Exclusive Interview - Investor

5 Top Dividend ETF Picks
Specialty: ETFs
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Published: 2/14/2013
By Sam Stovall, Chief Equity Strategist, Standard & Poor's Capital IQ Equity Research Department
Tickers mentioned: SPLV, SDY, RWO, PFF, LVL
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Here are five high-yielding ETFs that look attractive in the current market environment, courtesy of Sam Stovall, chief equity strategist for S&P Capital IQ Equity Research.

Sam, great to have you with us. 2012 was a low-volatility year, meaning that we didn’t get much in the way of market swings. For those of us looking forward to 2013 and 2014 now, where would you look for an investor who wants to ride on the merry-go-round and not on the rollercoaster?

Well, that’s a good way of putting it, because a lot of investors realize that they’ve been on the sidelines just for too long, waiting for a pullback, or simply because they’ve been nervous about being in the equities market.

My recommendation is you’ve got to be in it to win it, but it’s okay to ride the merry-go-round. Let's focus on what’s called the low-volatility component of the S&P 500, the TSX Composite, the International Developed Index, or even the emerging markets.

The S&P Low Volatility Index ETF (SPLV) takes the 100 companies in the S&P 500 that have the lowest trailing 12-month volatility and just holds onto them. It’s updated every quarter. Over the past five years, while the market was up less than 2%, these stocks were up about 6%. Of course, no guarantee.

So they tripled the market return with less volatility.

Per year, in each of the last five years. From an emerging markets perspective, while the emerging markets index was in negative territory for each of the last five years, the low-volatility version was in positive territory each of the last five years.

By how much?

Minus-9% for the overall emerging market index, whereas a positive low single-digit return for the low-volatility index.

Per year?

Per year.

For the last five years.

That’s right.

So give us some more ETFs for income investors.

Well, if you’re looking for income...I was on your panel the other day, and I was talking about how you can look to the S&P Dividend Aristocrats (SDY). I do own these shares. They’re offering about a 3.3% dividend yield, so you get nice growth with some income.

If you’re looking for a global real-estate offering, the Dow Jones Global REIT Index (RWO)—I own that one as well—offers a nice dividend yield, up in the high 3% or low 4% area.

The S&P Preferred Index (PFF) is another one I happen to own. This is providing a yield of about 6%. Guggenheim Global Dividend Opportunities (LVL) is one I don’t own, but I probably should; it offers a dividend yield of more than 7%. And these are your global dividend opportunities, the higher-yielding dividend stocks within the S&P global indices.

So, they’re big companies.

They’re big companies. A lot of them are from developed foreign nations that pay a pretty high dividend yield. But they’re actually found all over the world.

Related Reading:

How to Find the Best Dividend Stocks

Lessons from the Market's Defensive All-Stars

Look for Rising Payouts in Utilities

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San Francisco
 • August 15 – 17, 2013
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