Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Maximize Return: Buy These High Yield Cheap Dividend ETFs

As Q2 spells optimism around the broader market with the S&P 500 and Dow Jones Industrial Average touching the highs of 2016 on April 19, the buzz about stretched valuations will surface all over again. After all, the S&P 500 is now trading about 16% higher than its 52-week low level.

If the trend continues for a few more days, investors looking for cheap stocks, going by the securities’ pricing performance and valuation, may be disheartened. However, there is another way by which investors can enjoy bargains, i.e. expense ratio, though this holds true for fund investing.

We all know that expense ratio is the annual fee associated with the fund. Investors thus can tap those ETFs that are dirt cheap, but offer a high yield. Investors should note that the yields on 10-year U.S. Treasury bonds are hovering below the 2% mark for last few days.

A dovish Fed which vowed not to act fast on policy tightening given the global market turmoil and persistent issues in the oil patch put a lid on U.S. Treasury yields. Also, a volatile stock market has put the consistency of capital gains in question.

This has bolstered demand for high dividend products as yield-hungry investors are relying more on regular source of current income. Beyond the border, the wave of easy money polices, be it in Europe or Asia, has brightened the appeal for dividend investing (read: Popular Dividend-Focus ETFs to Buy Now).

These cash payouts can safeguard one’s portfolio in bear market movements and ensure steady income in a low yield backdrop. So, what could be better bets than high yield cheap dividend ETFs to beef up portfolio returns (read: Winning ETF Strategies for Q2)?
In this vein, we highlight three high dividend ETFs that charge very low as annual fees.

Vanguard High Dividend Yield ETF (VYM)

This large cap centric fund provides exposure to the high yielding U.S. dividend stocks by tracking the FTSE High Dividend Yield Index. The $13.4 billion-ETF is one of the largest and most popular choices in the dividend ETF space. Expense ratio comes in at 9 bps, which is “92% lower than the average expense ratio of funds with similar holdings,” as per the issuer (read: 3 Excellent Dividend ETFs for Growth and Income).

Holding 480 securities, the product does not put more than 5% share in each stock. In terms of sectors, the fund is widely spread out with consumer goods, technology, financials, industrials, health care and oil & gas taking double-digit exposure each in the basket. The Zacks Rank #2 (Buy) ETF’s yield is 3.11% (as of April 19, 2016). The fund advanced 13.7% in the last three months (as of April 19, 2016).

iShares High Dividend ETF (HDV)

This product provides exposure to 73 dividend stocks by tracking the Morningstar Dividend Yield Focus Index. From a sector look, this $4.93-billion fund is well spread out with double-digit exposure to Energy, Consumer Staples, Health Care and IT. It charges 12 bps in fees per year. This Zacks Rank #1 (Strong Buy) ETF yields 3.60% annually (as of April 19, 2016). The fund was also up 13.7% in the last three months (as of April 19, 2016).

SPDR S&P 500 High Dividend ETF (SPYD)
 
The fund tracks the S&P 500 High Dividend Index, which is designed to measure the performance of about 80 top dividend-paying securities listed on the S&P 500 Index, based on dividend yield. It charges 12 bps in fees. The dividend yield of the index is 4.33% (as of April 18, 2016).

The fund does not put more than 1.85% in any stock. The top sectors are electric utilities (13.87%) and multi-utilities (12.48%), though REITs have considerable exposure in the fund. Making its debut in late October 2015, the fund has amassed about $16 million in assets. The fund tacked 19.1% gains in the last three months (as of April 19, 2016).
 
There is yet another ETF Schwab US Dividend Equity ETF (SCHD) which charges just 7 bps in fees; but yields relatively lesser at about 2.9%. This fund has a Zacks ETF Rank #3 (Hold).


 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
VANGD-HI DV YLD (VYM): ETF Research Reports
 
ISHARS-CR HD (HDV): ETF Research Reports
 
SPDR-SP500 HD (SPYD): ETF Research Reports
 
PWRSH-SP5 HI DV (SPHD): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report