If you look at just about any list of the highest dividend paying ETFs available, they almost always lean towards the biggest and most well-known names. My ranking of dividend ETFs, which focuses on things like low fees, liquidity, marketability and diversification, follows a similar pattern. The largest ETF providers, including BlackRock, State Street and Vanguard, dominate the list.
According to ETF Action, there are nearly 140 ETFs that implement some type of dividend focus in their strategy. With the 10 biggest dividend ETFs accounting for around 75% of total invested assets within the group and sucking most of the oxygen out of the coin, there are a number of solid dividend ETFs available for investors who don’t get much attention.
We will try to remedy this problem.
Whether through their strategies, the low fees are pure potential, these ETFs deserve a little more attention than they get. For the purposes of defining âunder the radarâ, I will only consider funds with less than $ 1 billion in assets. It’s a bit of an arbitrary cut-off line, but it eliminates all of the large, well-known dividend ETFs from consideration and allows us to focus only on the smaller ones that are trying to break through. Best of all, 9 of the 10 ETFs on this list have matched or beaten the S&P 500 since the start of the year!
Here are my 10 dividend ETFs that should at least be on your radar.
WisdomTree US Total Dividend ETF (DTD)
- Assets under management (in millions): $ 929
- Spending rate: 0.28%
- YTD yield (at 06/25/21): 13.86%
I’ve always enjoyed DTD because in a world where most dividend ETFs focus on high yielding producers or producers or use a combination of factors or themes, its purpose is simple. It offers wide exposure to the universe of dividend-paying US stocks with no frills or real slants.
DTD can invest in small, medium or large capitalization stocks and is dividend weighted. This means that companies that pay higher cumulative cash dividends get a higher weighting in the fund index. It ends up looking a lot like a market cap weighted fund, but has bigger allocations to bigger dividend payers, such as Altria (MO), Philip Morris (PM) and Verizon (VZ).
JPMorgan US Dividend ETF (JDIV)
- Assets under management (in millions): $ 37
- Spending rate: 0.12%
- YTD yield (at 06/25/21): 21.87%
I really didn’t understand why JDIV didn’t put on weight. It’s very cheap, which always tends to grab attention in the ETF world. He has a reasonable goal and an above-average track record in his category. It comes from a well-known ETF issuer. Yet it has only managed $ 37 million in assets since its inception in late 2017.
JDIV uses a rules-based approach that adjusts sector weights based on volatility and performance and selects stocks with the highest returns. Think of it as trying to strike a balance between low risk and high risk, but ultimately producing a product that generates an above average return. Its current yield of 2.8% is more than double that of the S&P 500.
AAM S&P 500 High Dividend Value ETF (SPDV)
- Assets under management (in millions): $ 41
- Spending rate: 0.29%
- YTD return (at 06/25/21): 25.75%
AAM offers a trio of high dividend ETFs – this one and two others focused on developed and emerging markets respectively. As the name suggests, SPDV primarily focuses on two metrics – dividend yield and free cash flow yield, the latter helping to measure balance sheet quality and distribution sustainability. From there, he identifies 5 stocks within each of the 11 GICS sectors to produce a diversified portfolio.
SPDV has the added benefit of paying dividends on a monthly basis, not quarterly, so it can be particularly attractive to investors living on portfolio income. It has a TTM dividend yield of over 3%.
ETF FlexShares Quality Dividend Dynamic Index (QDYN)
- Assets under management (in millions): $ 21
- Spending rate: 0.37%
- YTD yield (at 06/25/21): 17.16%
I’m a fan of several of the FlexShares Dividend ETFs that implement their Dividend Quality Score (DQS) as part of their criteria, which aims to generate sustainable income and avoid dividend traps and sector biases. The DQS examines management efficiency, profitability and cash flow to develop an overall score, while automatically eliminating those in the lowest quintile. Eligible components are optimized to ensure balanced exposures in terms of safety, sector and industry.
QDYN has a noticeable slant in the value of large caps. He was overweight positions in technology, energy and materials, while underweighting communications and utilities.
Siren DIVCON Leaders Dividend ETF (LEAD)
- Assets under management (in millions): $ 44
- Spending rate: 0.43%
- YTD yield (at 06/25/21): 12.58%
Most dividend-growing ETFs look for stocks with a long-term track record of increasing their dividends. No LEAD. It targets the companies most likely to increase their dividends in the future according to the DIVCON dividend health rating system used by the fund index.
