As income-minded investors look for ways to bolster returns in a low rate environment, various exchange traded funds can rise to the challenge.
For example, the iShares Core High Dividend ETF (HDV) may be better for those requiring regular income from a trusted source, Chetan Woodun, Investment Research and Analytics at Keylogin Information and Technologies Co. Ltd., said on SeekingAlpha.
Woodun argued that HDV’s underlying portfolio weights is favorable for the current market environment. The iShares Core High Dividend ETF includes a hefty 19.3% tilt toward the healthcare sector.
“This sector, which is already up by 14.6% since last year, should maintain its growth with pharmaceuticals compensating for revenue shortfalls resulting from COVID-19-led disruption of normal care with increase sales of flu vaccines and other medications. Also, with Pfizer (PFE), vaccine manufacturing and administration to patients in the U.S. and Europe will be a priority next year,” Woodun said.
The iShares Core High Dividend ETF’s 20.6% tilt toward the energy sector has also helped the fund capitalize on the return to normalization, as many anticipate the coronavirus vaccine will help bring the economy back to normal.
“Now, with increasing confidence in the ability of mankind to overcome this deadly virus, energy prices have recovered to a small extent, but with COVID-19 cases on the rise, demand for oil should take a longer time to be at par with February 2020 levels,” Woodun said.
More importantly, HDV showed an attractive 3.95% 12-month yield.
“Also, the amount of dividend paid has been on a net upwards trend during the last three years and is also subject to a lesser cut since March as some companies trimmed dividends to the benefit of the balance sheet. These were not among HDV’s top ten holdings, though,” Woodun added.
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