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4 Dividend ETFs to Pick Amid Moderately Dovish Fed Minutes

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The Fed’s latest meeting on March 19-20 was a dovish one and indicated that it didn’t see a likelihood for any hikes through 2019. However, that also indicated that they would be closely monitoring the economic data, most of which are expected to improve over the year. Futures markets are currently pricing in no chance of a hike and in fact there was a 55% probability that the Fed might cut rates.

However, the minutes do not hint at rate cuts. The meeting summary noted that “some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.”

But even in this situation, rates rate is likely to remain subdued in the near term. Investors should note that, in March, federal funds rate projections for 2019 were trimmed to 2.4% from 2.9% while the same for 2020 and 2021 was cut to 2.6% from 3.1%. For the longer term, the rate is projected at 2.8%, unchanged from the December forecast.

The accommodative Fed should do good for stocks as there will be a few more months of cheap money inflows. Among stocks, income-producing securities might do even better for investors in search of solid and steady current income. The past decade was especially favorable for dividend ETFs as central banks including the Fed has been ultra-dovish (read: 6 Dividend ETFs That Beat S&P 500 in the 10-Year Bull Run).

Research shows that dividend stocks often beat their non-dividend paying counterparts over longer periods. According to Chicago-based Greenrock Research, a portfolio with the top 20% of the S&P 500 companies ranked by dividend yield and weighted by market capitalization, outperformed the overall S&P 500 by 2.13 percentage points annually from 1995 to 2018.

Global X SuperDividend U.S. ETF (DIV - Free Report)  

The underlying INDXX SuperDividend US Low Volatility Index tracks the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend-yielding equity securities in the United States. Utilities (23.5%), Mortgage REITs (21.4%), MLPs (14.2%) and Consumer Staples (12.3%) are the top four sectors of the fund. The fund yields 6.85% annually and charges 45 bps in fees.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report)

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. Real Estate and Consumer Discretionary get about 35% of the fund while Utilities and Energy also at about 12% each. The fund yields 4.19% annually and charges 7 bps in fees (read: Top-Ranked Dividend ETFs Crushing the Market).

FlexShares Quality Dividend Defensive Index Fund (QDEF - Free Report)

The underlying Northern Trust Quality Dividend Defensive Index looks to provide exposure to a high-quality, income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is generally between 0.5 to 1.0 times that of the Northern Trust 1250 Index that are selected based on expected dividend payment and fundamental factors. Technology (22.6%), Financials (12.3%), Healthcare (11%) and Consumer Discretionary (10.9%) hold the top four spots.

WisdomTree U.S. SmallCap Dividend Fund (DES - Free Report)

The underlying WisdomTree U.S. SmallCap Dividend Index is a fundamentally weighted index measuring the performance of the small-capitalization segment of the U.S. dividend-paying market. The fund charges 38 bps in fees and it yields 2.81% annually (read: 5 Hot Dividend ETFs Worth Buying Now).

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