With interest rates on the move, it’s reigniting an interest in high yield exchange traded funds (ETFs). Rather than try to implement a rate-hedging strategy, fixed income investors can opt to simply get more yield via dividends.
Using this methodology, fixed income investors are simply beating inflation at its own game by opting for fixed income options that offer more yield. One way to do this is to focus on dividend yields as opposed to other assets like bonds.
Two options to consider that provide dividend income are the Global X SuperDividend U.S. ETF (DIV) and the Global X SuperDividend ETF (SDIV). Of the two options, DIV keeps dividends within the safer confines of U.S. debt, which might be a safer play given the current market uncertainty regarding a recession.
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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.
- A 30-day SEC yield of 7.62% (as of October 7).
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.
- A 30-day SEC yield of 15.71% (as of October 7).
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