After hitting a series of record highs last month, the U.S. stock market has been witnessing bouts of volatility triggered by surging yields, tax hike fears and another wave of COVID-19 infections in Europe and India. In such a scenario, dividend investing remains a popular strategy. Though it does not offer dramatic price appreciation, the strategy is a major source of consistent income for investors in any type of market.
The dividend-focused products offer safety through payouts, and stability in the form of mature companies that are less volatile amid large swings in stock prices. 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. Current Market Trends
Rise in inflationary pressure has led to a surge in yields, sparking overvaluation concerns in the stocks. The third wave of coronavirus has hit Europe hard with the extension of lockdown measures in several countries. India too has been reporting rising virus cases despite vaccinations. The resurgence of the infection could have an impact on Wall Street in the coming weeks. Additionally, the latest comments from Fed Chairman Jerome Powell are also weighing on investors’ sentiment. The central bank said that it would gradually roll back its monthly bond purchases as the economy continues to improve. The Fed currently purchases $120 billion in bonds per month (read:
Fed Bumps Up Economic Growth Forecasts: ETFs to Play). However, continued progress in the development of more COVID-19 vaccines, rapid vaccination rollout, reopening of the economy as well as new stimulus are fueling growth in the stock market. The combination of all these factors has led to pent-up demand, resulting in higher demand for all types of products and services in the economy. Notably, President Joe Biden recently signed one of the largest U.S. fiscal $1.9 trillion stimulus bills into law. Additionally, the latest bouts of data have been encouraging, infusing optimism into economic growth. Dividend Payments on Rise
Dividends paid by U.S. corporations climbed 2.6% year over year to a
record high of $503.1 billion in 2020. According to the latest edition of the Janus Henderson Global Dividend Index, just one in 14 U.S. companies canceled their dividend between April and December. This is because the companies in North America successfully conserve their cash and protect their dividends by suspending or reducing share buybacks. Notably, about half of the world’s dividends come from North America (read: US Dividends Jump to Record High Amid Pandemic: ETFs to Tap). According to research from S&P Global, dividends payments in the S&P 500 Index rose 0.7% year over year to a new record of $58.28 per share in 2020. Per Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, 2021 dividend payments are on pace for its 10th consecutive record year, up 4.2% over 2020. Here, we have highlighted 10 most popular dividend ETFs for investors seeking yields and returns irrespective of stock market directions. Vanguard Dividend Appreciation ETF ( VIG Quick Quote VIG - Free Report) This is the largest and most popular ETF in the dividend space with AUM of $54.4 billion and an average daily volume of about 1.5 million 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 212 securities in the basket with none accounting for more than 4.6% share. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Vanguard High Dividend Yield ETF ( VYM Quick Quote VYM - Free Report) This fund provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 411 securities, the product is pretty well spread out across components as each holds no more than 4% of the assets. It has amassed $34.4 billion in its asset base while trading in volume of 2 million shares a day on average. Expense ratio is 0.06%. VYM has a Zacks ETF Rank #2 with a Medium risk outlook (read: $1.9-T Stimulus to Boost U.S. Equity Demand? ETFs to Gain). Schwab U.S. Dividend Equity ETF ( SCHD Quick Quote SCHD - Free Report) This product offers exposure to 104 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 4.4% of assets. It charges 6 bps in annual fees and trades in solid volume of about 2.2 million shares a day. It has AUM of $20.7 billion and a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 ETFs Most Loved by Investors Last Week). SPDR S&P Dividend ETF ( SDY Quick Quote SDY - Free Report) With AUM of $18 billion and an average daily volume of 622,000 shares, this fund provides a well-diversified exposure to 112 U.S. stocks that have been consistently increasing 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 3.5% of the assets. The fund charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook. iShares Select Dividend ETF ( DVY Quick Quote DVY - Free Report) 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 less than 2.5% of assets. The ETF has AUM of $17.2 billion and an average daily volume of around 775,000 shares. It charges 39 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. iShares Core Dividend Growth ETF ( DGRO Quick Quote DGRO - Free Report) This fund provides exposure to companies having a history of consistently growing dividends by tracking the Morningstar US Dividend Growth Index. It holds 391 stocks in its basket with each accounting for less than 3% share. The fund has accumulated $16.9 billion in its asset base and trades in solid volumes of about 2.3 million shares. It charges 8 bps in fess per year and has a Zacks ETF Rank #2 with a Medium risk outlook. First Trust Value Line Dividend Index Fund ( FVD Quick Quote FVD - Free Report) This ETF tracks the Value Line Dividend Index, which is a modified equal-dollar weighted index comprised of U.S. exchange listed securities of companies that pay above-average dividends and have potential for capital appreciation. The fund is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. It holds 195 securities in its basket and has accumulated $10.9 billion in its asset base. The ETF sees solid volume of about 1.4 million shares a day on average. It has a Zacks ETF Rank #3 with a Medium risk outlook. ProShares S&P 500 Aristocrats ETF ( NOBL Quick Quote NOBL - Free Report) 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 65 securities in its basket with each accounting for no more than 2.2% share. NOBL has amassed $7.6 billion in its asset base and trades in a volume of around 470,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook. iShares Core High Dividend ETF ( HDV Quick Quote HDV - Free Report) This ETF offers exposure to 75 high quality and high dividend stocks and tracks the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms with each making up for no more than 8.4% share. The fund has AUM of $6.3 billion and trades in a solid volume of around 329,000 shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Guide to High Dividend Paying ETFs). WisdomTree U.S. Quality Dividend Growth Fund ( DGRW Quick Quote DGRW - Free Report) This fund tracks the WisdomTree U.S. Quality Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics like long-term earnings growth expectations, and three-year historical averages for return on equity and return on assets. It has gathered $5.4 billion in its asset base and charges 28 bps in fees per year from investors. The ETF holds 299 securities in its basket, with each accounting for no more than 4.9% share. It trades in an average daily volume of 342,000 shares and has a Zacks ETF Rank #3 with a Medium risk outlook. Want key ETF info delivered straight to your inbox?
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