While the stock market has recorded an incredible rally in 2023, topping all expectations, its journey in the second half has been rough. We have just kicked off October after enduring the worst month of 2023. The S&P 500 lost about 5%. The Nasdaq Composite is off nearly 6% in September. The Dow logged a 3.8% decline.
The fizzled excitement for AI, the concentration of rally in some few large-cap tech stocks and still-present inflationary pressure indicate potential bubbles. Although inflation has cooled from its highs last year, there is still a significant risk that it could rebound due to lingering economic pressures, such as rising oil prices on geopolitical concerns.
If inflation remains sticky and interest rates remain higher for longer, the sectors (most importantly the tech sector) that have driven this year’s stock market rally might experience a pullback. If this is not enough, the U.S. banking industry is far from stable.
Recent reports indicate consumers’ credit card balances surpassed $1 trillion and marked a record high. Moreover, a significant portion of credit card borrowers (51%) have been unable to pay off their entire balance each month, resulting in accruing interest. No wonder, consumer confidence is not rock-solid.
Why High-Dividend ETFs Are Good Bets
High dividend ETFs can be a good investment during times of economic uncertainty, as they provide a steady source of income regardless of market conditions. These types of stocks and ETFs typically pay out a higher percentage of their profits as dividends than other stocks, implying that they can make up for capital losses, if there are any.
Several high-dividend foreign and emerging markets ETFs have fared better than the S&P 500 in September as the Fed indicated that interest rates are peaking in the United States. Such cues probably led to the views that further strength in the greenback is limited. This, in turn, boosted the emerging market investing. Moreover, the Chinese economy has turned and its all-important manufacturing sector has returned to growth.
Against this backdrop, we highlight a few high-dividend ETFs that are on sale currently as these have a lower P/E than the S&P 500 (i.e.17.86X). These ETFs have beaten the S&P 500 (down about 5%) past month (as of Sep 29, 2023). These ETFs yielded better than or almost in line with the benchmark U.S. treasury yield (i.e. 4.59%) as of Sep 29, 2023.
ETFs in Focus
Global X SuperDividend U.S. ETF DIV
P/E: 10.91X
Yield: 7.64%
One-Month Return: Negative 1.86%
First Trust Morningstar Dividend Leaders ETF FDL
P/E: 10.11X
Yield: 4.54%
One-Month Return: Negative 2.98%
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
P/E: 11.77X
Yield: 5.08%
One-Month Return: Negative 4.85%
Vanguard International High Dividend Yield ETF (VYMI)
P/E: 7.70X
Yield: 4.53%
One-Month Return: Negative 1.75%
SPDR S&P Emerging Markets Dividend ETF EDIV
P/E: 7.90X
Yield: 4.65%
One-Month Return: Negative 0.12%
FlexShares International Quality Dividend Defensive ETF (IQDE)
P/E: 16.13X
Yield: 4.83%
One-Month Return: Negative 2.19%
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Get it free >>First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports
SPDR S&P Emerging Markets Dividend ETF (EDIV): ETF Research Reports
SPDR Portfolio S&P 500 High Dividend ETF (SPYD): ETF Research Reports
Global X SuperDividend U.S. ETF (DIV): ETF Research Reports
Vanguard International High Dividend Yield ETF (VYMI): ETF Research Reports
FlexShares International Quality Dividend Defensive ETF (IQDE): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
