It is not unreasonable to say that many income investors
already know that 2013 is shaping up to be a fine year on the
dividend growth front.
For example, the U.S. dividend stream in cash terms currently
stands at $342 billion, above the $329 billion seen in late
November and well above the prior peak of $288 billion in
according to recent research from ETF sponsor
With the number of dividend
proliferating at a rapid clip, investors face myriad choices. And
while abundant choice can be viewed as a good thing, not all
dividend ETFs are created the same, leaving investors to ponder
which funds are best suited for their individual investment
Among dividend ETFs, a familiar choice investors face is
choosing between those funds that use length of dividend increase
as the primary screening criteria and rival ETFs that use an
alternative methodology. Other dividend ETF weighting
methodologies currently include weighting by yield or dividends
paid in cash terms.
Here is a look at the total returns, including paid dividends,
of some of the most popular U.S.-focused dividend ETFs this
Heading into the start of trading Monday, the top-performing
major dividend ETF was the SPDR S&P Dividend ETF (NYSE:
). SDY, is the second-largest dividend ETF by assets under
management, with over $10.8 billion. Home to 86 stocks, SDY
tracks the S&P High Yield Dividend Aristocrats Index
(SPHYDATR), which requires constituent companies to have raised
dividends for at least 25 consecutive years.
SDY allocates over 19 percent of its weight to the consumer
staples sector and does an admirable job of spreading its weight
around as its largest holding receives an allocation of just 3.12
percent. Familiar top-10 holdings include AT&T (NYSE:
), Clorox (NYSE:
) and Johnson & Johnson (NYSE:
). Overall, it is hard to argue with the fact that SDY has jumped
12.8 percent this year.
Two other ETFs that use dividend increase as their primary
screening metric have also performed well this year. The Vanguard
Dividend Appreciation ETF (NYSE:
) is the largest dividend ETF by assets and tracks an index that
requires a minimum of 10 years of boosted payouts. The
PowerShares Dividend Achievers Portfolio (NYSE:
) also has a the decade minimum of higher dividends for its
VIG is up nearly 10 percent year-to-date while PFM has
returned 10.6 percent. Looking at PFM, since it is arguably the
unheralded member of this trio, the ETF has nearly $286 million
in assets and an expense ratio of 0.6 percent, well above the
fees on SDY (0. 35 percent) and VIG (0.13 percent). PFM is
another staples-heavy play as it allocates 24.7 percent to that
The ETF also features eight Dow stocks among its top-10
holdings with PepsiCo (NYSE:
) and Abbott Labs (NYSE:
) being the exceptions.
Turning to some dividend ETFs that do things a little bit
differently, the WisdomTree Equity Income Fund (NYSE:
) has climbed 11.4 percent this year
while being less volatile than all three of the aforementioned
DHS tracks an index that includes "securities ranking in the
highest 30% by dividend yield are selected for inclusion. The
index is dividend weighted annually to reflect the proportionate
share of the aggregate cash dividends each component company is
projected to pay in the coming year, based on the most recently
declared dividend per share," according to WisdomTree.
DHS charges 0.38 percent per year and features many of the
same holdings as PFM, SDY and VIG. However, DHS has an advantage
over those funds because
it pays a monthly dividend
. That is good news for retirees looking for monthly income or
those income investors looking to put the power of compounding to
work for themselves faster.
In what is perhaps a surprise given the solid performance of
the financial services sector this year, the WisdomTree Dividend
ex-Financials Fund (NYSE:
) checks in with a year-to-date gain of almost 11 percent while
also being less volatile than SDY and VIG.
DTN, which also charges 0.38 percent per year and also
features a monthly dividend, has one way of making up for the
rally in bank stocks and restoration of that sector's dividends.
The ETF's second-largest sector weight is technology at 13.15
percent. In dollar terms, technology is now the largest dividend
sector in the U.S. and the one many analysts to be a primary
driver of dividend growth going forward due to the strong balance
sheets at many large-cap U.S. technology firms.
For those wondering, Apple (NASDAQ:
) is not a member of DTN's 85-stock lineup.
The PowerShares High Yield Equity Dividend Achievers Portfolio
) cannot be ignored. The $307 million fund tracks an index that
"is comprised of 50 stocks selected principally on the basis of
dividend yield and consistent growth in dividends,"
according to the issuer
Focusing on yield means PEY has a 30-day SEC of 4.22 percent,
by far the best in the group mentioned here. It is also the
second-best year-to-date performer behind SDY with a gain of 12.2
percent. PEY also pays a monthly dividend, but there is a
trade-off. The ETF's yield bias and a 52.5 percent weight to
small-caps means PEY is easily the most volatile fund mentioned
For more on dividend ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
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