The latest job report has rekindled interest in high dividend ETFs and stocks. This reflects the highest number of job addition by the economy in February since July 2016 with a slowdown in wage growth, easing fears of rising inflation.
The news has dismissed chances of faster-than-expected rate hikes, which would sharply increase borrowing costs for consumers. The Fed is now expected to move toward gradual normalization of the monetary policy, providing some relief to high dividend products, which were battered by the recent aggressive stance adopted by the Fed. As a result, these products are positioned to be the biggest potential movers in the weeks ahead.
Additionally, Trump’s tariff plan is weighing heavily on investor sentiments as it could lead to a trade war. Further, geopolitical tension, instability in Washington, mid-term election and stretched valuations are adding to the woes (read: Trump Tariffs: ETF Winners & Losers).
Amid this backdrop, dividend paying securities are the major sources of consistent income for investors, creating wealth when returns from the equity market are at risk. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Given this, we have highlighted four ETFs and stocks that yield more than 5% in dividends and could be interesting plays for the coming months.
Using our database, we have selected ETFs that offer broad exposure to a number of sectors and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with a decent AUM of above $50 million.
SPDR Portfolio Total Stock Market ETF (SPTM - Free Report) - Annual Yield: 7.12%
This fund offers exposure to the broad market by tracking the SSGA Total Stock Market Index, holding 2,791 stocks in its basket. It is a low-cost choice charging just 3 bps in annual fees and trades in average daily volume of 121,000 shares. The product has AUM of $1.5 billion and has a Zacks Rank #3.
SPDR S&P 500 Value ETF (SPYV - Free Report) - Annual Yield: 6.96%
This ETF offers exposure to the large-cap value segment of the U.S. equity market by tracking the S&P 500 Pure Value Index. Holding 392 securities in its basket, it has amassed $1.4 billion in its asset base and trades in a solid average daily volume of 399,000 shares. It charges 4 bps in annual fees and has a Zacks Rank #3 (read: Value Investing Set to Shine on Tax Reform: 5 Cheap ETFs).
Global X SuperDividend U.S. ETF (DIV - Free Report) - Annual Yield: 6.12%
This fund provides exposure to 50 of the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index. The product has amassed $399.3 million in its asset base while trading in moderate volume of about 78,000 shares. It charges 45 bps in fees per year from investors and has a Zacks ETF Rank #3 (read: 5 Overlooked Smart Beta Dividend ETFs Worth Buying Now).
SPDR Portfolio Large Cap ETF (SPLG - Free Report) – Annual Yield: 5.28%
This fund follows the SSGA Large Cap Index and offers exposure to the US large cap market segment. The product has $1.1 billion in AUM and charges an annual fee of 3 bps. Volume is light at around 21,000 shares a day on an average. The product holds 772 stocks in its basket and has a Zacks ETF Rank #3.
We have chosen four top picks using the Zacks Screener that fits our criteria: a Zacks Rank #1 or 2, a Value Style Score of A or B and a market capitalization of more than $1 billion. Our chosen stocks are:
AllianceBernstein Holding L.P. (AB - Free Report) – Annual Yield: 12.33%
This New York-based company provides diversified investment management services, primarily to pension funds, endowments, foreign financial institutions, and to individual investors. It has a five-year historical dividend growth rate of 4.1% and a payout ratio of 146.1%. AllianceBernstein has a Zacks Rank #2 and a market capitalization of $2.33 billion (read: Earn 5% Plus Yield With These ETFs).
Ladder Capital Corp (LADR - Free Report) – Annual Yield: 8.27%
This New York-based company is a commercial real estate finance company. With a market capitalization of $1.5 billion, the company has a five-year historical dividend growth rate of 7.2% and a payout ratio of 81.3%. The stock has a Zacks Rank #2.
AT&T Inc. (T - Free Report) – Annual Yield: 5.40%
This California-based company provides communication, entertainment and Internet services to consumers and businesses around the world. It is the largest pay-TV provider in the United States and owns the second largest wireless network. It has raised its dividend every year over the past five years at an annualized rate of 2.1%, with a current payout ratio of 65.6%. The company has a Zacks Rank #2 and a market capitalization of $231.7 billion.
Macy’s Inc. (M - Free Report) – Annual Yield: 5.23%
This Ohio-based company is one of the nation’s prime retailers offering a range of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. It has a market capitalization of more than $7.55 billion. The company has been increasing its dividend once every year over the past five years at an annualized rate of 14.5%. The payout ratio stands at 40.1%. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
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