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Dividend investing has been in vogue amid bouts of volatility and uncertainty. This is especially true as these are major sources of consistent income for investors in any type of market though they do not offer dramatic price appreciation.
As such, many dividend ETFs have been on the rise, reaching new peaks. These include iShares Select Dividend ETF (DVY - Free Report) , iShares Core High Dividend ETF (HDV - Free Report) , Morningstar Dividend Leaders Index Fund (FDL - Free Report) , Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) and Fidelity High Dividend ETF (FDVV - Free Report) . The funds also have the potential to move higher given the prevailing market uncertainty.
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 out 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
Wall Street staged a strong comeback over the past two weeks. The S&P 500 and the Nasdaq Composite logged in the gains for two consecutive weeks, marking their strongest performances since November 2020 (read: Wall Street Had the Best Week Since Nov 2020: 5 ETF Winners).
The gains came following the Fed’s decision to raise interest rates for the first time since 2018, with more to come. The central bank hiked rates by 25 basis points (bps) to 0.25-0.50% and signaled hikes in all the six remaining meetings this year to tackle the fastest inflation in four decades even as risks to economic growth mount. Additionally, consumer spending remains strong given the elevated wage growth and lower unemployment rate.
However, the persistent rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown. A resurgence of virus cases in China and the another wave of lockdown added to the chaos (read: 5 Sector ETFs That Crushed the Market in Q1).
iShares Select Dividend ETF 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 2.4% of assets.
iShares Select Dividend ETF has AUM of $21.7 billion and an average daily volume of around 1.4 million shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Dividend ETF Hits New 52-Week High).
First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)
First Trust Morningstar Dividend Leaders Index Fund offers exposure to stocks that have shown the highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 100 stocks in its basket with key holdings in healthcare, consumer staples, communication services and utilities.
With AUM of $2 billion, First Trust Morningstar Dividend Leaders Index Fund charges 45 bps in annual fees from investors and trades in a solid volume of about 454,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Core High Dividend ETF offers exposure to 75 high-quality and high dividend stocks. It tracks the Morningstar Dividend Yield Focus Index and is slightly concentrated on the top firms, with each making up for no more than 8% share.
iShares Core High Dividend ETF has AUM of $9 billion and trades in a solid volume of around 1 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 52 stocks traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with utilities, consumer staples, real estate and healthcare receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3.3 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 2 million shares.
Fidelity High Dividend ETF offers exposure to large and mid-cap high-dividend-paying companies that are expected to continue paying and growing their dividends. This is easily done by Fidelity High Dividend Index. The fund holds 115 stocks in its basket, with each making up for not more than 5.5% of assets. Sector-wise, information technology takes the largest share at 21.3%, while financials, energy, real estate, utilities and materials receive double-digit exposure each (read: 5 Top-Ranked ETFs on Sale).
Fidelity High Dividend ETF has gathered $1.2 billion in its asset base while it trades in an average daily volume of 234,000 shares. It charges 29 bps in annual fees and has a Zacks ETF Rank #2 (Buy).
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Dividend ETFs Scaling New Highs
Dividend investing has been in vogue amid bouts of volatility and uncertainty. This is especially true as these are major sources of consistent income for investors in any type of market though they do not offer dramatic price appreciation.
As such, many dividend ETFs have been on the rise, reaching new peaks. These include iShares Select Dividend ETF (DVY - Free Report) , iShares Core High Dividend ETF (HDV - Free Report) , Morningstar Dividend Leaders Index Fund (FDL - Free Report) , Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) and Fidelity High Dividend ETF (FDVV - Free Report) . The funds also have the potential to move higher given the prevailing market uncertainty.
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 out 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
Wall Street staged a strong comeback over the past two weeks. The S&P 500 and the Nasdaq Composite logged in the gains for two consecutive weeks, marking their strongest performances since November 2020 (read: Wall Street Had the Best Week Since Nov 2020: 5 ETF Winners).
The gains came following the Fed’s decision to raise interest rates for the first time since 2018, with more to come. The central bank hiked rates by 25 basis points (bps) to 0.25-0.50% and signaled hikes in all the six remaining meetings this year to tackle the fastest inflation in four decades even as risks to economic growth mount. Additionally, consumer spending remains strong given the elevated wage growth and lower unemployment rate.
However, the persistent rise in commodity prices and the aftermath of the Russia-Ukraine war have led to concerns about a global economic slowdown. A resurgence of virus cases in China and the another wave of lockdown added to the chaos (read: 5 Sector ETFs That Crushed the Market in Q1).
Let’s delve deeper into the above-mentioned ETFs:
iShares Select Dividend ETF (DVY - Free Report)
iShares Select Dividend ETF 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 2.4% of assets.
iShares Select Dividend ETF has AUM of $21.7 billion and an average daily volume of around 1.4 million shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Dividend ETF Hits New 52-Week High).
First Trust Morningstar Dividend Leaders Index Fund (FDL - Free Report)
First Trust Morningstar Dividend Leaders Index Fund offers exposure to stocks that have shown the highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 100 stocks in its basket with key holdings in healthcare, consumer staples, communication services and utilities.
With AUM of $2 billion, First Trust Morningstar Dividend Leaders Index Fund charges 45 bps in annual fees from investors and trades in a solid volume of about 454,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Core High Dividend ETF (HDV - Free Report)
iShares Core High Dividend ETF offers exposure to 75 high-quality and high dividend stocks. It tracks the Morningstar Dividend Yield Focus Index and is slightly concentrated on the top firms, with each making up for no more than 8% share.
iShares Core High Dividend ETF has AUM of $9 billion and trades in a solid volume of around 1 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
Invesco S&P 500 High Dividend Low Volatility ETF offers exposure to 52 stocks traded on the S&P 500 Index that historically have provided high dividend yields and low volatility. It follows the S&P 500 Low Volatility High Dividend Index. Invesco S&P 500 High Dividend Low Volatility ETF is widely spread across sectors, with utilities, consumer staples, real estate and healthcare receiving double-digit exposure each.
Invesco S&P 500 High Dividend Low Volatility ETF has amassed $3.3 billion and charges 30 bps in annual fees. The fund trades in an average daily volume of 2 million shares.
Fidelity High Dividend ETF (FDVV - Free Report)
Fidelity High Dividend ETF offers exposure to large and mid-cap high-dividend-paying companies that are expected to continue paying and growing their dividends. This is easily done by Fidelity High Dividend Index. The fund holds 115 stocks in its basket, with each making up for not more than 5.5% of assets. Sector-wise, information technology takes the largest share at 21.3%, while financials, energy, real estate, utilities and materials receive double-digit exposure each (read: 5 Top-Ranked ETFs on Sale).
Fidelity High Dividend ETF has gathered $1.2 billion in its asset base while it trades in an average daily volume of 234,000 shares. It charges 29 bps in annual fees and has a Zacks ETF Rank #2 (Buy).