Income-minded investors have looked into high dividend-paying stocks to generate greater yields in an extended low-rate environment and capitalize on strength in the equities market, but they come with risks. Nevertheless, there are some high dividend exchange traded fund strategies that specifically target low-volatility names to help diminish downside risks.
High dividend-paying companies are typically associated with heightened risk as some are concerned that these companies may find it hard to maintain their elevated levels of dividend handouts. However, a low-volatility theme may help diminish the oscillations associated with this riskier segment of the market.
For instance, investors may consider smart beta plays like the Legg Mason Low-Volatility High-Dividend ETF (NASDAQ: LVHD). The low volatility high dividend ETF should help investors who are seeking new sources of yield in a changing market environment. The funds focus on companies with relatively high yield and low price and earnings volatility, and the funds also targets profitable companies. LVHD shows an attractive 3.50% 12-month yield.
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Additionally, for those interested in more international exposure, the Legg Mason International Low Volatility High Dividend ETF (BATS: LVHI) tries to reflect the performance of the QS International Low Volatility High Dividend Hedged Index, which provides stable income through investments in stocks of profitable companies in developed markets outside the U.S. with relatively high dividend yields and lower price and earnings volatility while diminishing exposure to exchange-rate fluctuations between the U.S. dollar and other international currencies. LVHI shows a 3.51% 12-month yield.