funds in the first quarter.

Three of the four largest U.S. dividend ETFs suffered outflows in the first quarter with only the Vanguard High Dividend Yield ETF (VYM) seeing inflows. The $256.4 million investors sent into VYM was not enough to stem the tide of the more than $820 lost by the three largest U.S. dividend ETFs. [Some Dividend ETFs Lose Cash]

That despite the fact that almost 1,100 dividend increases were reported during the quarter, displacing the prior first quarter record of 1,069 set in 1979. Q1 2014 is 14.2% higher than the 944 increases in Q1 2013, according to S&P Dow Jones Indices.

The ALPS Sector Dividend Dogs ETF (SDOG) made a new high Thursday and since the start of April, the fund has pulled in over $56 million in new assets. Year-to-date, SDOG is up almost 6%. SDOG surged 34.2% last year.

The ETF applies the “Dogs of the Dow” theory to S&P sectors, buying five highest-yielding stocks in each of the S&P 500 index’s 10 sectors. SDOG caps sector weights at 10% and individual holdings weights at 2%. A 10% weight to utilities is more than triple the weight the sector commands in the S&P 500 and that has been a boon for SDOG in a year when utilities have shined. The ETF has a 30-day SEC yield of 3.56%. [Other ETFs Getting Lifts From Utilities Sector]

Small-caps may be wilting, but the same cannot be said of dividend-paying mid-caps. The WisdomTree MidCap Dividend Fund (DON) , a recent entrant to the $1 billion in assets club, hit a new all-time high Thursday and gained $46.2 million in new assets since the start of April. [WisdomTree Mid-Cap ETF Tops $1B in AUM]

DON tracks the WisdomTree MidCap Dividend Index, which “is dividend weighted annually to reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share,” according to WisdomTree.

The index has a dividend yield of almost 3.1% with a price-to-book ratio of 2.4, according to issuer data. Nearly half of the almost 400 stocks held by DON have dividend yields in excess of the 10-year Treasury yield, currently 2.62%. [Dividends Gain an Advantage]

Some of the more venerable names among U.S.-focused dividend ETFs also made new highs Thursday, including the Vanguard Dividend Appreciation ETF (VIG) and the SPDR S&P Dividend ETF (SDY) , two of the largest dividend ETFs by assets. The Schwab US Dividend Equity ETF (SCHD) also hit an all-time high.

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