Heightened volatility has shaken the stock market badly in recent months and pushed the S&P 500 on the brink of a bear market (down 18% from its peak early this year). The Nasdaq Composite Index is also in a bear market (down 22% below its record reached in August) while Dow Jones logged in its worst week since the financial crisis in 2008.
The combination of factors including lingering U.S.-China trade tensions, slowing economic growth in Europe and Japan, troubles in emerging markets, threats of global slowdown as well as slide in oil price have dampened demand for riskier assets.
The sell-off worsened following the Fed's less-expected dovish move in the latest FOMC meeting and threats of an extended government shutdown. Even the holiday optimism has failed to drive the stocks higher, indicating that there is no signs of Santa Claus rally this year. The market turbulence pushed the S&P 500 to record its first annual loss in a decade while Dow Jones logged its worst year since 2008.
However, the American economy is on track this year to expand at the fastest pace in 13 years thanks to robust job creation, strong GDP growth, a 50-year low unemployment rate, solid wage gains, as well as rising consumer and business confidence. Against such a backdrop, nothing seems a better strategy than picking dividend-focused products (read: 5 Market-Beating Dividend ETFs of 2018 ).
Dividend-focused products offer safety in the form of payouts while at the same time providing stability as mature companies are less volatile to large swings in stock prices. Dividend paying securities are the major source of consistent income for investors to create 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.
Here, we have highlighted 10 most popular dividend ETFs for investors seeking yields and returns in a rocky market.
Vanguard Dividend Appreciation ETF VIG
This is the largest and most popular ETF in the dividend space with AUM of $27.8 billion and average daily volume of about 929,000 shares. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high quality stocks that have a record of raising dividend every year. It holds 182 securities in the basket, with none accounting for more than 4.5% share. The fund charges 8 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 4 Recession-Proof ETFs to Buy Right Away ).
Vanguard High Dividend Yield ETF VYM
This fund provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 400 securities, the product is pretty well spread out across components as each holds no more than 3.9% of the assets. It has amassed $20.9 billion in its asset base while trading in volume of 1.1 million shares a day on average. Expense ratio comes in at 0.08%. VYM has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Select Dividend ETF DVY
This fund provides exposure to the high dividend-paying U.S. equities with a 5-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 98 securities in its basket with each accounting for no more than 2.2% of assets. The ETF has AUM of $16.2 billion and average daily volume of around 711,000 shares. It charges 39 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR S&P Dividend ETF SDY
With AUM of $15.5 billion and average daily volume of 594,000 shares, this fund provides a well-diversified exposure to 111 U.S. stocks that have been consistently increasing their dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.4% of the assets. The fund charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Large-Cap ETF Hits New 52-Week High ).
Schwab U.S. Dividend Equity ETF SCHD
This product offers exposure to 117 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. The fund is well spread across components, with none holding more than 5.7% of assets. It charges 7 bps in annual fees and trades in solid volume of about 896,000 shares a day. It has a AUM of $7.6 billion and a Zacks ETF Rank #3 with a Medium risk outlook (read: Wall Street Shrugs Off Trade Fears: 6 Large-Cap ETF Picks ).
iShares Core High Dividend ETF HDV
This ETF offers exposure to 75 high quality and high dividend stocks and tracks the Morningstar Dividend Yield Focus Index. It is concentrated on the top firm with nearly 10% exposure while other firms hold less than 7.7% share each. HDV is among the largest and most popular funds in the space with an AUM of around $6.4 billion and trades in a solid volume of around 602,000 shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Solid High Dividend Value ETFs & Stocks to Buy Now ).
iShares Core Dividend Growth ETF DGRO
This fund provides exposure to companies having a history of consistently growing dividends by tracking the Morningstar US Dividend Growth Index. It holds 480 stocks in its basket with each accounting for less than 3% share. The fund has accumulated $4.7 billion in its asset base and trades in solid volumes of about million shares. It charges 8 bps in fess per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 4 ETFs to Play Key Events in Q4 ).
First Trust Value Line Dividend Index Fund FVD
This ETF tracks the Value Line Dividend Index, giving investors exposure to about 185 companies that have a Value Line Safety Ranking of #1 or 2. This results in an equal-weight approach for individual securities albeit with some concentration risk from a sector look. The fund is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. It holds 182 securities in its basket and has accumulated $4.3 billion in its asset base. The ETF sees solid volume of about 585,000 shares a day on average. It has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares International Select Dividend ETF IDV
This product offers exposure to established, high-quality international companies that have provided consistently high dividend yields over time. It tracks the Dow Jones EPAC Select Dividend Index and holds 101 stocks in its basket with none accounting for more than 6.2% share. From a country look, United Kingdom and Australia take the top two spots with 24.3% and 15.9% share, respectively while other makes up for single-digit allocation each. IDV has amassed $3.8 billion in its asset base while trading in volume of 709,000 shares per day on average. It has an expense ratio of 0.50%.
ProShares S&P 500 Aristocrats ETF NOBL
This product provides exposure to companies that have raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. It holds 53 securities in its basket with each accounting for no more than 2.1% share. NOBL has amassed $3.5 billion in its asset base and trades in a volume of around 487,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook.
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