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5 Sectors & Its Top ETFs to Play Solid Dividend & Buyback Yield

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The S&P 500’s Q1 of 2022 dividends increased 2.8% to a record $137.6 billion from Q4 of 2021's $133.9 billion and were 11.1% higher than the $123.9 billion recorded in Q1 of 2021. For the past one year, dividends were a record $524.9 billion, up 9.3% year over year. Total shareholder return of buybacks and dividends was a record $418.6.0 billion in Q1 of 2022, up 3.6% sequentially and up 38.6% year over year.

The quarter’s share repurchases were a record $281.0 billion, up 4.0% from Q4 of 2021's record $270.1 billion expenditure and up 57.8% year over year. As many as 374 S&P 500 companies reported buybacks of at least $5 million for the quarter, up from 325 in Q4 of 2021 and up from 335 in Q1 of 2021. About 17.6% of companies lowered share counts used for earnings-per-share (EPS) by at least 4% year-over-year, up from Q4 of 2021's 14.9% and Q1 of 2021's 5.8%.

Overall, the S&P 500’s dividend yield was 1.37% in Q1 of 2022 and the stock buyback yield was 2.57%, resulting in a combined yield of 3.94%. 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 sky-high inflation and the Fed policy tightening (which is likely to result in a spike in rates).

Communications ServicesCombined Yield 6.34%

Communication Services buybacks fell 21.3% sequentially to $34.1 billion but were still up 56.4% from the Q1 of 2021’s $21.8 billion.  As a percentage of all buybacks, the sector decreased to 12.1% of all buybacks from the prior quarter's 16.0%, and the Q1 2021 12.2%. Still, the sector ruled in terms of combined yield. Communication Services Select Sector SPDR ETF (XLC - Free Report) with a Zacks Rank #2 (Buy) is thus a great pick out here.

Information Technology – Combined Yield 5.51%

Information Technology continued to maintain its winning position in buybacks, even as its percentage of buybacks fell.In Q1 of 2022, IT's share declined to 25.5% of all S&P 500 buybacks compared to Q4 2021's 27.7% and Q1 2021's 31.6%. Technology Select Sector SPDR ETF (XLK - Free Report) has a Zacks Rank #1 (Strong Buy).

Consumer Discretionary – Combined Yield 5.45%

Consumer Discretionary buybacks rose 76% year over year to $28.2 billion in Q1 of 2022, though buybacks fell slightly sequentially. The sector represented 10.05% of all buybacks. Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) has a Zacks Rank #1.

Financials Combined Yield 4.93%

Financial buybacks rose 6.2% to $54.7 billion, marking 19.5% of the buybacks, from the Q4 of 2021’s $51.5 billion, which represented 19.1% of all buybacks. SPDR S&P Bank ETF (KBE - Free Report) has a Zacks Rank #1.

HealthCare Combined Yield 4.13%

Health Care buybacks shot up 88.3%, spending $41.1 billion in Q1 of 2022 representing 14.6% of all buybacks, up from the Q4 of 2021 $21.8 billion, which made up 8.1% of the total repurchases. Hence, investors can tap Health Care Select Sector SPDR ETF (XLV - Free Report) , which has a Zacks Rank #1.

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