The S&P 500’s Q4 of 2021 dividends increased 3.0% to a record $133.9 billion from Q3 of 2021's $130.0 billion and were 10.1% higher than the $121.6 billion recorded in Q4 of 2020. For 2021, dividends were a record $511.2 billion, up 5.8% year over year. Total shareholder return of buybacks and dividends was a record $404.0 billion in Q4 2021, up 10.8% sequentially and up 60.2% year over year.
Overall, the S&P 500’s dividend yield was 1.63% in Q4 of 2021 and the stock buyback yield was 2.45%, resulting in a combined yield of 4.08%. Against this backdrop, below we highlight a few sectors and its ETFs that offer outsized combined yield (buyback + dividend). This is especially true given investors must be looking forward to high-yielding investments currently thanks to a 6%+ U.S. PCE inflation and the Fed policy tightening (which is likely to result in a spike in rates).
Financials – Combined Yield 6.70%
A rising interest rate scenario would be highly profitable for banks as they seek to borrow money at short-term rates and lend at long-term rates. With the rise in short-term interest rates, banks would be able to earn more on lending and pay less on deposits. This would expand net margins and bolster banks’ profits.
SPDR S&P Bank ETF ( KBE Quick Quote KBE - Free Report) and SPDR S&P Regional Banking ETF ( KRE Quick Quote KRE - Free Report) both have a Zacks Rank #2 (Buy). Communication Services – Combined Yield 5.94%
As we are emerging increasingly connected through internet, the communication sector has been receiving more prominence. Work-shop-learn-play-and-entertain-from-home trend has made the sector a very popular one. And the continuous evolvement in sector will keep it strong over the long term.
Communication Services Select Sector SPDR ETF ( XLC Quick Quote XLC - Free Report) with a Zacks Rank #3 (Hold) is thus a great pick out here. Consumer Staples – Combined Yield 4.86%
The consumer staples sector has been an area to watch lately as markets are volatile currently leading investors to bet big on defensive sectors like consumer staples. The sector enjoys a few benefits at this moment. Greater spending power in the wake of improving wage growth is helping the consumer segment. Plus, as long as geopolitical tensions rule the market, consumer staples is likely to outperform, thanks to its non-cyclical nature. Hence, investors can tap the staples ETF (
XLP Quick Quote XLP - Free Report) . Energy – Combined Yield 4.39%
After remaining subdued for quite some time, oil prices staged a rebound thanks to the rise in demand on ebbing pandemic. The Russia-Ukraine war also added to the energy strength. With meaningful production ramp-up not possible in the near term, we expect the rally in oil prices to continue ahead. Investors may try ETFs like
iShares U.S. Oil Equipment & Services ETF ( IEZ Quick Quote IEZ - Free Report) . Materials – Combined Yield 4.46%
The metal industry is on a tear currently thanks to the pent-up demand that is flourishing on the economic reopening post the height of the COVID-19 pandemic. Plus, several metals are staging a rally lately as these are used in the clean energy production and electric vehicle manufacturing. The disruptive metals industry is also attracting attention now as it is benefiting from the Russia-Ukraine crisis. Ukraine is a major producer of uranium, titanium, iron ore, steel, and ammonia too. And the country’s steel makes up around 10% of Europe’s imports. The materials ET
F ( XLB Quick Quote XLB - Free Report) should thus be the winner.