The days of easy money policies are gradually passing by. Higher inflationary expectations and rising rate worries are widespread. The Fed enacted the third-rate hike of 2018 in September and offered a hawkish guidance for the near term. The central bank is now planning one more hike this year and maintains its view of three more hikes next year and one in 2020 (read:
Top-Performing Fixed-Income ETFs of 1H).
raised its forecast for real GDP growth from 2.8% in June to 3.1% for 2018 and from 2.4% to 2.5% for 2019 but maintained the 2020 growth forecasts at 2.0%. The Fed projected the longer-run growth measure of 1.8%. The central bank issued projections for 2021, which call for economic growth of 1.8%, in line with the long-run forecast (read: Fed Hikes Rates as Expected: ETF Areas That Gained).
Not only the Fed, the Norges Bank raised its key policy rate for the first time since 2011, as inflation accelerated and economic growth picked up. Bank of England hiked interest rates for the second time since the financial crisis in August. Plus, there is heightened speculation over the European Central Bank’s (ECB) possible announcement of a rate hike next year (read:
ECB May Hike Rates After Summer 2019: ETFs to Gain).
Not only the developed economies, emerging economies have been hiking rates to keep pace with the Fed and shore up their currency. Bank of Indonesia lifted rates lately for the
fifth time this year since May. The Philippine central bank also raised its key rate in late September by half a percentage point to check inflation. Why High-Dividend Securities?
As economies have rebounded and inflation rates are likely to rise, bond yields should soar. In such a scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out turbulent times. This is especially true as trade war tensions between the United States and China have hit a fever pitch.
Even if stocks or funds decline, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.
We thus have zeroed in on some high-yielding ETFs.
Invesco Canadian Energy Income ETF ENY — Yields 10.69%
The 29-stock fund is composed of high yielding Canadian securities in the energy sector. It charges 66 bps in fees. No stock accounts for more than 5.26% of the fund.
Invesco KBW High Dividend Yield Financial ETF KBWD — Yields 8.64%
The 37-stock fund reflects the performance of financial companies engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. The fund charges 35 bps in fees. No stock makes up for more than 4.61% of the fund.
Global X SuperDividend Alternatives ETF ALTY — Yields 7.60%
The 45-stock fund looks to track the performance of among the highest dividend yielding securities in each category of alternative investments. The fund is heavy on BDCs and Private Equity (27.89%) and REITs (22.84%). It charges 75 bps in fees.
Global X SuperDividend ETF SDIV — Yields 7.54%
The 102-fund tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. REITs (35.0%), Mortgage REITs (20.4%) and Consumer Discretionary (12.55) are the top three sectors of the fund. The United States takes half of the fund, followed by Australia’s 12.1%.
Legg Mason International Low Volatility High Dividend ETF ( LVHI Quick Quote LVHI - Free Report) — Yields 7.50%
The fund comprises equity securities of developed markets outside the United States with relatively high yield and low price and earnings volatility while lowering exposure to currency fluctuations. The fund charges 40 bps in fees. Japan, U.K., Switzerland and Spain have double-digit weight in the fund. Financials (20%), Utilities (17.6%), Telecom (17.2%) and Consumer Discretionary (14.8%) are the top four sectors (read:
Top Foreign ETFs of Q3). Invesco KBW Premium Yield Equity REIT ETF KBWY — Yields 7.45%
The 29-stock fund looks to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the United States. It charges 35 bps in fees. None of the stocks make up for more than 6.25% of the fund.
WisdomTree Global ex-US Real Estate Fund DRW — Yields 7.10%
The underlying index of the fund measures the performance of companies from developed and emerging markets, outside the United States, which are classified as being part of the Global Real Estate sector. The fund is heavy on Hong Kong (24.25%) and Australia (12.5%). It charges 58 bps in fees.
Invesco S&P 500 BuyWrite ETF PBP — Yields 6.88%
The underlying index measures total returns of a theoretical portfolio, including the S&P 500 Index stocks on which S&P 500 Index call options are systematically written against the portfolio through a buy-write strategy. The fund holds 506 stocks and charges 49 bps in fees (read:
4 Defensive ETFs to Tackle Fed & Trade Tensions). Amplify YieldShares Senior Loan and Income ETF YESR — Yields 6.64%
The underlying index measures the performance of CEFs that invest in floating rate senior loans or other floating rate debt instruments, pay dividends and are listed in the United States. The fund holds 24 securities and charges 45 bps in fees.
Global X SuperDividend Emerging Markets ETF SDEM — Yields 6.51%
The 50-stock fund tracks the performance of 50 equally-weighted companies that rank among the highest dividend yielding equity securities in Emerging Markets. Financials (25.86%), Real Estate (18.10%), Materials (14.23%) and Information technology (12.37%) are top four sectors of the fund. Geographically, South Africa (18.94%), Russia (18.44%), Taiwan (14.21%) and China (13.57%) hold the top four spots.
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