Investors’ hunger for yield has caused many to sniff around dividend exchange traded funds to boost income in their portfolios.
“With interest rates relatively low, we believe that many investors are increasingly starved for income. As a result, we think more attention has been given to dividend-yielding stocks,” said S&P Capital IQ Equity Analyst Tom Graves in a research note.
ETFs can add diversification to the mix — they typically own a basket of stocks, fixed-income securities or other types of financial holdings, Graves wrote. [Dividend ETFs Without the Label]
According to S&P Capital IQ Equity Research, 13 ETFs stood out and are singled out as “overweight” from the 74 non-sector higher-yielding ETPs categorized with 12-month trailing yields of 3.0% or more. Among the 13, seven are international and the other six are U.S. domestic.
The iShares MSCI EAFE Index (NYSEArca: EFA) is the largest of the recommended funds, at $36 billion in assets, and the BLDRS Europe 100 ADR Index (NYSEArca: ADRU) is the smallest at $17 million.
Vanguard Europe ETF (NYSEArca: VGK) has the highest dividend yield, with a trailing 12-month yield of 5.65%. The iShares MSCI EAFE Value Index (NYSEArca: EFV) and WisdomTree Equity Income (NYSEArca: DHS) also have trailing 12-month yields of more than 4.0%.
WisdomTree Equity Income (NYSEArca: DHS), Vanguard High Dividend Yield Indx ETF (NYSEArca: VYM), WisdomTree LargeCap Dividend (NYSEArca: DLN), WisdomTree Total Dividend (NYSEArca: DTD) and SPDR S&P Dividend (NYSEArca: SDY) outperformed the S&P 500.
Additionally, the other recommended high-yielding equity ETFs include BLDRS Developed Markets 100 ADR Index Fund (ADRD), iShares Morningstar Large Value Index Fund (JKF), iShares S&P Europe 350 Index Fund (IEV), and iShares S&P Global 100 Index Fund (IOO).
It should be noted that international divided ETFs were more volatile over the recent three-year period, with VGK showing the highest volatility among the 13, according to S&P’s Graves.
WisdomTree LargeCap Dividend
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.