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5 Market-Beating Dividend ETFs of 1H

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If there’s any equity ETF segment that almost always comes to investors’ rescue, then it is definitely dividend. This year too, the segment has been the silver lining in the cloud of uncertainty gathering mainly from trade tensions.

There were two main market movers in the first half of 2019 — U.S.-China trade relation and a dovish Fed. U.S.-China trade relation showed some signs of easing in the first quarter but flared up from May. And citing trade issues and sensing its impact on global growth, the Fed has also kept on dropping hints of policy easing by the end of this year. Not only the Fed, the ECB also harped on the same tune (read: ECB Considers Further Stimulus: ETFs to Top & Flop).

This has brought down bond yields materially. Yield on benchmark 10-year U.S. Treasury yield slipped to 2.05% on Jun 26 from 2.66% recorded at the start of the year, with the lowest half-yearly yield of 2% recorded on Jun 25. Some parts of the yield curve inverted this year on cues of recessionary fears.

The accommodative Fed does good for stocks as there will be 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. So, the past six months were favorable for dividend ETFs as central banks including the Fed have been dovish (read: 6 Dividend ETFs That Beat S&P 500 in the 10-Year Bull Run).

Also, given the volatility in the market owing to trade and geopolitical worries, investors rushed toward quality or value exposure. This is where some dividend ETFs shone and were able to beat the broader market. 

Dividend ETF Winners

Against this backdrop, below we highlight a few dividend ETFs that beat the S&P 500 (up 16.2%) this year (as of Jun 26, 2019).

First Trust Dorsey Wright Momentum & Dividend ETF DDIV – Up 19.3%

The underlying Dorsey Wright Momentum Plus Dividend Yield Index is designed to track the overall performance of the 50 stocks with the highest dividend yield comprising the NASDAQ US Large Mid Index that still maintain high levels of relative strength. The fund yields 2.76% annually and charges 60 bps in fees.

ClearBridge Dividend Strategy ESG ETF (YLDE - Free Report) – Up 19.3%

This ETF is active and does not track a benchmark. The fund is an actively managed strategy that seeks attractive income growth and capital appreciation over time by seeking to invest in dividend paying stocks with positive ESG attributes. It yields 2.18% annually and charges 60 bps in fees.

VictoryShares Dividend Accelerator ETF VSDA – Up 18.2%

The underlying Nasdaq Victory Dividend Accelerator Index forms a diversified portfolio of securities which are forecast to grow dividends. This calls for a more quality exposure. The fund yields 1.40% and charges 35 bps in fees.

First Trust NASDAQ Technology Dividend Index Fund TDIV Up 17.2%

The underlying NASDAQ Technology Dividend Index includes up to 100 Technology and Telecommunications companies that pay a regular or common dividend. The fund charges 50 bps in fees and yields 2.40% annually.

Vanguard International Dividend Appreciation Index Fund ETF Shares VIGI Up 17.2%

The underlying Nasdaq International Dividend Achievers Select Index focuses on high-quality companies located in developed and emerging markets, excluding the United States, that have both the ability and the commitment to grow their dividend over time. The fund charges 25 bps and yields 2.20% annually.

Bottom Line

Uncertainty still prevails in the market. The United States and China are to discuss at the G-20 meet and the OPEC is to decide on the renewal of the output cur agreement. The U.S.-Iran relation is also worsening. So, we can expect some more run for dividend ETFs, be it high-yielding and aristocrats in nature.

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