Getting high dividend yields doesn’t mean that investors have to withstand stomach-churning volatility, especially with ETF options like the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD).
In fact, low-volatility equities translate to better returns over time. SPHD in particular focuses on large-cap and mid-cap value to not only extract maximum dividends, but also decrease volatility.
“The observation that low-volatility stocks outperform the high-volatility ones has received considerable attention in recent times, especially since the onset of the Covid-19 pandemic,” a Financial Express article said. “More specifically, low-volatility stocks, i.e., stocks which fluctuate less over time and have lower variance, are the ones that provide higher risk-adjusted returns to the investors in the long run.”
SPHD seeks to track the investment results (before fees and expenses) of the S&P 500® Low Volatility High Dividend Index. The fund will generally invest at least 90% of its total assets in the securities that comprise the underlying index.
The index provider compiles, maintains, and calculates the underlying index, which is composed of 50 securities in the S&P 500® Index that have historically provided high-dividend yields with lower volatility. To get a piece of SPHD, ETF investors are looking at a net expense ratio of 0.30%.
What’s Next For Dividends?
Dividend yields have actually been down thus far in 2021, but things could look rosy ahead for 2022. Dividend hikes are expected as quarterly profits in the S&P 500 could reach highs as soon as the first quarter of next year.
“Shares of the eight S&P 500 stocks yielding more than 4.5% this year that announced dividend hikes are only up 12.3% in 2021, trailing the S&P 500’s gain,” an Investor’s Business Daily article said. “And shares of the 228 S&P 500 companies to announce dividend hikes this year are only up 20.8% on average this year, roughly in line with the S&P 500.”
“But (Adviser Investments portfolio manager Charles) Toole says more dividend hikes may be coming,” the article added. “Futures markets show investors expect S&P 500 quarterly profits to hit a new high in the first quarter of 2022.”
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