The U.S. ETF industry has been gaining immense popularity over mutual funds or any other alternative investment fund thanks to its transparency, liquidity, tax effectiveness and cost efficiency. As per the data from ETFGI, the ETF industry reached to a record high of $1.76 trillion at the end of April with 1,577 products from 57 providers on three exchanges.
Though the industry has gathered $34.9 billion in new capital since the start of the year through April, it is well below $65.6 billion in net inflows recorded in the same period a year ago. Equity products have been leading the way higher with net inflows of $18.3 billion, followed by $13.4 billion inflows in fixed income products. Commodity ETFs/ETPs were the biggest laggards with $1.4 billion of asset outflows.
Despite the fact that a downslide in momentum stocks and geopolitical risk in Russia are keeping stock market returns at check, most investors are still pouring their money into the equity ETFs on a flurry of increased mergers & acquisitions and an improving job market.
On the other hand, cautious investors prefer to invest in bond ETFs as yields have declined to much lower levels and the Fed has committed to keep short-term interest rates near zero levels for a considerable period of time to support the gradually improving economy (read: 3 Bond ETFs Surging as Interest Rates Tumble).
Given mixed fundamentals in both equity and bond markets, a low interest rate environment and Fed tapering, investors are chasing higher income and looking for stability in their portfolios, making dividend paying products attractive investment opportunities.
As such, two ETFs (one from the equity and another from the bond space) yielding higher dividends have hit the $1 billion mark this month. Below, we have highlighted those in greater detail:
WisdomTree MidCap Dividend Fund (NYSEARCA:DON)
This fund offers concentrated exposure to the mid cap segment of the broad U.S. dividend-paying market. It follows the WisdomTree MidCap Dividend Index, which is dividend weighted annually to reflect proportional share of cash dividend that each company is expected to pay in the coming year based on the most recently declared dividend per share.
The product was launched in June 2006 and topped $1 billion in AUM in early May. It charges 38 bps in annual fees from investors and trades in moderate volume of about 54,500 shares a day on average. Additionally, DON is the highest dividend payer in the U.S. mid cap space, yielding 2.31% annually.