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Range of Choices and Risks
Luckily, there are a plethora of monthly dividend ETF funds offered by the major firms, including State Street Global Advisors, Vanguard Group, and BlackRock, Inc. However, there are also smaller firms such as the Global X Funds that have increased their presence in the ETF arena. These investment products have become nearly household names and include the popular Spider SPDR and iShares products.
Before any investor falls too head-over-heels in love with these products, they must do their due diligence and review the ETF for its expenses and risk. While getting dividend income every month may sound appealing, the investor must offset the expenses of the holding against its benefits.
Fund managers sometimes offer high double-digit yields that they cannot sustain in order to attract investors who would otherwise ignore them. It is important to pay attention to expense ratios, as well. Remember, the less money that goes into a manager’s pocket the better. Some funds may return their high income through the use of leverage which may not suit the risk tolerance of all investors. (For related reading, see: Is Dividend Investing a Good Strategy?)
The following list of exchange-traded funds do not appear in any particular order and are offered only as an example of the funds that fall into the category of the monthly-dividend paying ETFs.
Global X SuperDividend ETF
Net Assets as of 8/21/20: $646 million
Total Expense Ratio: 0.59%
Yield (12 mo.): 11.60%
Price as of 8/21/20: $11.341
The Global X SuperDividend (SDIV) fund tracks an index of 100 equally weighted companies that rank among the highest-dividend payers around the world—a strategy that has earned it kudos in the financial press.1
The fund includes common stocks, real estate investment trusts (REITs), and master limited partnerships (MLPs) that must combine top returns with lower-than-average volatility to be included in the index. The fund has made monthly dividend distributions for more than eight years.
Some of the main holdings of the fund are:
Diversified Gas & Oil PLC
B&G Foods Inc
Mobile Telesystems-SP ADR
Kumba Iron Ore Ltd1
Global X SuperDividend U.S. ETF
Net Assets as of 8/21/20: $430 million
Total Expense Ratio: 0.46%
Yield (12 mo.): 10.65%
Price as of 8/21/20: $15.992
Established in 2013, the Global X U.S. SuperDividend (DIV) fund focuses on a basket of low-volatility, high-yielding securities. The objective is to track the performance of 50 equally weighted common stocks, MLPs, and REITs within the U.S.
Securities listed in the index are among the highest-yielding in the United States, and they have lower relative volatility than the market. It pairs very nicely with SDVI for investors who want a truly global grip on high-yielding equities.
Holdings in the fund include:
B&G Foods Inc
General Mills Inc
Verizon Communications
Kraft Heinz2
Invesco S&P 500 High Dividend Low Volatility ETF
Net Assets as of 8/21/20: $2.4 billion
Total Expense Ratio: 0.30%
Yield (12 mo.): 6.10%
Price as of 8/21/20: $33.963
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) looks for stocks that pay high dividends and offer low volatility. It invests 90% of its assets in the common stocks of companies listed in the S&P 500 Low Volatility High Dividend Index. The fund is concentrated in real estate and utilities.3 Holdings include:
Iron Mountain Inc
Altria Group Inc
Gilead Sciences Inc
AT&T Inc3
WisdomTree U.S. High Dividend Fund
Net Assets as of 8/24/20: $710 million
Total Expense Ratio: 0.38%
10-year Average Annual Return: 10.37%
Price as of 8/24/20: $64.184 5
The WisdomTree U.S. High Dividend Fund (DHS) mimics the WisdomTree High Dividend Index, a fundamentally weighted index that features companies ranked by dividend yield with average daily trading volumes of at least $200 million.6
The fund’s holdings are well diversified among sectors such as real estate, health care, utilities, IT, and consumer staples. Top holdings include:
Verizon Communications Inc
Pfizer Inc
AT&T Inc
The Coca-Cola Company6
Invesco Preferred ETF
Net Assets as of 8/24/20: $5 billion
Total Expense Ratio: 0.52%
Yield (12 mo.): 5.09%
Price as of 8/24/20: $14.937
The Invesco Preferred Fund (PGX) is another preferred stock ETF that delivers on yield. PGX's objective is to replicate the performance and yield of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. Its portfolio holds more than 200 preferred stocks with a heavy weighting towards the financial sector. The bulk of investments are in BBB rated holdings. Some of the investments include:8
Citigroup Inc
JPMorgan Chase & Co
Wells Fargo & Co
Bank of America Corp8
Invesco KBW High Dividend Yield Financial ETF
Net Assets as of 8/24/20: $167 million
Total Expense Ratio: 1.58%
Yield (12 mo.): 12.80%
Price as of 8/24/20: $13.939
Based on one of the prestigious Keefe, Bruyette & Woods NASDAQ indexes, the Invesco KBW High Dividend Yield Financial Portfolio ETF (KBWD) fund's large dividend yield is pretty tempting. KBWD is heavily weighted (at least 90%) towards publicly held financial companies, which should perform better in a rising interest rate environment. The fund, however, has an extremely high expense ratio of 1.58%.10
Holdings include:
Orchid Island Capital Inc
Apollo Investment Corp
ARMOUR Residential REIT Inc
Dynex Capital Inc9
iShares Preferred and Income Securities ETF
Net Assets as of 8/24/20: $16.6 billion
Total Expense Ratio: 0.46%
Yield (12 mo.): 5.47%
Price as of 8/24/20: $36.6911
The iShares Preferred and Income Securities ETF (PFF) is a viable alternative for investors seeking high yields. PFF seeks to mirror the performance and yield of the S&P U.S. Preferred Stock Index. The portfolio is well-diversified, with no security weighted more than 2.14%. However, it does tend to favor banks, diversified financials, and utilities. Some of the main holdings include:11
Broadcom Inc
Wells Fargo & Co
Bank of America Corp
Becton Dickinson & Co11
SPDR Dow Jones Industrial Average ETF Trust
Net Assets as of 8/24/20: $23.3 million
Total Expense Ratio: 0.16%
10-year Average Annual Return: 12.29%
Price as of 8/24/20: $283.1612
The SPDR Dow Jones Industrial Average ETF (DIA) does not offer the highest yield, but investors who prefer some capital appreciation potential with their income might find its portfolio attractive. Launched in January 1998 (making it one of the oldest ETFs still standing), the fund is one of the few to directly play the Dow Jones Industrial Average (DJIA)—itself the grandpa of stock indexes, composed of 30 of the bluest blue chip companies.12 It's holdings include:
Apple Inc
UnitedHealth Group Inc
Home Depot Inc
Boeing Co12
The Bottom Line
High-dividend ETFs offer a cheap, easy way to add an extra stream of income to the portfolios of retirees and new investors alike. As always, it is important to do your due diligence on any fund before committing your hard-earned cash
Luckily, there are a plethora of monthly dividend ETF funds offered by the major firms, including State Street Global Advisors, Vanguard Group, and BlackRock, Inc. However, there are also smaller firms such as the Global X Funds that have increased their presence in the ETF arena. These investment products have become nearly household names and include the popular Spider SPDR and iShares products.
