Amid a tumultuous start to 2016 for stocks, advisors and investors are likely to continue embracing low volatility exchange traded funds, including those funds sporting an income component, such as the PowerShares S&P 500 High Dividend Portfolio (NYSEArca: SPHD).
The PowerShares S&P 500 High Dividend Portfolio has not been immune to the broader market’s recent weakness, falling 4.7% over the past month. However, that performance is nearly 400 basis points better than the S&P 500 over the same stretch. SPHD “is composed of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility,” according to PowerShares.
With a trailing 12-month dividend yield of about 3.5%, SPHD’s yield is 150 basis points higher than the current yield on 10-year U.S. Treasurys. Over the past year, investors have added $289.3 million in new assets to SPHD, a total surpassed by just four other PowerShares ETFs, according to issuer data.
While SPHD lacks an official dividend growth screen, it is worth noting that several members of the ETF’s 50-stock lineup, including AT&T (NYSE: T) and Sysco (NYSE: SYY), are also members of the S&P Yield Dividend Aristocrats Index, which mandates 25 years of dividend hikes for entry. [An ETF for Late Year Dividend Hikes]
As its name implies, SPHD is defensively positioned at the sector level. The ETF allocates a combined 42% of its weight to utilities and consumer staples stocks. Those are the fund’s largest and third-larges sector weights, respectively. The volatile energy and materials sectors, which have recently accounted for most of the negative dividend actions among S&P 500 members, combine for just over six percent of the ETF’s weight.
“I believe SPHD is a quality ETF that has shown it can outperform the broad market during a correction. In addition, SPHD has a dividend yield of 3.70%, which is significantly above the current ten-year treasury rate and significantly, above the 2.24% the S&P 500 is currently yielding,” according to a Seeking Alpha analysis of SPHD.
SPHD charges 0.3% year and pays its dividend on a monthly basis, allowing for steadier income for income investors.
PowerShares S&P 500 High Dividend Portfolio
