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Buy These Dividend ETFs to Beat Inflation & Omicron in 2022
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The hunt for dividend in the equity market is always steady irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty and global growth worries, the lure for dividend investing will increase.
The present investing backdrop is saddled with uncertainties regarding sky-high inflation, a likely hawkish Fed in 2022 and the Omicron strain of COVID-19. The Consumer Price Index soared at the fastest clip since 1982. This has led to a hawkish Fed. The Fed has paced up QE tapering to contain sky-high inflation. At least one Fed rate hike is sure in 2022 while a maximum of three is possible.
Fed Chairman Jerome Powell said that the central bank now plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and $120 billion from the start of the pandemic through November. No wonder, rising rate worries due to a hawkish Fed adds stress to the equity market. Hence, dividend ETFs may serve the purpose for safe investing.
Notably, the year 2020 was a bit difficult for dividend investing due to the corporate cash crunch and announcement of dividend cuts. But things changed for the better in 2021. Vaccine rollout and better management of the pandemic helped the corporates to remain in the pink of their health.
S&P Dow Jones Indices announced in early October that indicated dividend net increases for U.S. domestic common stocks increased $20.9 billion during Q3 of 2021 compared with $12.9 billion in Q2 of 2021 and a decline of $2.3 billion in Q3 of 2020 (which was an extremely COVID-afflicted quarter). The Q3 dividend marked the largest increase since Q1 of 2012 ($24.2 billion).
Investors should note that the dividend aristocrats, which have paid out higher dividend for at least 25 straight quarters, topped the S&P 500 value stocks by a wider margin, per an article published on barrons.com. Apart from aristocrats, stocks that have strong fundamentals currently and offer high dividends appear to be great bets. 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 dividend ETFs and describe their characteristics in detail below.
If rates rise, high dividend investing would be helpful for investors to make up for the higher yields. The underlying Morningstar Dividend Leaders Index of FDL consists of stocks that have shown dividend consistency and dividend sustainability. The dividend yield of FDL is 3.47% annually, way higher than the benchmark U.S. treasury yield of 1.41%, as of Dec 17, 2021.
Global X SuperDividend ETF (SDIV - Free Report) – Yield 8.56% Annually
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 yields 8.56% annually.
The fund is a winning combination of high dividend and low volatility – the need of the hour. The S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility (read: Low-Volatility ETFs in Focus on Virus & Fed Taper Worriess).
REIT as a sector holds strong potential at the current level. In a rising inflation environment, real estate or REIT stocks act as a good bet. Both, resale value of the property and rental income, rise with price inflation. The underlying KBW Nasdaq Premium Yield Equity REIT Index is a dividend-weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the United States. The dividend yield of the fund is as high as 5.60%.
This is an Omicron-oriented investment options. If Omicron fear takes Wall Street in its grip, yields will fall and high-growth tech stocks will soar. The underlying S&P Technology Dividend Aristocrats Index targets well-established, technology-related companies that have constantly raised their dividends for at least seven years. However, the dividend yield of the fund is meagre.
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Buy These Dividend ETFs to Beat Inflation & Omicron in 2022
The hunt for dividend in the equity market is always steady irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty and global growth worries, the lure for dividend investing will increase.
The present investing backdrop is saddled with uncertainties regarding sky-high inflation, a likely hawkish Fed in 2022 and the Omicron strain of COVID-19. The Consumer Price Index soared at the fastest clip since 1982. This has led to a hawkish Fed. The Fed has paced up QE tapering to contain sky-high inflation. At least one Fed rate hike is sure in 2022 while a maximum of three is possible.
Fed Chairman Jerome Powell said that the central bank now plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and $120 billion from the start of the pandemic through November. No wonder, rising rate worries due to a hawkish Fed adds stress to the equity market. Hence, dividend ETFs may serve the purpose for safe investing.
Notably, the year 2020 was a bit difficult for dividend investing due to the corporate cash crunch and announcement of dividend cuts. But things changed for the better in 2021. Vaccine rollout and better management of the pandemic helped the corporates to remain in the pink of their health.
S&P Dow Jones Indices announced in early October that indicated dividend net increases for U.S. domestic common stocks increased $20.9 billion during Q3 of 2021 compared with $12.9 billion in Q2 of 2021 and a decline of $2.3 billion in Q3 of 2020 (which was an extremely COVID-afflicted quarter). The Q3 dividend marked the largest increase since Q1 of 2012 ($24.2 billion).
Investors should note that the dividend aristocrats, which have paid out higher dividend for at least 25 straight quarters, topped the S&P 500 value stocks by a wider margin, per an article published on barrons.com. Apart from aristocrats, stocks that have strong fundamentals currently and offer high dividends appear to be great bets. 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 dividend ETFs and describe their characteristics in detail below.
ETFs in Focus
First Trust Morningstar Dividend Leaders ETF (FDL - Free Report) – Yield 3.47% Annually
If rates rise, high dividend investing would be helpful for investors to make up for the higher yields. The underlying Morningstar Dividend Leaders Index of FDL consists of stocks that have shown dividend consistency and dividend sustainability. The dividend yield of FDL is 3.47% annually, way higher than the benchmark U.S. treasury yield of 1.41%, as of Dec 17, 2021.
Global X SuperDividend ETF (SDIV - Free Report) – Yield 8.56% Annually
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 yields 8.56% annually.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) – Yield 3.53% Annually
The fund is a winning combination of high dividend and low volatility – the need of the hour. The S&P 500 Low Volatility High Dividend Index comprises of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility (read: Low-Volatility ETFs in Focus on Virus & Fed Taper Worriess).
Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) – Yield 5.60% Annually
REIT as a sector holds strong potential at the current level. In a rising inflation environment, real estate or REIT stocks act as a good bet. Both, resale value of the property and rental income, rise with price inflation. The underlying KBW Nasdaq Premium Yield Equity REIT Index is a dividend-weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the United States. The dividend yield of the fund is as high as 5.60%.
ProShares S&P Technology Dividend Aristocrats ETF (TDV - Free Report) – 1.04% Annually
This is an Omicron-oriented investment options. If Omicron fear takes Wall Street in its grip, yields will fall and high-growth tech stocks will soar. The underlying S&P Technology Dividend Aristocrats Index targets well-established, technology-related companies that have constantly raised their dividends for at least seven years. However, the dividend yield of the fund is meagre.