Dividend is among the investing themes that should be under radar amid the ongoing uncertainty in the markets caused by rising inflation and rising rate worries. Wall Street has been lackluster this year with the S&P 500 losing 5.9%, the Dow Jones shedding 4.5% and the Nasdaq Composite retreating about 9.5%.
Rising rates amid a hawkish Fed in 2022 has cast a pall on Wall Street. U.S. Treasury yields soared to this year’s high of 1.87% on Jan 18. Inflation in Euro zone is no different, having hit a new record high just last month. Unlike the Fed, the ECB has maintained its bond-buying program, but bond yields have jumped there too.
The German 10-year bond yield traded in positive territory for
the first time since May 2019. The ECB said last month that it would be reducing its monthly asset purchases, but would continue its unprecedented level of stimulus in 2022. Overall, rising rates and overvaluation concerns in the market might keep the high-risk securities on the edge this year. Hunt for Dividend Yield?
No wonder, such a situation would spur investors to rush to dividend destinations that are usually safe investments. This is especially true given that dividend hikes are back. We know that dividend payments were mostly stalled in the year 2020 because of the coronavirus-led corporate cash crunch. 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.
The S&P Dow Jones Indices announced in early January that indicated dividend net increases for U.S. domestic common stocks rose to $18.0 billion during Q4 of 2021 compared with $20.9 billion in Q3 of 2021, and $9.5 billion in Q4 of 2020. There were as many as 852 dividend hikes in Q4 of 2021 compared with 620 during Q4 of 2020, marking a 37.4% year-over-year increase.
Investors should note that the 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.
Investors interest for dividend investing in 2022 can also be understood from the recent rally in dividend ETFs despite a downbeat broader market. Below we highlight a few dividend ETFs that have gained at least 4% this year and yields more than 3%.
ETFs in Focus Pacer Global Cash Cows Dividend ETF (– Up 6.2% This Year; Yields 4.38% GCOW Quick Quote GCOW - Free Report)
The 101-stock ETF puts 32.33% weight in the United States. United Kingdom and Japan also have a double-digit weight.
Fidelity International High Dividend ETF (– Up 5.36% This Year; Yields 3.79% FIDI Quick Quote FIDI - Free Report)
The Fidelity International High Dividend Index reflects the performance of stocks of large and mid-capitalization developed international high dividend-paying companies that are expected to continue to pay and grow their dividends. Europe takes about 52.3% weight of FIDI while Asia takes about 29% of the fund.
iShares International Select Dividend ETF (– Up 5.32% This Year; Yields 5.51% IDV Quick Quote IDV - Free Report)
The underlying Dow Jones EPAC Select Dividend Index measures the performance of a select group of equity securities issued by companies that have provided relatively high dividend yields on a consistent basis over time. United Kingdom (23.24%) and Canada (10.84%) hold the top two spots in the fund.
First Trust Dow Jones Global Select Dividend Index Fund (– Up 4.9% This Year; Yields 5.10% FGD Quick Quote FGD - Free Report)
The underlying index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index. Canada, United States and South Korea get a double-digit weight in the fund.
ALPS International Sector Dividend Dogs ETF (– Up 4.82% This Year; Yields 3.67% IDOG Quick Quote IDOG - Free Report)
The underlying index of the fund identifies five high-yielding securities, based on regular cash dividends, in each of the ten Global Industry Classification Standard sectors and is rebalanced quarterly. Japan, United Kingdom and Australia hold top three spots in the fund.
iShares Asia/Pacific Dividend ETF (– Up 4.64% This Year; Yields 5.53% DVYA Quick Quote DVYA - Free Report)
The fund tracks the relatively high dividend paying equities in Asia/Pacific developed markets. Japan (39.76%), Hong Kong (34.31%) and Australia (17.81%) occupy top three spots in the fund.
WisdomTree International High Dividend Fund (– Up 4.31% This Year; Yields 4.82% DTH Quick Quote DTH - Free Report)
The underlying index measures the performance of companies with high dividend yields selected from the WisdomTree International Equity Index. United Kingdom, Japan and Australia get a double-digit weight.
ALPS Sector Dividend Dogs ETF (– Up 4.1% This Year; Yields 3.50% SDOG Quick Quote SDOG - Free Report)
The underlying index measures the performance of U.S. large-cap equities with above-average dividend yields.
SPDR Portfolio S&P 500 High Dividend ETF (– Up 4.02% This Year; Yields 3.54% SPYD Quick Quote SPYD - Free Report)
The underlying S&P 500 High Dividend Index tracks the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield.