After being depressed by the Fed’s taper talks, the appeal for dividend stocks and ETFs have returned over the past few months. This is especially true as the fears of interest rate hike has abated and Treasury yields have once again fallen to lower levels despite the Fed paring its stimulus.
Though the broad equity markets are hovering around their record highs, uneven economic growth, uncertain Fed policy, China slowdown and geopolitical tensions in Ukraine and Iraq are weighing on the market. Given this, investors are becoming defensive and shifting their focus to products that provide stability and safety in a rocky market.
Dividend products offer both of these world’s – safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in the stock prices. The dividend paying securities are the major sources of consistent income for investors when returns from equity market are at risk. This is especially true as the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Below, we have highlighted three dividend ETFs that are clearly outpacing the broad market indices by wide margins and are considered solid options for investors searching for yields in a low rate environment as well as some returns in uncertain markets (read: Dividend ETFs Explained: What Investors Need to Know).
Global X SuperDividend U.S. ETF (NYSEARCA:DIV)
This fund provides exposure to the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index. It has amassed $109.3 million in its asset base while trades in small volume of less than 35,000 shares. The ETF charges 45 bps in fees per year from investors.
Holding 50 securities in its basket, the product is widely diversified across each component as none of these holds more than 2.45% of assets. However, utilities accounts for one-fourth of the portfolio, closely followed by energy (20%) and real estate (19%). DIV hit its fresh high of $29.00 yesterday and moved higher by about 14.2% in the year-to-date time period. The ETF has high annual dividend yield of 5.5%.