enjoy strong investor interest in today's low-yield environment,
but their performance varies greatly.
These funds compete to deliver the highest yield to investors,
which makes perfect sense.
But I wonder how often a fund's total return is overlooked.
Yield is one of the two components of total return. The other is
capital appreciation, or just plain price, if you like.
My message is simple:When shopping for high-dividend yield
funds, by all means, look at the yield, but also compare total
High-dividend-yield ETFs competing in the same market
segment-whether U.S., global, international or emerging-can produce
remarkably different returns even if the yields are similar.
The table below shows this. I picked a representative fund with
comparatively high or low 12-month total return among U.S.
high-yield equity ETFs.
In this case, the yields for the two funds-the WisdomTree
Equity Income ETF (NYSEArca:DHS) and the PowerShares High Yield
Equity Dividend Achievers (NYSEArca:PEY)-are similar, but note that
the returns differ by 5.4 percentage points.
Yield can be measured a half dozen different ways, but the
common denominator-literally-is price. As price falls, yield goes
up. This simple notion is just one more reason to check the total
return when choosing a fund.
A strategist at a fund issuer stopped by our offices recently
and commented on the difference in perception on high yield when it
comes to bonds vs. stocks.
High-yield bonds immediately bring to mind high risk, but
high-dividend yield equities do not. After all, equity dividend
payers are often large, mature firms-well past their frothy growth
phase-that generate consistent cash flows and pass them to their
Still, the examples above show that risk lives here too.
At the time this article was written, the author had no
positions in the securities mentioned. Contact Paul Britt at
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