The Right Dividend ETF for These Tumultuous Times

With Thursday’s 2.1% decline, the S&P 500 has shed almost 4.2% since its Sept. 18 peak, a decline that has proven damaging for scores of stocks and exchange traded funds.

Even some dividend ETFs have been caught in the downdraft, but income investors do have options for finding shelter from the storm while staying involved with dividend stocks. In fact, the PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD) has been something of a standout in a recent weeks. Yes, it underscores how weak U.S. equities have been when SPHD’s 0.2% gain since September qualifies as standout material, but gains have been hard to come by in recent weeks.

SPHD tracks the S&P 500 Low Volatility High Dividend Index, which is comprised of 50 stocks taken from the S&P 500 that have historically exhibited high dividend yields and low volatility. Lately, the low volatility trait has been prized by investors and it is SPHD’s emphasis on less volatile sectors that have fostered the ETF’s recent durability. [Investors Flocking to Low Vol ETFs]

SPHD allocates a combined 37.5% of its weight to the utilities and consumer staples sectors. That sector allocation is a positive because since Sept. 18, the Utilities Select Sector SPDR (NYSEArca: XLU) is the top performer among the nine sector SPDR ETFs while the Consumer Staples Select Sector SPDR (NYSEArca: XLP) is the only other one that has traded higher. [At Least Staples ETFs Like This Market]

Six of the ETF’s top-10 holdings are either utilities or staples stocks, a group that includes Altria (NYSE: MO), Southern Co. (NYSE: SO) and Philip Morris (NYSE: PM).

A nearly 19% tilt towards utilities and an 8.3% weight to telecom stocks fosters SPHD’s 12-month trailing yield of almost 3.4%. SPHD also features a 16.2% weight to the financial service sector, the bulk of which is allocated to real estate investment trusts (REITS). That along with the aforementioned hefty utilities weight nicely positions SPHD to benefit should interest rates remain low.