Back to top

Image: Bigstock

5 Popular US Dividend ETFs That Yield More Than Treasuries

Read MoreHide Full Article

The appeal for dividend investing remained intact even in the face of rising yields, which generally do not bode well for the dividend stocks. Growing inflationary expectations triggered by a quicker economic rebound is pushing the long-term yields higher.

Notably, the 10-year U.S. Treasury yield climbed to more than 1.61% on Mar 8, after the Senate passed a $1.9 trillion coronavirus economic relief and stimulus bill in the weekend. Investors should note that rising yields are indicators of economic improvement rather than inflation fears.

The dovish Fed continued to attract investors toward the dividend stocks. Fed Chairman Jerome Powell has pledged to maintain its accommodative stance and said that inflation is likely to rise as the economy recovers, but the increase will be temporary. The central bank will continue to buy $120 billion in Treasury and mortgage-backed securities per month, allowing inflation to move in an average range that could rise above its 2% target without triggering a rate hike.

Although the yields are surging, they are far behind many high-yield dividend ETFs. In fact, dividend ETFs have proven to be outperformers over the long term. These offer safety in the form of payouts and stability through mature companies that are less volatile to the large swings in stock prices. The dividend-paying securities are major sources of consistent income for investors when returns from equity markets are at risk (read: Guide to High Dividend Paying ETFs).

With continued progress in more vaccines, a rapid vaccination rollout, a new fiscal relief package, and signs of a healing labor market, the economy is on the mend and expected to recover faster than expected from the pandemic-driven recession. In such a scenario, equities are poised to move higher with no exception for dividend stocks.

Below, we have highlighted five ETFs that yield more than 5% and could be compelling plays this year. These offer broad exposure to a number of sectors and are among the popular options in the dividend space with AUM of more than $1 billion.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) – Annual Yield: 4.25%

This fund provides exposure to stocks with a high level of dividend income and the opportunity for capital appreciation by tracking the S&P 500 High Dividend Index. Holding 80 stocks in its basket, the fund is well diversified across securities with each making up for less than 1.6% of assets. It has AUM of $2.9 billion and trades in volume of about 1.1 million shares. It charges 7 bps in annual fees and has a Zacks ETF Rank of #2 (Buy) with a Medium risk outlook.

iShares Core High Dividend ETF (HDV - Free Report) – Annual Yield: 3.82%

This ETF offers exposure to 74 high-quality and high-dividend paying stocks, and tracks the Morningstar Dividend Yield Focus Index. It is heavily concentrated on the top firm with a double-digit allocation, while other firms hold no more than 8.5% of assets. HDV has AUM of $6 billion and trades in a solid volume of around 328,000 shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Select Dividend ETF (DVY - Free Report) – Annual Yield: 3.19%

This fund provides exposure to the high dividend-paying U.S. equities with a five-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 100 securities in its basket with each accounting for no more than 3.3% of assets. The ETF has AUM of $16.2 billion and an average daily volume of more than 531,000 shares. It charges 39 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook (read: US Dividends Jump to Record High Amid Pandemic: ETFs to Tap).

Vanguard High Dividend Yield ETF (VYM - Free Report) – Annual Yield: 2.96%

This fund provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 410 securities, the product is pretty well spread out across components as each holds no more than 4% of the assets. It has amassed $32.9 billion in its asset base while trading in volume of 1.9 million shares a day on average. Expense ratio is 0.06%. VYM has a Zacks ETF Rank #3 with a Medium risk outlook (read: Great Rotation From Bonds to Stocks: ETFs to Win).

Schwab U.S. Dividend Equity ETF (SCHD - Free Report) – Annual Yield: 2.89%

This product offers exposure to 101 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 5.3% of assets. It charges 6 bps in annual fees and trades in solid volume of about 1.9 million shares a day. It has AUM of $19 billion and a Zacks ETF Rank #3 with a Medium risk outlook.

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 >>