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6 Dividend ETFs That Beat S&P 500 in the 10-Year Bull Run

Sanghamitra Saha
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The hunt for dividend in the equity market is always steady irrespective of how the market is behaving. After all, who doesn’t like a steady stream of current income along with capital gains?

The lure for income stayed strong even in the 10-year old bull market, which was the longest-running in U.S. history. Investors should note that on Mar 6, 2009, the S&P 500 touched a bear market nadir of 666.79, only to stage an astral rally next decade. During this 10-year period, the S&P 500 index has quadrupled, rallying more than 300% (read: 10 Top-Ranked ETFs Leading the 10-Year Bull Run).

Inside Dividend’s Outperformance

Research shows that dividend stocks often beat 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.

And the past decade was especially favorable for dividend ETFs as central banks including the Fed has been ultra-dovish. The Fed’s quantitative easing and rock-bottom interest rate policy actually kept rates lower for a longer period of time. As a result, investors rushed toward higher yielding securities in quest of solid and steady current income.

Plus, stocks with dividend growth point to quality investing – a pre-requisite to making money in a volatile environment. The past decade has seen many ups and downs. The Euro zone debt crisis, Abenomics in Japan, the Taper Tantrum in the United States, China’s soft-landing issues, oil price massacre, initiation of QE by ECB, Brexit and U.S.-China trade tensions are to name a few.

So, while growth stocks have skyrocketed with cheap money in the past decade, dividend stocks and ETFs did not sit on the sidelines. They participated equally in the market rally and some even beat the S&P 500 handily. Against this backdrop, below we highlight a few dividend ETFs that beat the S&P 500 in the 10-year old bull market.

Invesco High Yield Equity Dividend Achievers ETF (PEY) – Up 474.5%

The underlying NASDAQ US Dividend Achievers 50 Index comprises 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 54 bps in fees and yields 3.93% annually. The yield comes against 1.86% offered by SPDR S&P 500 ETF SPY (read: 7 Promising ETFs Under $20).

First Trust Morningstar Dividend Leaders Index Fund FDL – Up 404.5%

The underlying Morningstar Dividend Leaders Index consists of stocks listed on one of the three major exchanges, NYSE, NYSE Amex or Nasdaq, that have shown dividend consistency and dividend sustainability. The fund charges 45 bps in fees and yields 3.68% annually (as of Mar 11, 2019).

SPDR S&P Dividend ETF SDY – Up 401.4%

The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. It yields 2.51% annually and charges 35 bps in fees.

WisdomTree U.S. SmallCap Dividend Fund (DES– Up 451.9%

The underlying WisdomTree U.S. SmallCap Dividend Index is a fundamentally weighted index measuring the performance of the small-capitalization segment of the U.S. dividend-paying market. The fund yields 3.21% annually and it charges 38 bps in fees.

WisdomTree U.S. High Dividend Fund (DHS – Up 399.9%

The underlying index that measures the performance of companies with high dividend yields selected from the WisdomTree Dividend Index. It yields about 3.53% annually and charges 38 bps in fees.

iShares Select Dividend ETF DVY – Up 394.1%

The underlying index measures the performance of a selected group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time. The fund yields 3.29% annually and charges 39 bps in fees.

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First Trust Morningstar Dividend Leaders Index Fund (FDL): ETF Research Reports
 
WisdomTree U.S. SmallCap Dividend Fund (DES): ETF Research Reports
 
iShares Select Dividend ETF (DVY): ETF Research Reports
 
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
 
WisdomTree U.S. High Dividend Fund (DHS): ETF Research Reports
 
SPDR S&P Dividend ETF (SDY): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
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