Even though inflation has been eating into fixed income sources for much of 2022, one saving grace has been the rise in global dividends. This paves the path for opportunities for fixed income investors in getting global dividend exposure via exchange traded funds (ETFs).
When looking at indexes such as the S&P Global Dividend Opportunities Index, there’s been a rise in global dividends, particularly in the latest quarter-to-date numbers. The index QTD for global dividends is up 10% based on the index itself, which could be a positive sign as 2022 winds down and 2023 sets in.
The rise could be even more profound should the global economy stave off a recession, as central banks around the world back off on tightening monetary policy. That said, all eyes will be on the U.S. Federal Reserve and how it continues to implement its interest rate hiking.
“This next phase of policymaking is much more difficult, because you have to be mindful of so many things,” said Mary Daly, president of the Federal Reserve Bank’s San Francisco branch, in a Financial Times article. “You have to be mindful of the cumulative tightening that’s already in the system. You have to be mindful of the lags in monetary policy. You have to be mindful of the risks that are all throughout the global economy and the tremendous uncertainty that we have even about what the evolution of inflation is going to be.”
Whatever happens, higher interest rates could be muted if investors simply try to obtain higher-yielding income. Two options to consider that provide dividend income are the Global X SuperDividend U.S. ETF (DIV) and the Global X SuperDividend ETF (SDIV).
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Per its fund description, DIV seeks to provide investment results that generally correspond to the price and yield performance, before fees and expenses, of the Indxx SuperDividend® U.S. Low Volatility Index. The underlying index tracks the performance of 50 equally weighted common stocks, including MLPs and REITs, that rank among the highest dividend-yielding equity securities in the United States.
DIV gives investors:
- High income potential: DIV accesses 50 of the highest dividend-paying equities in the United States, potentially increasing a portfolio’s yield.
- Monthly distributions: DIV makes distributions every month, and has done so for over seven years. With rates scheduled to rise in 2022 worldwide, this could translate to higher yields.
- Low volatility: DIV’s index methodology screens for equities that have exhibited low betas relative to the S&P 500 to produce low-volatility returns.
For bolder investors willing to extract additional yield in lieu of more risk, there are options for dividend-producing equities overseas with SDIV. The fund seeks investment results that generally correspond to the price and yield performance of the Solactive Global SuperDividend Index, which tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world, including in emerging market countries.
SDIV, which offers an even more attractive yield option, features:
- High income potential: Potentially increasing a portfolio’s yield, SDIV accesses 100 of the highest dividend-paying equities around the world.
- Monthly distributions: SDIV makes distributions on a monthly basis and has made distributions each month for over 10 years.
- Global exposure: Investing in equities from around the globe can help diversify geographic and interest rate exposure.
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