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Some Dividend ETFs Outperforming The S&P 500

By: Investor's Business Daily
Posted: 5/16/2013 5:46:00 PM
Referenced Stocks: DXJ;ED;JNJ;KO;SDY

So much for stodgy, slow-moving dividend stocks.

Of nearly 50 dividend-focused exchange traded funds, 18 are outperforming the S&P 500 this year.

TheSPDR S&P Dividend ( SDY ) ETF, which mirrors the S&P High Yield Dividend Aristocrats Index, was up nearly 20% from Jan. 1 to Wednesday's close. The S&P 500, by comparison, was up 16.3%.

The Dividend Aristocrats fund is the largest dividend ETF by market value. Its holdings include some of the most trusted dividend providers, such asConsolidated Edison ( ED ),Johnson & Johnson ( JNJ ) andCoca Cola ( KO ).

But it's not the best performer.

A look at the dividend ETFs and exchange traded notes in IBD's database finds thatWisdomTree Japan Hedged Equity ( DXJ ) has soared nearly 40%. The fund -- which offsets the yen risk -- has benefited from a strong Nikkei since a major stimulus plan was announced. Mitsubishi UFJ Financial Group, Nomura Holdings and the Japanese automakers are some of its largest holdings.

That's a sharp contrast to other foreign dividend ETFs, which by and large are lagging.

The bottom of the year-to-date performance table shows WisdomTree China Dividend Ex-Financials (CHXF) (down about 7%),iShares Emerging Markets Dividend (DVYE) (down 5%) andSPDR S&P Emerging Markets Dividend (EDIV) (down 4%).

No doubt, that's a reflection of relative weakness in most major emerging markets.

Another big gainer this year isALPS Sector Dividend Dogs (SDOG), which follows the "dogs of the Dow" investment strategy. It's up about 20%.

The original strategy involves buying the 10 stocks with the highest dividend yields in the 30-stock Dow. But ALPS uses the S&P 500 as its starting point.