Surveying the Dividend ETF Landscape
April 3rd at 9:21am by Tom Lydon
Dividend exchange traded funds have attracted investors looking for yield and a tilt to more defensive stocks and sectors. However, as a result of different index approaches, the funds can offer varying exposures to dividend paying equities.
Some dividend ETFs weight individual stocks by their dividend yield, or simply by total dividend paid in a dollar amounts. Still other dividend ETFs weight companies by size or market cap. [Some High-Yield Dividend ETFs Off the Beaten Path]
Indices that follow a dividend yield-weighted methodology produce more income, but the strategy comes with greater risks. [Fast and Furious Dividend ETF Growth to Start 2013]
Specifically, the funds would lean toward more distressed, high-yield and small-cap firms than other types of broad equity ETFs.
For example, a few dividend yield-weighted ETFs include:
- SPDR S&P Dividend ETF (NYSEArca: SDY): 2.82% 12-month yield
- SPDR S&P International Dividend ETF (NYSEArca: DWX): 6.30% 12-month yield
- WisdomTree Dividend ex-Financials Fund (NYSEArca: DTN): 3.88% 12-month yield
In contrast, ETF indices weighted by total dividends paid would lean toward large-caps since larger stocks would dish out the most overall dividends. Additionally, the large-cap tilt provides lower volatility in times of market distress.
For instance, some dividend weighted ETFs include:
- iShares Dow Jones Select Dividend (NYSEArca: DVY): 3.43% 12-month yield
- WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM): 3.31% 12-month yield
- iShares High Dividend Equity Fund (NYSEArca: HDV): 3.22% 12-month yield
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.