In part 1 of our commentary, we discussed the current Fundamental Gravity of our “Slowing Drag...
The Best ETFs for High Yield Investors: Part 2
07/11/2018 5:00 am EST
Ned Piplovic, editor of DividendInvestor, has compiled a list of the 11 best exchange-traded funds for investors seeking high dividend yields. In Part 1 of this feature, the ETF expert reviewed six of these funds. Here, he looks at the final 5 best ETF ideas for income investors.
#5: Arrow Dow Jones Global Yield ETF (GYLD)
Dividend Yield: 7.23%
The Arrow Dow Jones Global Yield ETF is a multi-asset class composite index comprised of equally weighted exposure across five global yield categories – Global Sovereign Debt, Global Equity, Global Corporate Debt, Global Real Estate and Global Alternative. The fund has more than $70 million in total assets distributed across more than 160 individual holdings.
The share price fell almost 5% over the last year but the dividend yield of more than 7% overcame the share-price drop to deliver a total return of 2.4%. That positive total return amid share-price erosion is another example of the power of owning a high-dividend-paying fund.
#4: Global X SuperDividend ETF (SDIV)
Dividend Yield: 7.51%
The fund seeks to invest nearly $1 billion of its total assets in 100 of the highest-dividend-yielding equity securities in the world. As of June 2018, the fund had its assets diversified across 104 individual equities. The top 10 holdings combined for less than 13% of total assets.
The fund boosted its annualized dividend for 2018, which is the second consecutive annual hike and fifth increase in the past seven years. The dividend distributions over the past year overcame the share-price drop to deliver a 6% total return over the past 12 months.
#3: UBS ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (DVYL)
Dividend Yield: 7.6%
This sole exchange-traded note (ETN) among the funds on this list is linked to the monthly compounded 2x leveraged performance of the Dow Jones U.S. Select Dividend Index. The ETN has more than $40 million in total assets spread across 100 individual holdings.
The ETN’s share price rose more than 9% in the past 12 months to combine with the dividend distributions for a total return of nearly 17% over the same period. The share price and dividend distributions rose in parallel to combine for total returns of 67% and 161% over the past three and five years, respectively.
#2.: YieldShares High Income ETF (YYY)
Dividend Yield: 8.56%
The YieldShares High Income fund operates a “fund of funds” and tracks the performance of the ISE High Income Index, which provides exposure to the top closed-end funds measured by yield, discount to net asset value and liquidity. The fund had approximately $200 million in total assets spread across 30 individual holdings and cash. The current asset allocation is 75% bonds and 25% stocks.
The ETF’s share price has been fluctuating between $18 and $20 over the past two years. Even though the fund’s share price has fallen 5.6% in the past 12 months, the dividend distributions over the past year more than compensated to deliver a 2.4% total return since June 2017.
#1: Invesco PowerShares KBW High Dividend Yield Financial Portfolio (KBWD)
Dividend Yield: 8.6%
The PowerShares KBW High Dividend Yield Financial Portfolio uses the KBW Nasdaq Financial Sector Dividend Yield Index as its basis. As of January 2, 2018, the fund had total assets of approximately $330 million allocated across 38 individual holdings.
The ETF is on track for a third consecutive annual dividend boost in 2018. While the share price declined 2.1% over the past year, the price gained 13% over the past two years and 7% over the past four months.
Additionally, the company’s robust dividend distribution delivered a 6.3% total return over the past 12 months.
This list of 11 high-yield-dividend-paying funds shows how the payouts can make the difference between investing profitability or taking a loss, if not boosting already positive returns when share prices rise.
Investors may not be able to predict how individual funds and stocks will perform but owning dividend-paying equities helps to reduce the fallout during rough market conditions and enhances total returns regardless of share-price fluctuations.
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