The DIVCON dividend health rating system begins by looking at large cap companies that have paid an ordinary dividend and announced a future dividend payout in the past 12 months. It examines a number of quantitative factors in order to predict changes in dividends to produce a company’s DIVCON score, humorously labeled DIVCON 1, DIVCON 2, DIVCON 3, DIVCON 4 and DIVCON 5. All DIVCON 5 shares or 30 stocks with the highest DIVCON scores, the higher of the two, are selected for inclusion in the index.
VictoryShares US Equity Income Enhanced Volatility Weighted ETF (CDC)
- Assets under management (in millions): $ 914
- Spending rate: 0.37%
- YTD return (at 06/25/21): 21.83%
CDC is interesting because it’s not just your standard dividend ETF. The basic strategy is high return / low volatility. It starts with a generic universe of large caps comprising companies that have positive earnings for 4 consecutive quarters. It extracts the top 100 returns from this group and overweight the components with the lowest volatility.
The unique aspect of CDC is that it will pull out of equities when the market drops significantly. If stocks fall more than 8% from their all-time high, they will turn 75% of assets into cash. Depending on the depth of the decline, CDC will begin to increase its position in equities once prices return above a predetermined level. Essentially, it’s a bit of a low buy strategy in addition to a dividend strategy.
Fidelity Dividend Dividends for Rising Rates ETF (FDRR)
- Assets under management (in millions): $ 469
- Spending rate: 0.29%
- YTD return (at 06/25/21): 16.02%
Here is an ETF that could be interesting in the current environment. The FDRR targets large and mid-cap dividend paying companies that 1) are expected to continue to pay and increase their dividends and 2) have a positive correlation of returns with increasing 10-year US Treasury yields.
Stocks are ranked within each sector and given a composite rating based on four fundamental characteristics: high dividend yield, low dividend payout ratio, high dividend growth, and positive correlation of returns with increasing yields of the US Treasury. in 10 years. The stocks with the highest composite scores within each sector are identified for inclusion in the index.
As you might expect, the fund is overweight cyclical and defensive stocks. The highest exposures in the sector are in banks, pharmaceuticals, media, and consumer goods companies, but the heaviest allocation is still in the tech sector.
RiverFront Dynamic US Dividend Advantage ETF (RFDA)
- Assets under management (in millions): $ 125
- Spending rate: 0.52%
- YTD return (at 06/25/21): 14.11%
RFDA is actively managed and could best be described as a multi-factor ETF. He looks for stocks that exhibit several basic attributes, such as value, quality, and momentum. Some of the metrics it will use to determine this are the price relative to the book value of a security when determining value, a company’s cash flow as a percentage of the company’s market capitalization when determining value. determining the quality and relative change in price of a security over three months when determining momentum. Stock selection will also focus on stocks that pay above average.
RFDA is another fund that pays dividends on a monthly basis and offers a current yield of 1.6%.
ALPS REIT Dividend Dogs ETF (RDOG)
- Assets under management (in millions): $ 31
- Spending rate: 0.35%
- YTD return (at 06/25/21): 21.61%
Most investors are familiar with the dividend dog strategy. This is where a fund or index targets the highest performing stocks within the group, often seeking to either capture above-average return or take advantage of a value opportunity. The ALPS Sector Dividend Dogs ETF (SDOG) is probably the most well-known ETF using this strategy, but RDOG does the same in the high yield REIT sector.
RDOG targets the five most profitable REITs in nine REIT segments. It includes a technological REIT segment to help capture the strong growth in wireless towers and data centers, which can also serve as a defensive attribute to the fund, and excludes the mortgage REIT segment to avoid the more rate sensitive REITs. ‘interest and credit spreads.
For now, it is reporting 4.4%.
ProShares Russell 2000 Dividend Growers ETF (SMDV)
- Assets under management (in millions): $ 898
- Spending rate: 0.41%
- YTD yield (as of 06/25/21): 13.88%
This is the small-cap version of the popular Dividend Aristocrats ETF (NOBL) from ProShares. In the small-cap universe, there aren’t as many companies that meet the 25-year dividend growth requirement that typically qualifies a company as an aristocrat, so it requires a comparatively longer growth streak. modest over 10 years.
Like other dividend growth funds, the yields are not very high, just 1.9% currently, but the ability to seize the growth potential of small caps while achieving a steady dividend increase is appealing.
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