SPHD was well-positioned to take advantage of ongoing easing and low interest rates because of its large allocations to rate-sensitive sectors. However, the high-yield sector script was flipped when Treasury yields started rising. From May 22 through September 17, SPHD dropped 3.5%, a decline that highlighted the ETF’s potential vulnerability to changes in Fed policy.
With tapering no longer a concern, SPHD merits immediate consideration by income investors. The 24% weight to utilities and 15.8% to staples stocks that did not look attractive a few weeks ago suddenly look alluring thanks to the Fed. SPHD also features an 18.8% weight to financial services names. That is another added benefit because the majority of SPHD’s 10 financial services holdings are REITs, another group that was stung by tapering speculation.
Adding to SPHD’s potential upside for income investors in a post-tapering environment is a monthly dividend, a feature many of the larger dividend ETFs, like VIG, lack.
PowerShares S&P 500 High Dividend Portfolio
ETF Trends editorial team contributed to this article.
