For investors parked in money markets, now is an ideal time to consider moving that cash to a dividend ETF.
Money market rates typically look less competitive as interest rates decline. As the Fed is expected to begin cutting rates next week, now is an opportune time to reallocate cash in money markets.
A dividend ETF may be an alternative solution for investors currently in money market funds. A reduction in short-term interest rates may make dividend stocks more attractive. Additionally, demand for dividend-paying stocks tends to rise as interest rates decline, according to Invesco.
Dividend ETFs offer dividend income as well as potential distribution growth to protect purchasing power. Additionally, the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), with its low volatility screen, is constructed to avoid dividend traps.
SPHD provides exposure to the 50 stocks in the S&P 500 with the highest yield and lowest one-year trailing volatility. Names in SPHD are weighted by dividend yield. The fund will not hold more than 10 names per GICS sector at any given time. Furthermore, there’s a 25% GICS sector and 3% single-stock cap at the semiannual reconstitution.
SPHD’s 30-day SEC yield is 4.1% as of Sept. 10.
Under the Hood of Invesco’s Dividend ETF
The top holdings in Invesco’s S&P 500 high dividend ETF as of Sept. 5 include Altria Group (MO), Crown Castle (CCI), Verizon Communications (VZ), VICI Properties (VICI), and Bristol-Myers Squibb Company (BMY).
SPHD has $3.8 billion in assets under management. In the past one month, SPHD has accreted $398 million in net flows. Meanwhile, the fund has seen $107 million in net flows in the one-year period trailing Sept. 5, according to ETF Database.
The dividend ETF charges 30 basis points.
For more news, information, and analysis, visit the Innovative ETFs Channel.
