Why High Dividend, Low Volatility ETFs are Beating the Market

Stocks remain under pressure as high inflation and rising interest rates continue to weigh on investor sentiment. Many investors are looking for safety in defensive areas of the market while dumping high-growth tech stocks that are more sensitive to interest rates.

Dividend paying stocks look attractive to income focused investors in the rising rate environment, which is quite negative for bonds. Dividend stocks also tend to outperform during volatile markets and can reduce volatility of a portfolio.

Adding another screen of low volatility and focusing on high quality companies with steady and growing payouts could be a great strategy for investors. Such ETFs have significantly outperformed the broader indexes this year.

The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) holds 50 least volatile, highest dividend-yielding stocks in the S&P 500 index. The Williams Companies (WMB) and Chevron (CVX) are its top holdings.

The Legg Mason Low Volatility High Dividend ETF (LVHD) invests in stocks with high dividends, low price volatility and low earnings volatility. Lockheed Martin (LMT) and Johnson & Johnson (JNJ) are its top holdings.

The VictoryShares U.S. Large Cap High Div Volatility Wtd ETF (CDL) holds higher dividend paying stocks weighted by inverse volatility. Costco Wholesale (COST) and PepsiCo (PEP) are among the top holdings.

To learn more about these ETFs, please watch the short video above.

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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.