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Higher inflationary expectations thanks to a super-easy monetary policy and the resultant rise in interest rates are now rife globally. A measure showing financial market expectations for future U.S. inflation has jumped to an 18-month high (as quoted on Financial Times), as investors anticipate a robust economic recovery on vaccine breakthroughs.
Responding to such economic developments, the benchmark U.S. treasury yields touched as high as 0.97% on Dec 4 compared with 0.52% touched this year in August as safe-haven trades had taken an upper hand amid the pandemic.
However, things have been changing from last month despite the rising cases of coronavirus globally. Wall Street has been charged up since election. Both Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) said their vaccines were about 95% effective in preventing the COVID-19. AstraZeneca too came up with an upbeat vaccine update. All these started vaccination and instilled optimism in the markets.
Apart from this, a divided Congress in the United States acted as a tailwind. In a nutshell, the global markets have been behaving positively lately on the dual tailwinds of a likely divided U.S. Congress (which indicates the likely reiteration of the existing policies) and vaccine optimism (which indicates a return to economic normalcy) (read: Vaccine Hopes & Divided Government: Sector ETFs to Win).
Why to Pick High-Dividend Securities
As economies are likely to rebound next year and inflation rates are likely to pace up, bond yields should soar. In such a scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.
Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.
We thus have zeroed in on some high-dividend ETFs.
ETFs in Focus
Global X SuperDividend Alternatives ETF (ALTY - Free Report) – Yield 10.40%; Up 4.1% Past Month
The underlying Indxx SuperDividend Alternatives Index tracks the performance of among the highest dividend yielding securities in each category of alternative investments, as defined by the Index Sponsor. The expense ratio of the fund 2.95%.
Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) – Yield 10.02%; Up 7.3% Past Month
The underlying KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. Expense ratio is 1.58%.
Global X SuperDividend ETF (SDIV - Free Report) – Yield 8.32%; Up 8.7% Past Month
The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. The index provider applies certain dividend stability filters. It charges 59 bps in fees.
Global X SuperDividend U.S. ETF (DIV - Free Report) – Yield 8.19%; Up 5.5% Past Month
The underlying INDXX SuperDividend U.S. Low Volatility Index tracks the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend-yielding equity securities in the United States. Consumer Staples, Energy, Real Estate and Utilities have a double-digit weight in the fund.
Nationwide RiskManaged Income ETF (NUSI - Free Report) – Yield 7.57%; Up 2.3% Past Month
This ETF is active and does not track a benchmark. The ETF seeks current income with downside protection. The fund charges 68 bps in fees.
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Higher inflationary expectations thanks to a super-easy monetary policy and the resultant rise in interest rates are now rife globally. A measure showing financial market expectations for future U.S. inflation has jumped to an 18-month high (as quoted on Financial Times), as investors anticipate a robust economic recovery on vaccine breakthroughs.
Responding to such economic developments, the benchmark U.S. treasury yields touched as high as 0.97% on Dec 4 compared with 0.52% touched this year in August as safe-haven trades had taken an upper hand amid the pandemic.
However, things have been changing from last month despite the rising cases of coronavirus globally. Wall Street has been charged up since election. Both Pfizer (PFE - Free Report) and Moderna (MRNA - Free Report) said their vaccines were about 95% effective in preventing the COVID-19. AstraZeneca too came up with an upbeat vaccine update. All these started vaccination and instilled optimism in the markets.
Apart from this, a divided Congress in the United States acted as a tailwind. In a nutshell, the global markets have been behaving positively lately on the dual tailwinds of a likely divided U.S. Congress (which indicates the likely reiteration of the existing policies) and vaccine optimism (which indicates a return to economic normalcy) (read: Vaccine Hopes & Divided Government: Sector ETFs to Win).
Why to Pick High-Dividend Securities
As economies are likely to rebound next year and inflation rates are likely to pace up, bond yields should soar. In such a scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.
Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.
We thus have zeroed in on some high-dividend ETFs.
ETFs in Focus
Global X SuperDividend Alternatives ETF (ALTY - Free Report) – Yield 10.40%; Up 4.1% Past Month
The underlying Indxx SuperDividend Alternatives Index tracks the performance of among the highest dividend yielding securities in each category of alternative investments, as defined by the Index Sponsor. The expense ratio of the fund 2.95%.
Invesco KBW High Dividend Yield Financial ETF (KBWD - Free Report) – Yield 10.02%; Up 7.3% Past Month
The underlying KBW Nasdaq Financial Sector Dividend Yield Index is a dividend yield weighted index seeking to reflect the performance of approximately 24 to 40 publicly listed financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. Expense ratio is 1.58%.
Global X SuperDividend ETF (SDIV - Free Report) – Yield 8.32%; Up 8.7% Past Month
The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. The index provider applies certain dividend stability filters. It charges 59 bps in fees.
Global X SuperDividend U.S. ETF (DIV - Free Report) – Yield 8.19%; Up 5.5% Past Month
The underlying INDXX SuperDividend U.S. Low Volatility Index tracks the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend-yielding equity securities in the United States. Consumer Staples, Energy, Real Estate and Utilities have a double-digit weight in the fund.
Nationwide RiskManaged Income ETF (NUSI - Free Report) – Yield 7.57%; Up 2.3% Past Month
This ETF is active and does not track a benchmark. The ETF seeks current income with downside protection. The fund charges 68 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>