Heightened volatility has once again shaken the stock market badly and pushed all major indices deep in red to start the final quarter of 2018. Soaring bond yields have dampened demand for riskier assets, sparking speculation about faster-than-expected rate hikes.
Higher rates will likely erode corporate profits and slow down economic growth, making investors less willing to pay high prices for stocks. The combination of other factors like the ongoing trade war between the United States and its major allies, troubles in emerging markets, Iran oil sanctions, political disturbance in Italy and fears over sanction on Saudi Arabia, and the mid-term election in November will continue to weigh on stocks.
However, the dual tailwinds of booming domestic growth and surging corporate profits will continue to keep the momentum in stocks alive. This is especially attributable to historic tax cuts, robust job gains, growing wages, record low unemployment, and an 18-year high consumer confidence that will likely drive the longest nine-year bull run. Against such a backdrop, nothing seems a better strategy than picking dividend-focused products (read: 5 Dividend ETFs Worth Buying Now).
Dividend-focused products offer safety in the form of payouts while at the same time providing stability as mature companies are less volatile to 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 downside protection by offering outsized payouts or sizable yields on a regular basis.
Here, we have highlighted 10 most popular dividend ETFs for investors seeking yields and returns in a rocky market.
Vanguard Dividend Appreciation ETF VIG
This is the largest and most popular ETF in the dividend space with AUM of $29.2 billion and average daily volume of about 601,000 shares. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high quality stocks that have a record of raising dividend every year. It holds 182 securities in the basket, with none accounting for more than 4.5% share. The fund charges 8 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 4 ETF Picks for October).
Vanguard High Dividend Yield ETF VYM
This fund provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 404 securities, the product is pretty well spread out across components as each holds no more than 3.7% of the assets. It has amassed $21.4 billion in its asset base while trading in volume of 698,000 shares a day on average. Expense ratio comes in at 0.08%. VYM has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Select Dividend ETF DVY
This fund provides exposure to the high dividend-paying U.S. equities with a 5-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 98 securities in its basket with each accounting for less than 2.6% of assets. The ETF has AUM of $16.7 billion and average daily volume of more than 491,000 shares. It charges 39 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR S&P Dividend ETF SDY
With AUM of $15.4 billion and average daily volume of 379,000 shares, this fund provides a well-diversified exposure to 111 U.S. stocks that have been consistently increasing their dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.5% of the assets. The fund charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Large-Cap ETF Hits New 52-Week High).
Schwab U.S. Dividend Equity ETF SCHD
This product offers exposure to 108 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. The fund is well spread across components, with none holding more than 4.8% of assets. It charges 7 bps in annual fees and trades in solid volume of about 762,000 shares a day. It has a AUM of $7.9 billion and a Zacks ETF Rank #3 with a Medium risk outlook (read: Wall Street Shrugs Off Trade Fears: 6 Large-Cap ETF Picks).
iShares Core High Dividend ETF HDV
This ETF offers exposure to 75 high quality and high dividend stocks and tracks the Morningstar Dividend Yield Focus Index. It is concentrated on the top firm with 10% exposure while other firms hold less than 7.3% share each. HDV is among the largest and most popular funds in the space with an AUM of around $6 billion and trades in a solid volume of around 348,000 shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Solid High Dividend Value ETFs & Stocks to Buy Now).
iShares Core Dividend Growth ETF DGRO
This fund provides exposure to companies having a history of consistently growing dividends by tracking the Morningstar US Dividend Growth Index. It holds 449 stocks in its basket with each accounting for less than 3.2% share. The fund has accumulated $4.3 billion in its asset base and trades in solid volumes of about 566,000 shares. It charges 8 bps in fess per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 4 ETFs to Play Key Events in Q4).
First Trust Value Line Dividend Index Fund FVD
This ETF tracks the Value Line Dividend Index, giving investors exposure to about 185 companies that have a Value Line Safety Ranking of #1 or 2. This results in an equal-weight approach for individual securities albeit with some concentration risk from a sector look. The fund is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. It holds 189 securities in its basket and has accumulated $4.3 billion in its asset base. The ETF sees solid volume of about 411,000 shares a day on average. It has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares International Select Dividend ETF IDV
This product offers exposure to established, high-quality international companies that have provided consistently high dividend yields over time. It tracks the Dow Jones EPAC Select Dividend Index and holds 99 stocks in its basket with none accounting for more than 5.6% share. From a country look, United Kingdom and Australia take the top two spots with 24.4% and 15.9% share, respectively while other makes up for single-digit allocation each. IDV has amassed $4.3 billion in its asset base while trading in volume of 541,000 shares per day on average.
ProShares S&P 500 Aristocrats ETF NOBL
This product provides exposure to companies that have raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. It holds 53 securities in its basket with each accounting for no more than 2.21% share. NOBL has amassed $3.6 billion in its asset base and trades in a volume of around 316,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook.
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ISHARS-INTL SD (IDV): ETF Research Reports
ISHRS-CORE DG (DGRO): ETF Research Reports
VANGD-HI DV YLD (VYM): ETF Research Reports
SPDR-SP DIV ETF (SDY): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
ISHARS-CR HD (HDV): ETF Research Reports
FT-VL DIV IDX (FVD): ETF Research Reports
PRO-SP5 ARISTOC (NOBL): ETF Research Reports
ISHARS-SEL DIV (DVY): ETF Research Reports
SCHWAB-US DV EQ (SCHD): ETF Research Reports
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