The appeal for dividend ETFs has been on the rise this year on investors’ drive for juicy yields. This is especially true against the backdrop of falling yields, easing monetary policy globally as well as market uncertainty triggered by trade gyrations, geopolitical tensions and global growth slowdown concerns.
The central banks across the globe are taking steps to prop up slowing economic growth that will push yields lower. China’s central bank unveiled a key interest rate reform to lower borrowing costs for companies while Germany is ready to potentially free up 50 billion euros ($82 billion) of extra spending. The European Central Bank is expected to cut rates in September and resume a bond-buying program while the Federal Reserve might signal further rate cuts this year. In the rate cuts stampede, Mexico was the latest to cut interest rates last week (read: Global Stimulus & Huawei Relief Boost Markets: ETFs in Focus).
Amid the turbulent times, dividend paying securities are the major sources of consistent income for investors, creating wealth when returns from the equity market are at risk. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Further, per Goldman Sachs, high dividend paying stocks are trading at their cheapest levels in nearly 40 years relative to low yield stocks. As such, investors should buy the stocks with high dividend yields. Notably, S&P 500 dividends rose 9% in the first and second quarters this year (read: 5 High-Dividend ETFs Available Under $20).
Given this, we have highlighted five ETFs and stocks that yield more than 5% in dividends and could be interesting plays for the coming months.
We have highlighted ETFs that offer broad exposure to a number of sectors with a dividend yield of more than 5% and AUM of above $50 million.
Global X SuperDividend ETF (SDIV - Free Report) – Annual Yield: 10%
This ETF provides exposure to 101 highest dividend paying equities around the world by tracking the Solactive Global SuperDividend Index. About 40% of the portfolio is allocated to United States while Australia rounds off the next spot with 15.1% share. The product has amassed $892.8 billion in its asset base and sees good trading volume of about 374,000 shares a day on average. Its expense ratio is 0.58%. The fund has a Zacks ETF Rank #4 (Sell) with a Low risk outlook.
Global X SuperDividend U.S. ETF (DIV - Free Report) – Annual Yield: 7.59%
This fund provides exposure to 50 of the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index. Mortgage REITs, consumer staples, MLPs and communication services are the top four sectors accounting for double-digit exposure each. The product has amassed $510.4 million in its asset base while trading in good volume of about 131,000 shares. It charges 45 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Low Beta ETFs for a Volatile Market).
First Trust Dow Jones Global Select Dividend Index (FGD - Free Report) – Annual Yield: 6.72%
This ETF tracks the Dow Jones Global Select Dividend Index, which is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index. It holds 99 stocks in its basket with key holdings in financials, consumer cyclicals and telecommunication services. It has amassed $503.1 million in its asset base and charges 58 bps in annual fees from investors. Volume is moderate trading in average daily volumes of 97,000 shares. The fund has a Zacks ETF Rank #4 with a Low risk outlook.
FlexShares Quality Dividend Defensive Index Fund (QDEF - Free Report) – Annual Yield: 6.46%
This product fund follows the Northern Trust Quality Dividend Defensive Index, which offers exposure to a high-quality income-oriented portfolio of U.S. stocks with an emphasis on long-term capital growth and a beta higher than the Northern Trust 1250 Index. In total, the fund holds 162 stocks in its basket with key holdings in information technology, financials, consumer discretionary, health care and consumer staples. QDEF has $407.1 million and trades in a paltry volume of about 25,000 shares. It charges 37 bps in expense ratio (read: Quality ETFs for Volatile Markets).
WBI Power Factor High Dividend ETF (WBIY - Free Report) – Annual Yield: 6.03%
This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket with key holdings in consumer cyclical, financial services, technology, energy, and communication services. The product has accumulated $89.2 million in its asset base and charges 70 bps in annual fees. It trades in a lower volume of 35,000 shares a day on average.
We have chosen five top picks using the Zacks Stock Screener that fits our criteria — a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Value Style Score of A or B. Our chosen stocks are:
Vector Group Ltd. (VGR - Free Report) – Annual Yield: 13.44%
This Florida-based company is principally engaged in the manufacture and sale of cigarettes and the sale of information processing systems. Vector Group has a Zacks Rank #1 and a market capitalization of $1.7 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.
Delek Logistics Partners L.P. (DKL - Free Report) – Annual Yield: 11.28%
This Tennessee-based company owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It has a market capitalization of $750.7 million and has a Zacks Rank #2.
AllianceBernstein Holding L.P. (AB - Free Report) – Annual Yield: 8.19%
This New York-based company is a publicly owned investment manager that provides diversified investment management services, primarily to pension funds, endowments, foreign financial institutions, and to individual investors. It has a Zacks Rank #2 and a market capitalization of $2.6 billion.
Buckeye Partners L.P. (BPL - Free Report) – Annual Yield: 7.31%
With a market cap of $6.3 billion, this Texas-based company owns and operates liquid petroleum products pipelines in the United States and internationally. It has a Zacks Rank #2.
Enbridge Inc (ENB - Free Report) – Annual Yield: 6.64%
This energy infrastructure company in Canada and the United States has a market capitalization of $68.2 billion and a Zacks Rank #2.
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