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5 Dividend ETFs for Safety and Higher Yields

Sweta Killa

After reaching the peak in early May, the Wall Street retreated to escalation in trade tensions. The S&P 500 registered the third consecutive weekly losses, marking its longest losing streak since last December while the Dow Jones fell for a fifth straight week — representing the longest losing streak since June 2011. This steep decline was induced by the technology sector, which is heavily exposed to China for revenues.

Additionally, the seasonal phenomenon also resulted in this downside. Per the old adage “Sell in May and Go Away”, seasonality plays a huge role in pushing stocks down during the summer months (May to October). According to this investment saying, the stock market has a long history of weak performance during this time-period (read: Inverse ETFs to Bet on as Trade War Fears Grip Markets).

The return of volatility to the stock market has rekindled investors’ love for products that provide stability and safety in a rocky market. Nothing seems a better strategy than picking the dividend-focused products in such rough environment.

Dividend-focused products offer safety in the form of payouts while at the same time, providing stability as mature companies are less volatile to the large swings in stock prices. Dividend paying securities are the major source of consistent income for investors to create wealth when returns from the equity market are at risk. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide a downside protection by offering outsized payouts or sizable yields on a regular basis

That being said, we highlight five dividend ETFs for investors seeking yields and returns in an unsteady market. These funds yield higher than the S&P 500, making them excellent choices in the current market turmoil.

Global X SuperDividend U.S. ETF DIV

This fund provides exposure to 50 of the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index. It is widely diversified across each component as none of these hold more than 2.5% of the assets. Real estate accounts for one-fourth of the portfolio, closely followed by energy (15%), consumer staples (15%), communications (12%) and real estate (11%). The product has amassed $447.8million in its asset base while trading in moderate volume of about 108,000 shares. It charges 45 bps in fees per year from investors and has a solid dividend yield of 7.30%. The product has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Trade Deal Hit or Miss: Dividend ETFs Are Investor-Friendly).

FlexShares Quality Dividend Defensive Index Fund QDEF

This product fund follows the Northern Trust Quality Dividend Defensive Index, which offers exposure to a high-quality income-oriented portfolio of U.S. stocks with an emphasis on long-term capital growth and a beta higher than the Northern Trust 1250 Index. In total, the fund holds 158 stocks in its basket that are well spread out across securities with each accounting for less than 3.9% of the assets. In terms of sector holdings, information technology, financials, health care, consumer staples and consumer discretionary are the top five sectors. QDEF has $379 million and trades in a paltry volume of about 126,000 shares. It charges 37 bps in expense ratio and has a dividend yield of 2.70% per annum.

WBI Power Factor High Dividend ETF WBIY

This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket with none making up for more than 5.3% share. Consumer discretionary is the top sector with one-fourth of the portfolio while financials, consumer staples and technology round off the next three spots. The product has accumulated $114.4 million in its asset base and has an annual yield of 4.33%. It charges 70 bps in annual fees and trades in a lower volume of 42,000 shares a day on average.

SPDR Portfolio S&P 500 High Dividend ETF SPYD

This fund provides exposure to stocks with a high level of dividend income and the opportunity for capital appreciation by tracking the S&P 500 High Dividend Index. Holding 80 stocks in its basket, the fund is well-diversified across securities with each making up for less than 2.3% of assets. It is slightly skewed toward the real estate at 21.9%, closely followed by consumer discretionary (13.9%) and utilities (13%). The fund has AUM of $1.6 billion and trades in volume of about 611,000 shares. It charges 7 bps in annual fees and has a good dividend yield of 4.33%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Buyback or Dividend: Which ETF Wins YTD & What Lies Ahead?).   

Fidelity High Dividend ETF FDVV

This ETF offers exposure to large and mid-cap high-dividend-paying companies that are expected to continue paying and growing their dividends. This is easily done by Fidelity High Dividend Index. The fund holds 121 stocks in its basket with each making up for not more than 3.14% of assets. Sector-wise, financials take the largest share at 20.6% while information technology, consumer staples, energy, utilities and real estate also receive double-digit exposure each. FDVV has gathered $330.4 million in its asset base while it trades in average daily volume of 108,000 shares. It charges 29 bps in annual fees and has an annual dividend yield of 4.15%.

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