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There’s sustainability in these dividend ETFs


Jhe S&P 500 is down 17.4% year-to-date, leading many investors to believe there’s nowhere to hide in the equity world.

They are not wrong to feel this. After all, borderline bear markets test the soul of investors. To make matters worse for income investors — or those seeking respite from volatility — is that with the Federal Reserve raising interest rates, bonds are crashing. The widely followed Bloomberg Barclays US Aggregate Bond Index is down 10% this year.

Fortunately, there are places investors turn to and one of the most credible options is also one of the best known: dividend stocks. To be fair, not all dividend-paying stocks and exchange-traded funds are trading higher this year. Many are not. However, many of them outperform the broader market – which is admittedly not a difficult task – while some generate positive returns.

These are points to consider, especially with falling bonds and other interest rate increases underway. Consider the following dividend ETFs to weather these tough times.

ALPS Sector Dividend Dogs ETF (SDOG)

the ALPS Sector Dividend Dogs ETF (SDOG) is a star among ETFs this year, dividends and otherwise. A year-to-date of 1% doesn’t sound like a lot, but in 2022, it’s downright impressive.

“Certainly, some of the outperformance of income investments can be attributed to the avoidance of weaker sectors like technology and communication services,” writes Alerian analyst Stacey Morris.

This goes through SDOG’s essentially equal-weight sectors (it excludes real estate), meaning the fund is underweight high-growth sectors relative to the broader market while being overweight like energy and goods. basic consumption. Additionally, many of the SDOG constituents have the potential for payout growth, indicating that there is an element of quality to this high-dividend, value ETF.

“Quality-focused dividend strategies tend to be more defensive and less exposed to technology, which has supported performance,” Morris concludes. “As interest rates rose, bonds fell unsurprisingly, but the benchmark bond indices shown still performed better than the broader market.”

WisdomTree U.S. Large Cap Dividend Fund (DLN)

the WisdomTree U.S. Large Cap Dividend Fund (DLN) is not in the dark this year, but it largely outperforms the S&P 500 while yielding 2.16%. Approaching his 16and anniversary, DLN has long been seen as a value strategy – a positive trait today – but it has a penchant for topping the broader value ETF category.

DLN “has taken a unique approach by weighting the dividends of the largest companies in the US stock market. Due to its emphasis on dividends, it has been classified as a value strategy throughout its lifetime,” notes Brian Manby, analyst at WisdomTree. “Although value strategies have seen headwinds in the decade and a half since the global financial crisis (due to the allure of growth strategies in a historically low interest rate environment), DLN has remained one of the top performers within its value cohort.”

Unsurprisingly, the $3.3 billion DLN is underweight in growth sectors and fortunately, like the aforementioned SDOG, it is overweight in consumer staples and energy. DLN also pays a monthly dividend.

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) is another star of the dividend ETF fray this year, as evidenced by a 2.58% gain and which comes with the added benefit of a 3.79% yield. As the name suggests, SPHD marries two popular investing concepts and the pair is clearly working for investors this year.

“Low-volatility stocks and healthy dividends often go hand in hand,” Jesse Pound reports for CNBC. “These companies tend to have stable, predictable earnings that can act as safe havens during market downturns, but they can underperform when investors expect economic growth to pick up.”

Unsurprisingly, SPHD is heavily allocated to defensive sectors such as consumer staples and utilities. Boring, but beautiful in the current climate. Like the aforementioned DLN, SPHD offers a monthly payment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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