With the yield on the 10-year Treasury note climbing more than 100 basis points thus far in 2022, due to recent and pending Fed rate hikes, advisors are seeking out higher dividend-yielding equity ETFs to generate income and still participate in the potential gains in the stock market. Indeed, traffic on ETF Database has recently climbed sharply for a handful of distinct ETFs sporting above-average dividend yields.
The largest and most popular of these ETFs is the Vanguard High Dividend Yield ETF (VYM), which was the 23rd most searched for ticker overall year-to-date through April 19. However, in the past 30 days, the fund jumped nine spots, climbing past sector-focused funds such as the iShares Aerospace & Defense ETF (ITA), the Technology Select Sector SPDR (XLK), and the Van Eck Semiconductor ETF (SMH).
At the sector level, VYM is most heavily exposed to financials (21% of assets), healthcare (14%), and consumer staples (12%), with companies such as JPMorgan Chase (JPM), Johnson & Johnson (JNJ), and Procter & Gamble (PG) among the top overall positions. VYM charges a minuscule 0.06% expense ratio.
The next most popular high dividend-yielding ETF, according to our data, is the SPDR Portfolio S&P 500 High Dividend ETF (SPYD). SPHD jumped 20 spots and was the 40th most viewed ticker on the ETF database platform in the last 30 days. The ETF was heavily weighted to utilities (19% of assets) and energy (15%) relative to the parent S&P 500 Index, with stakes in Chevron (CVX) and Valero Energy (VLO). SPYD also has a low expense ratio, charging just 0.07%.
Meanwhile, the iShares Select Dividend ETF (DVY) jumped 27 spots to be the 57th most searched for ticker on our platform in the past month. DVY’s largest sector exposure was to utilities (27% of assets), and financials (21%) through companies such as Edison International (EIX) and Prudential Financial (PRU). DVY is more expensive than some of its peers, with a 0.39% fee, but as we shall see, fees are not the only thing that matters.
Lastly is the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD). SPHD skyrocketed 60 spots on the year-to-date most searched for tickers list to number 71 in the last 30 days. The combination of above-average income and lower risk traits has resulted in a fund with hefty exposure to utilities (21%) and consumer staples (19%), but also one with less exposure to energy (9.6%) than SPYD, which similarly stems from the S&P 500 Index. SPHD’s expense ratio is 0.30%.
Year-to-date, all four of these ETFs have outperformed the broader S&P 500 Index and generated gains for shareholders, yet there are differences. SPHD’s 8.8%, HDV’s 8.7%, and SPYD’s 8.6% total returns in 2022 are notably higher than VYM’s 2.0%, highlighting the importance of looking inside the fund and beyond just the expense ratio.
Investors have also taken notice of SPYD and SPHD gathering $165 million and $123 million of new money in the past month, respectively. However, we remind advisors and their end investors that high dividend-yielding equity ETFs incur more risk than investment-grade corporate bonds or even Treasury bond-focused ETFs.
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