In a low-yield environment, the Global X SuperDividend U.S. ETF (NYSEArca: DIV) has acted as an attractive investment opportunity this year, outperforming the broader market and generating decent yields.
DIV follows 50 of the highest dividend yielding equity securities in the U.S. and equally weights its component holdings. The ETF has a 0.45% expense ratio and a 3.58% 12-month yield. The fund also generates a monthly dividend yield for those seeking a steady stream of income. [More Monthly Dividend ETFs]
The SuperDividend U.S. ETF has been outperforming the broader equities market. DIV is up 20.0% year-to-date, whereas the S&P 500 is 13.1% higher.
The fund also includes a low-volatility filter to diminish volatility in the portfolio. Specifically, underlying holdings must have a beta of less than 0.85 relative to the S&P 500 to be included in the index. Beta is a measure of volatility, and stocks with 1 reading reflects perfect correlation, so anything below 1 suggests the security is less volatile than the market.
However, potential investors should be aware that while the ETF takes on a diversified approach to high-yield dividend stocks, DIV includes significant exposure to rate-sensitive sectors.
For example, utilities make up 21.4% of DIV’s holdings. As interest rates rise, utility stocks will likely underperform other equity sectors. The rising rates typically make fixed-income securities more attractive on a relative basis to bondlike stocks. So far this year, the utilities sector has benefited from a pullback in interest rates.