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This has been a terrible year for global markets. High inflation, rising rates, geopolitical tensions and supply-chain woes due to the zero-Covid policy in China made matters most difficult this year. The S&P 500 is off 19.8% this year (as of Dec 22, 2022). This marked the index’s biggest decline since the 2008 financial crisis.
Vanguard Total International Stock ETF (VXUS - Free Report) has lost about 18.8% this year. Vanguard European Stock Index Fund (VGK - Free Report) has retreated about 18.7%. iShares MSCI Emerging Markets ETF (EEM - Free Report) is off 22.5%
Hence, dividend investing is in vogue this year amid huge 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. These stocks tend to outperform in volatile markets and can reduce the volatility of a portfolio.
Inflows to dividend ETFs are 25% higher this year than 2021’s record with positive inflows every month so far this year, per a Bloomberg article. A record $50 billion allocation to dividend ETFs so far this year has been noticed. Money managers betting big on stable companies that have a history of paying out profits to shareholders, hoping that will minimize immense losses across the broader market.
Though cash-like treasuries are offering highest income in over a decade, dividend-paying stocks are gaining appeal in a rising rate environment as bond ETFs underperform in a rising rate environment. The Federal Reserve raised the fed funds rate by 50 bps to 4.25%-4.5% during its last monetary policy meeting of 2022 to tame inflation, pushing borrowing costs to the highest level since 2007.
What Lies Ahead?
The Fed’s job is not done yet. The U.S. central bank will likely hike rates next year again to restrict inflationary pressure. The policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023 (read: Top-Ranked ETFs to Play Fed's Seventh Rate Hike of 2022).
Add to this, recessionary fears are rife. Hence, dividend investing, which is safer in nature, would be in bright spot in 2023 as well. But after a huge jump in prices for dividend ETFs in 2022, we would suggest investors to look for some cheap dividend ETFs for investing in 2023.
Below we highlight a few such options. These dividend ETFs have a low P/E ratio than the S&P 500 (P/E: 21.70X) and have returned better than the key U.S. equity gauge.
ETFs in Focus
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) – Up 0.6%; P/E 13.85X
The underlying 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. The fund charges 30 bps in fees and yields 3.89% annually.
Invesco High Yield Equity Dividend Achievers ETF (PEY - Free Report) – Up 2%; P/E: 14.06X
The underlying NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 52 bps in fees and yields 4.24% annually.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) – Down 1.5%; P/E:14.38X
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The fund charges 7 bps in fees and yields 5.03% annually.
Principal Value ETF (PY - Free Report) – Down 4.6%; P/E: 11.56X
The 80-stock fund targets growth of income by investing in companies that grow dividends, increase cash flows, and engage in buybacks over time. The fund is driven by companies with strong cash flow generation and prudent payout policies. The fund charges 15 bps in fees and yields 3.08% annually.
WisdomTree Japan Hedged SmallCap Equity Fund (DXJS - Free Report) – Up 4.5%; P/E: 10.72X
The underlying WisdomTree Japan Hedged SmallCap Equity Index is designed to provide exposure to the small capitalization segment of the Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar. The fund charges 58 bps in fees and yields 3.14% annually (read: ETFs to Play BoJ's Surprise Policy Shift).
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5 Cheap Dividend ETFs to Buy and Hold for 2023
This has been a terrible year for global markets. High inflation, rising rates, geopolitical tensions and supply-chain woes due to the zero-Covid policy in China made matters most difficult this year. The S&P 500 is off 19.8% this year (as of Dec 22, 2022). This marked the index’s biggest decline since the 2008 financial crisis.
Vanguard Total International Stock ETF (VXUS - Free Report) has lost about 18.8% this year. Vanguard European Stock Index Fund (VGK - Free Report) has retreated about 18.7%. iShares MSCI Emerging Markets ETF (EEM - Free Report) is off 22.5%
Hence, dividend investing is in vogue this year amid huge 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. These stocks tend to outperform in volatile markets and can reduce the volatility of a portfolio.
Inflows to dividend ETFs are 25% higher this year than 2021’s record with positive inflows every month so far this year, per a Bloomberg article. A record $50 billion allocation to dividend ETFs so far this year has been noticed. Money managers betting big on stable companies that have a history of paying out profits to shareholders, hoping that will minimize immense losses across the broader market.
Though cash-like treasuries are offering highest income in over a decade, dividend-paying stocks are gaining appeal in a rising rate environment as bond ETFs underperform in a rising rate environment. The Federal Reserve raised the fed funds rate by 50 bps to 4.25%-4.5% during its last monetary policy meeting of 2022 to tame inflation, pushing borrowing costs to the highest level since 2007.
What Lies Ahead?
The Fed’s job is not done yet. The U.S. central bank will likely hike rates next year again to restrict inflationary pressure. The policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023 (read: Top-Ranked ETFs to Play Fed's Seventh Rate Hike of 2022).
Add to this, recessionary fears are rife. Hence, dividend investing, which is safer in nature, would be in bright spot in 2023 as well. But after a huge jump in prices for dividend ETFs in 2022, we would suggest investors to look for some cheap dividend ETFs for investing in 2023.
Below we highlight a few such options. These dividend ETFs have a low P/E ratio than the S&P 500 (P/E: 21.70X) and have returned better than the key U.S. equity gauge.
ETFs in Focus
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report) – Up 0.6%; P/E 13.85X
The underlying 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. The fund charges 30 bps in fees and yields 3.89% annually.
Invesco High Yield Equity Dividend Achievers ETF (PEY - Free Report) – Up 2%; P/E: 14.06X
The underlying NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 52 bps in fees and yields 4.24% annually.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) – Down 1.5%; P/E:14.38X
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The fund charges 7 bps in fees and yields 5.03% annually.
Principal Value ETF (PY - Free Report) – Down 4.6%; P/E: 11.56X
The 80-stock fund targets growth of income by investing in companies that grow dividends, increase cash flows, and engage in buybacks over time. The fund is driven by companies with strong cash flow generation and prudent payout policies. The fund charges 15 bps in fees and yields 3.08% annually.
WisdomTree Japan Hedged SmallCap Equity Fund (DXJS - Free Report) – Up 4.5%; P/E: 10.72X
The underlying WisdomTree Japan Hedged SmallCap Equity Index is designed to provide exposure to the small capitalization segment of the Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar. The fund charges 58 bps in fees and yields 3.14% annually (read: ETFs to Play BoJ's Surprise Policy Shift).