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Flurry of High-Dividend ETFs Hit the Market (Revised)
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The year 2022 as a whole could easily be attributed to the Russia-Ukraine war, red-hot inflation and rising-rate worries. No wonder, such worries caused an upheaval in the market this year. Wall Street slid in three quarters in a row.
Overall, the S&P 500 is down 25% this year. The Nasdaq Composite is off 30.9%, the Dow Jones has lost about 18.8% while the Russell 2000 has skidded 23.9% year to date (as of Oct 3, 2022) on rising rate worries.
Against this backdrop, dividend or high-income ETFs are currently in high demand. As a result, we have seen the launch of John Hancock U.S. High Dividend ETF (JHDV) and Altrius Global Dividend ETF (DIVD) lately.
JHDV in Focus
This fund is actively managed; it does not track an index. The net expense ratio of JHDV is 0.34%.
DIVD in Focus
The investment seeks long-term capital growth of capital and income. To pursue its objective, the fund will invest at least 90% of its net assets, plus the amount of any borrowings for investment purposes, in dividend-paying equity securities. The fund charges 49 bps in fees.
How Do These Fit In a Portfolio?
The Fed has been super-hawkish this year. With the Fed looking to hike rates further to cool down scorching inflation, market volatility is prevailing at quite a high level. The median Federal Funds rates are now projected to be 4.4% for 2022 (from 3.4% projected in June). For 2023, the same is projected to be 4.6% (from 3.8% in June) and for 2024, the same is projected to be 3.9% (from 3.4% in 2024).
No wonder, demand for dividend ETFs is high right now as these act as a great safety. Investors may be interested in equities or products 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.
Competition
The space is jam-packed with products. However, many of high-AUM ETFs in the space is passively-managed. JHDV’s active nature may help it to stand out in the crowd. Overall, global dividend ETFs’ space is headed by (in terms of assets) Vanguard International Dividend Appreciation ETF (VIGI - Free Report) , which charges 15 bps in fees.
U.S. dividend ETFs’ space is headed by the likes of Vanguard Dividend Appreciation ETF (VIG - Free Report) , Vanguard High Dividend Yield Index ETF (VYM - Free Report) and Schwab US Dividend Equity ETF (SCHD - Free Report) . Each of these funds charges 6 bps in fees. Hence, newbies may find it tough to amass assets due to their high expense ratios.
(NOTE: We are reissuing this article to correct a mistake. The original version, published on Oct 7, 2022, should no longer be relied upon.)
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Flurry of High-Dividend ETFs Hit the Market (Revised)
The year 2022 as a whole could easily be attributed to the Russia-Ukraine war, red-hot inflation and rising-rate worries. No wonder, such worries caused an upheaval in the market this year. Wall Street slid in three quarters in a row.
Overall, the S&P 500 is down 25% this year. The Nasdaq Composite is off 30.9%, the Dow Jones has lost about 18.8% while the Russell 2000 has skidded 23.9% year to date (as of Oct 3, 2022) on rising rate worries.
Against this backdrop, dividend or high-income ETFs are currently in high demand. As a result, we have seen the launch of John Hancock U.S. High Dividend ETF (JHDV) and Altrius Global Dividend ETF (DIVD) lately.
JHDV in Focus
This fund is actively managed; it does not track an index. The net expense ratio of JHDV is 0.34%.
DIVD in Focus
The investment seeks long-term capital growth of capital and income. To pursue its objective, the fund will invest at least 90% of its net assets, plus the amount of any borrowings for investment purposes, in dividend-paying equity securities. The fund charges 49 bps in fees.
How Do These Fit In a Portfolio?
The Fed has been super-hawkish this year. With the Fed looking to hike rates further to cool down scorching inflation, market volatility is prevailing at quite a high level. The median Federal Funds rates are now projected to be 4.4% for 2022 (from 3.4% projected in June). For 2023, the same is projected to be 4.6% (from 3.8% in June) and for 2024, the same is projected to be 3.9% (from 3.4% in 2024).
No wonder, demand for dividend ETFs is high right now as these act as a great safety. Investors may be interested in equities or products 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.
Competition
The space is jam-packed with products. However, many of high-AUM ETFs in the space is passively-managed. JHDV’s active nature may help it to stand out in the crowd. Overall, global dividend ETFs’ space is headed by (in terms of assets) Vanguard International Dividend Appreciation ETF (VIGI - Free Report) , which charges 15 bps in fees.
U.S. dividend ETFs’ space is headed by the likes of Vanguard Dividend Appreciation ETF (VIG - Free Report) , Vanguard High Dividend Yield Index ETF (VYM - Free Report) and Schwab US Dividend Equity ETF (SCHD - Free Report) . Each of these funds charges 6 bps in fees. Hence, newbies may find it tough to amass assets due to their high expense ratios.
(NOTE: We are reissuing this article to correct a mistake. The original version, published on Oct 7, 2022, should no longer be relied upon.)