Investors who seek steady income and downside protection can find this through holding certain exchange traded funds. ETFs that hold quality dividend-paying companies or that use a low-volatility strategy are favored, and continue to be popular with investors.
According to Dodd Kittsley, the director and global head of exchange-traded products (ETP) research at BlackRock, equity dividends and low volatility represent two areas of the ETF space that were recently created to fill the market’s needs, but without some of the risks inherent with equities.
“I think creative products, innovative products that offer different exposures than market cap can certainly do well and I think it reflects investor sentiment that …they’re positive on the equity markets, but it’s not a risk-on type of trade,” he says. [Low-Volatility ETFs Remain Popular with Risk Averse Investors]
For exmple, iShares High Dividend Equity Fund (NYSEArca: HDV) pays out a dividend yield of 3.1%, which still beats the payout on long term Treasury notes. The fund is weighted toward consumer staples, information technology and healthcare.The SPDR S&P Dividend Overweight ETF (NYSEArca: SDY) pays a dividend of 2.8% and focuses in on the financial, industrial and consumer staples sectors. [Dividend ETFs: Yields Falling as Market Rallies]
The iShares Minimum Volatility ETF suite seeks to provide investors with downside protection while seeking to maintain some exposure to the upside, S&P Capital wrote in a recent note. The PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) have been popular amid the past year or so of market uncertainty.
USMV has gathered $2.7 billion in new inflows this year Over the first quarter of 2013, the low-volatility ETF sector gathered over $4 billion in new inflows. Both ETFs offer U.S. large-cap stock exposure while mitigating risk and volatility, reports Eric Balchunas for Bloomberg BusinessWeek. [Interest Rates Dim Utility Sector ETFs]
Tisha Guerrero 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.