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5 Dividend ETFs to Tap if the Initial Trade Deal Fails

Sanghamitra Saha

Global growth slowdown fears, thanks to U.S.-China trade tensions and Fed’s rate hike, shattered Wall Street in 2018 with the SPDR S&P 500 ETF SPY losing 9%, SPDR Dow Jones Industrial Average ETF DIA shedding 8.9% and Invesco QQQ Trust QQQ retreating about 8.8%. The market saw the most awful December since the Great Depression.

The story this year is no different despite the ongoing holiday season buying. Wall Street saw a dull start to December as President Trump’s comment “that he could wait until after the 2020 election for a trade deal with China” sent a shockwave through the markets. Though the latest developments on the trade front charged up the broader market, tensions persist.

The key OPEC meeting seems to be in dismay even before it started this week. However, analysts are still betting big on a further output cut. Saudi Arabia reportedly has been in favor of cuts, but it was reportedly also warning to raise outputs if other OPEC members don’t come into unison.

Added to this, the ISM manufacturing and U.S. construction spending data was worse than expected. Consumer confidence data was also subdued. Investors’ focus is now on Dec 15 — the date for the imposition of another round of tariffs on Chinese goods.

Bet on Dividend ETFs

Against this backdrop, investors might consider the below-mentioned dividend ETFs. Dividend aristocrats have a history of raising dividend payouts each year. These high-quality companies provide hedge against economic uncertainty. The S&P 500 Dividend Aristocrat Index has historically outperformed the S&P 500 Index, with lower volatility over a longer period of time. Meanwhile, investors should note that the high-dividend yield can save investors even if there is any capital loss.

FlexShares Quality Dividend Defensive Index Fund QDEF — Yield 2.45%

The underlying Northern Trust Quality Dividend Defensive Index is designed to provide exposure to a high-quality, income-oriented portfolio of long-only U.S. equity securities. The index emphasizes long-term capital growth and a targeted overall beta that is generally between 0.5 to 1.0 times that of the Northern Trust 1250 Index. The securities are selected on expected dividend payment and fundamental factors (read: 5 Dividend ETFs for Safety and Higher Yields).

WBI Power Factor High Dividend ETF WBIY — Yield 4.78%

The underlying Solactive Power Factor High Dividend Index tracks the performance of 50 U.S.-listed stocks among large, mid and small-caps, which exhibit high dividend yield and strong fundamentals. The fund charges 70 bps in fees.

Schwab US Dividend Equity ETF SCHD – Yield 2.96%

The underlying Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend-yielding stocks issued by U.S. companies that have a record of consistently paying out dividends, selected for fundamental strength relative to their peers, based on financial ratios. The fund charges 6 bps in fees.

Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF KNG – Yield 4.17%

The underlying Cboe S&P 500 Dividend Aristocrat Target Income Index Monthly Series is designed to track the performance of a hypothetical buy-write strategy on optionable constituents of the S&P 500 Dividend Aristocrat Index. It charges 75 bps in fees. Dividend Indicated Gross Yield of the fund is 4.17%, per Bloomberg, as of Dec 4, 2019.

Legg Mason Low Volatility High Dividend ETF LVHD – Yield 3.61%

The underlying QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility. The fund charges 27 bps in fees.

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SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
Legg Mason Low Volatility High Dividend ETF (LVHD): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
FlexShares Quality Dividend Defensive Index Fund (QDEF): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
CBOE Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG): ETF Research Reports
WBI Power Factor High Dividend ETF (WBIY): ETF Research Reports
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