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The hunt for dividend in the equity market is always steady irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are caught in the web of equity market volatility, the lure for dividend investing increases.
This is what happened in 2018 for global markets. Stocks took a dive in the January-February period on rising rate concerns, remained volatile on trade tensions and the emerging market (EM) pain in the middle (barring some occasional spike) and again slumped in the fourth quarter on fears of a renewed slowdown in global economies. Apart from these, the oil price slump also played foul.
The net result is global markets turning red for the year. The S&P 500 is down about 5.6%, the Dow Jones Industrial Average is off about 4.6% and the NASDAQ Composite is losing about 3.7% (as of Dec 18, 2018) (read: Global Markets in Red for 2018: 8 Inverse ETF Winners).
How Did Dividend ETFs Fare?
Given the volatility in the market, specifically in late 2018, investors rushed toward quality or value exposure. This is where some dividend ETFs shone and were able to beat the broader market.
Investors should note that not all dividend stocks will give them the same protection or serve the same purpose. While the high-yield ones are known for offering hefty current income, these crash in a rising rate environment (read: A Guide to Dividend ETF Investing).
On the other hand, stocks with dividend growth point to quality investing – a pre-requisite to making money in this volatile environment. The Fed’s policy tightening is less threatening to stocks with consistent dividend growth. These companies – known as dividend aristocrats – are usually good for value investing and are in demand when volatility flares up.
Against this backdrop, below we highlight a few dividend ETFs that beat the S&P 500, by offering positive or less negative returns this year (as of Dec 18, 2018). Investors should note that most of the winners of 2018 belong to the dividend aristocrat family.
WisdomTree Middle East Dividend Fund – Up 7.4%
The underlying index is fundamentally weighted and measures the performance of companies in the Middle East region that offer regular cash dividends on shares of common stock and the index must be incorporated in and have their shares listed on a major stock exchange in Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar or the United Arab Emirates. The fund yields 4.025 annually.
ProShares Russell 2000 Dividend Growers (SMDV - Free Report) – Down 0.8%
The underlying Russell 2000 Dividend Growth Index targets companies that are currently members of the Russell 2000 Index and have increased dividend payouts each year for at least 10 years. This ETF calls for quality exposure. However, its yield is minimal at 1.87% annually (read: Tech Sell-Off, New Tariff Threat Put Low Beta ETFs in Focus).
The underlying Nasdaq Victory Dividend Accelerator Index seeks to create a diversified portfolio of securities which are forecast to grow dividends. This is another quality ETF which yields only 1.80% annually.
The underlying Fidelity High Dividend Index reflects the performance of stocks of large and mid-capitalization high-dividend-paying companies that are expected to continue to payout and increase their dividends. It yields 3.05% annually.
The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. It yields 1.94% annually.
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5 Market-Beating Dividend ETFs of 2018
The hunt for dividend in the equity market is always steady irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are caught in the web of equity market volatility, the lure for dividend investing increases.
This is what happened in 2018 for global markets. Stocks took a dive in the January-February period on rising rate concerns, remained volatile on trade tensions and the emerging market (EM) pain in the middle (barring some occasional spike) and again slumped in the fourth quarter on fears of a renewed slowdown in global economies. Apart from these, the oil price slump also played foul.
The net result is global markets turning red for the year. The S&P 500 is down about 5.6%, the Dow Jones Industrial Average is off about 4.6% and the NASDAQ Composite is losing about 3.7% (as of Dec 18, 2018) (read: Global Markets in Red for 2018: 8 Inverse ETF Winners).
How Did Dividend ETFs Fare?
Given the volatility in the market, specifically in late 2018, investors rushed toward quality or value exposure. This is where some dividend ETFs shone and were able to beat the broader market.
Investors should note that not all dividend stocks will give them the same protection or serve the same purpose. While the high-yield ones are known for offering hefty current income, these crash in a rising rate environment (read: A Guide to Dividend ETF Investing).
On the other hand, stocks with dividend growth point to quality investing – a pre-requisite to making money in this volatile environment. The Fed’s policy tightening is less threatening to stocks with consistent dividend growth. These companies – known as dividend aristocrats – are usually good for value investing and are in demand when volatility flares up.
Against this backdrop, below we highlight a few dividend ETFs that beat the S&P 500, by offering positive or less negative returns this year (as of Dec 18, 2018). Investors should note that most of the winners of 2018 belong to the dividend aristocrat family.
WisdomTree Middle East Dividend Fund – Up 7.4%
The underlying index is fundamentally weighted and measures the performance of companies in the Middle East region that offer regular cash dividends on shares of common stock and the index must be incorporated in and have their shares listed on a major stock exchange in Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar or the United Arab Emirates. The fund yields 4.025 annually.
ProShares Russell 2000 Dividend Growers (SMDV - Free Report) – Down 0.8%
The underlying Russell 2000 Dividend Growth Index targets companies that are currently members of the Russell 2000 Index and have increased dividend payouts each year for at least 10 years. This ETF calls for quality exposure. However, its yield is minimal at 1.87% annually (read: Tech Sell-Off, New Tariff Threat Put Low Beta ETFs in Focus).
VictoryShares Dividend Accelerator ETF (VSDA - Free Report) – Down 1.1%
The underlying Nasdaq Victory Dividend Accelerator Index seeks to create a diversified portfolio of securities which are forecast to grow dividends. This is another quality ETF which yields only 1.80% annually.
Fidelity High Dividend ETF (FDVV - Free Report) – Down 2.8%
The underlying Fidelity High Dividend Index reflects the performance of stocks of large and mid-capitalization high-dividend-paying companies that are expected to continue to payout and increase their dividends. It yields 3.05% annually.
SPDR S&P Dividend ETF (SDY - Free Report) – Down 3.7%
The underlying S&P High Yield Dividend Aristocrats Index measures the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. It yields 1.94% annually.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>