S&P 500 exchange traded funds were fighting to stay in positive territory for the year in Wednesday’s volatile trading.
But Standard & Poor’s equity analyst Todd Rosenbluth notes the broad benchmark is stronger with a positive return for 2011 when factoring in dividends. [S&P 500 ETFs Test Support]
“Investors are likely to find high-yielding stocks in various sectors, and through certain ETFs they can balance out the risk and rewards at a relatively modest cost,” he wrote in a report Wednesday. “Dividends remain a key focus of cash flow for large-cap companies, and with interest rates remaining relatively modest, investors are eager to receive these quarterly checks.”
Stock investors alarmed over the global debt crisis and volatile markets have moved into ETFs tracking defensive sectors and dividend-focused indexes. [Defensive Sector ETFs in Favor]
Dividend ETFs include iShares Dow Jones U.S. Select Dividend (NYSEArca: DVY), Vanguard Dividend Appreciation (NYSEArca: VIG), SPDR S&P Dividend (NYSEArca: SDY), WisdomTree Large Cap Dividend (NYSEArca: DLN) and PowerShares International Dividend Achievers (NYSEArca: PID). [Hunting for Yield with ETFs]
“For many investors, ETFs are an appealing way to receive broad sector diversification in one portfolio. There are a number of dividend-focused ETFs to choose from, but it is important to understand what they own and their relevant cost factors,” Rosenbluth wrote.
The two highest-yielding U.S. equity ETFs to which S&P assigns overweight rankings are WisdomTree Total Dividend (NYSEArca: DTD), which has a SEC 30-day yield of 3.14%, and Vanguard High Dividend Yield Index (NYSEArca: VYM).
WisdomTree Total Dividend
Full disclosure: Tom Lydon’s clients own DVY.