Dividend ETFs that Look Beyond Large Caps
07/21/2016 9:00 am EST
With investors flocking to the relative safety of bonds, S&P Global Market Intelligence thinks investors should look closely at mid- and small-cap dividend paying securities, suggests Todd Rosenbluth, in S&P The Outlook.
In addition to individual stocks, there are some strong income-oriented ETF choices to consider relative to the 1.57% yield offered by the 10-year Treasury bond.
ProShares S&P Mid Cap 400 Dividend Aristocrats (REGL) holds 46 companies that have raised their dividends for 15 or more consecutive years.
Financials (28% of assets), utilities (20%), and industrials companies (17%) are well represented in the portfolio, but all GICS (Global Industry Classification Standard) sectors except energy have representation.
Investors seeking individual stock ideas can look inside here for inspiration, but should be aware that not all the securities found there are undervalued.
The ETF has a 0.40% expense ratio. For investors seeking a small-cap dividend approach, Wisdom-Tree Small Cap Dividend (DES) is a strong candidate.
While financials (25% of assets) and industrials (17%) are widely held, so are consumer discretionary (17%) securities. The ETF’s holdings include Regal Entertainment (RGC) and Lexmark International (LXK).
Meanwhile, SPDR S&P Dividend (SDY) holds a mix of large-, mid-, and small-cap within the S&P 1500 index that have raised their dividends for 20-plus years.
Financials (24% of assets), industrials (15%), and utilities (14%) are the largest sector exposures for this ETF, which has a 0.35% expense ratio.
We think dividend-growth focused ETFs remain appealing, particularly as the flight to safety has pushed down bond yields.
Todd Rosenbluth, Editor of S&P The Outlook