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Trade Deal Hit or Miss: Dividend ETFs Are Investor-Friendly
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If there’s any equity ETF segment that almost always comes to investors’ rescue, it is definitely dividend. This year too, the segment has been the silver lining in the cloud of uncertainty.
The latest narratives of the market revolve around renewed trade tensions between the United States and China. The current 10% tariffs on $200 billion worth of Chinese goods jumped to 25% from May 10. Moreover, President Donald Trump has stated that he will impose 25% tax on an extra $325 billion of Chinese goods “shortly,” per CNBC. Against this backdrop, U.S.-China trade talks opened up.
What if the Deal Falls Through?
Investors should note that if there is no deal, then the broader market will go into a tailspin and dividend ETFs — relatively safer zone of investing — will gain. Also, the Fed may cut interest rates if tariff turmoil keeps bothering consumer spending. At least, Atlanta Fed gave such cues.
What if the Deal is Struck?
If both parties manage to reach an agreement, markets will surely soar. This is especially true as valuation got corrected a bit at the start of May on account of a renewed trade skirmish. If markets rally and the economy strengthens, long-term U.S. treasury yields will tend to move north. But even if U.S. Treasury bond yields shoot up, there are plenty of dividend ETFs for investors that offer benchmark-beating yields.
Also, a wave of easy money polices across the globe, especially negative interest rates in a number of economies including the Euro zone and Japan, has kept the appeal for dividend investing alive. The Fed has also opted for a dovish stance this year.
Dividend ETF Bets
So, it is better to bet either on relatively safe dividend products with solid yields that follow unique investment objectives and hone in on value while offering smart yields or those dividend ETFs that promise steady growth. Both ways, investors can overcome a volatile environment like the kind we are facing now.
In this context, we highlight a few ETFs that might look enticing at the current level.
The underlying S&P 500 Low Volatility High Dividend Index comprises 50 securities traded on the S&P 500 Index that historically provided high dividend yields and low volatility. The fund yields 3.98% annually and charges 30 bps in fees.
The underlying FTSE High Dividend Yield Index consists of common stocks of companies that pay dividends, generally higher than average. The fund yields 3.12% annually and charges 6 bps in fees.
The underlying Morningstar Dividend Yield Focus Index offers exposure to high-quality U.S. domiciled companies that have had sturdy financial health and an ability to sustain above-average dividend payouts. The fund yields 3.34% annually and charges 8 bps in fees (read: Top-Ranked Dividend ETFs Crushing the Market).
The underlying Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.The fund charges 8 bps in fees and yields 2.23% annually.
This is yet another low volatile bet. The index is designed to reflect the performance of high-quality U.S. Large and Mid-Cap equities, exhibiting relatively low volatility and high dividend yields. It charges 48 bps in fees and yields about 2.78% annually.
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Trade Deal Hit or Miss: Dividend ETFs Are Investor-Friendly
If there’s any equity ETF segment that almost always comes to investors’ rescue, it is definitely dividend. This year too, the segment has been the silver lining in the cloud of uncertainty.
The latest narratives of the market revolve around renewed trade tensions between the United States and China. The current 10% tariffs on $200 billion worth of Chinese goods jumped to 25% from May 10. Moreover, President Donald Trump has stated that he will impose 25% tax on an extra $325 billion of Chinese goods “shortly,” per CNBC. Against this backdrop, U.S.-China trade talks opened up.
What if the Deal Falls Through?
Investors should note that if there is no deal, then the broader market will go into a tailspin and dividend ETFs — relatively safer zone of investing — will gain. Also, the Fed may cut interest rates if tariff turmoil keeps bothering consumer spending. At least, Atlanta Fed gave such cues.
What if the Deal is Struck?
If both parties manage to reach an agreement, markets will surely soar. This is especially true as valuation got corrected a bit at the start of May on account of a renewed trade skirmish. If markets rally and the economy strengthens, long-term U.S. treasury yields will tend to move north. But even if U.S. Treasury bond yields shoot up, there are plenty of dividend ETFs for investors that offer benchmark-beating yields.
Also, a wave of easy money polices across the globe, especially negative interest rates in a number of economies including the Euro zone and Japan, has kept the appeal for dividend investing alive. The Fed has also opted for a dovish stance this year.
Dividend ETF Bets
So, it is better to bet either on relatively safe dividend products with solid yields that follow unique investment objectives and hone in on value while offering smart yields or those dividend ETFs that promise steady growth. Both ways, investors can overcome a volatile environment like the kind we are facing now.
In this context, we highlight a few ETFs that might look enticing at the current level.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD - Free Report)
The underlying S&P 500 Low Volatility High Dividend Index comprises 50 securities traded on the S&P 500 Index that historically provided high dividend yields and low volatility. The fund yields 3.98% annually and charges 30 bps in fees.
Vanguard High Dividend Yield ETF (VYM - Free Report)
The underlying FTSE High Dividend Yield Index consists of common stocks of companies that pay dividends, generally higher than average. The fund yields 3.12% annually and charges 6 bps in fees.
iShares Core High Dividend ETF (HDV - Free Report)
The underlying Morningstar Dividend Yield Focus Index offers exposure to high-quality U.S. domiciled companies that have had sturdy financial health and an ability to sustain above-average dividend payouts. The fund yields 3.34% annually and charges 8 bps in fees (read: Top-Ranked Dividend ETFs Crushing the Market).
iShares Core Dividend Growth ETF (DGRO - Free Report)
The underlying Morningstar US Dividend Growth Index is composed of U.S. equities with a history of consistently growing dividends.The fund charges 8 bps in fees and yields 2.23% annually.
O'Shares FTSE US Quality Dividend ETF (OUSA - Free Report)
This is yet another low volatile bet. The index is designed to reflect the performance of high-quality U.S. Large and Mid-Cap equities, exhibiting relatively low volatility and high dividend yields. It charges 48 bps in fees and yields about 2.78% 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 >>