Before any investor falls too head-over-heels in love with these products, they must do their due diligence and review the ETF for its expenses and risk. While getting dividend income every month may sound appealing, the investor must offset the expenses of the holding against its benefits.
Fund managers sometimes offer high double-digit yields that they cannot sustain in order to attract investors who would otherwise ignore them. It is important to pay attention to expense ratios, as well. Remember, the less money that goes into a manager’s pocket the better. Some funds may return their high income through the use of leverage which may not suit the risk tolerance of all investors. (For related reading, see: Is Dividend Investing a Good Strategy?)
The following list of exchange-traded funds do not appear in any particular order and are offered only as an example of the funds that fall into the category of the monthly-dividend paying ETFs.
Global X SuperDividend ETF
Net Assets as of 8/21/20: $646 million
Total Expense Ratio: 0.59%
Yield (12 mo.): 11.60%
Price as of 8/21/20: $11.341
The Global X SuperDividend (SDIV) fund tracks an index of 100 equally weighted companies that rank among the highest-dividend payers around the world—a strategy that has earned it kudos in the financial press.1
The fund includes common stocks, real estate investment trusts (REITs), and master limited partnerships (MLPs) that must combine top returns with lower-than-average volatility to be included in the index. The fund has made monthly dividend distributions for more than eight years.
Some of the main holdings of the fund are:
Diversified Gas & Oil PLC
B&G Foods Inc
Mobile Telesystems-SP ADR
Kumba Iron Ore Ltd1
Global X SuperDividend U.S. ETF
Net Assets as of 8/21/20: $430 million
Total Expense Ratio: 0.46%
Yield (12 mo.): 10.65%
Price as of 8/21/20: $15.992
Established in 2013, the Global X U.S. SuperDividend (DIV) fund focuses on a basket of low-volatility, high-yielding securities. The objective is to track the performance of 50 equally weighted common stocks, MLPs, and REITs within the U.S.
Securities listed in the index are among the highest-yielding in the United States, and they have lower relative volatility than the market. It pairs very nicely with SDVI for investors who want a truly global grip on high-yielding equities.
Holdings in the fund include:
B&G Foods Inc
General Mills Inc
Verizon Communications
Kraft Heinz2
Invesco S&P 500 High Dividend Low Volatility ETF
Net Assets as of 8/21/20: $2.4 billion
Total Expense Ratio: 0.30%
Yield (12 mo.): 6.10%
Price as of 8/21/20: $33.963
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) looks for stocks that pay high dividends and offer low volatility. It invests 90% of its assets in the common stocks of companies listed in the S&P 500 Low Volatility High Dividend Index. The fund is concentrated in real estate and utilities.3 Holdings include:
Iron Mountain Inc
Altria Group Inc
Gilead Sciences Inc
AT&T Inc3
WisdomTree U.S. High Dividend Fund
Net Assets as of 8/24/20: $710 million
Total Expense Ratio: 0.38%
10-year Average Annual Return: 10.37%
Price as of 8/24/20: $64.184 5
The WisdomTree U.S. High Dividend Fund (DHS) mimics the WisdomTree High Dividend Index, a fundamentally weighted index that features companies ranked by dividend yield with average daily trading volumes of at least $200 million.6
The fund’s holdings are well diversified among sectors such as real estate, health care, utilities, IT, and consumer staples. Top holdings include:
Verizon Communications Inc
Pfizer Inc
AT&T Inc
The Coca-Cola Company6
Invesco Preferred ETF
Net Assets as of 8/24/20: $5 billion
Total Expense Ratio: 0.52%
Yield (12 mo.): 5.09%
Price as of 8/24/20: $14.937
The Invesco Preferred Fund (PGX) is another preferred stock ETF that delivers on yield. PGX's objective is to replicate the performance and yield of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. Its portfolio holds more than 200 preferred stocks with a heavy weighting towards the financial sector. The bulk of investments are in BBB rated holdings. Some of the investments include:8
Citigroup Inc
JPMorgan Chase & Co
Wells Fargo & Co
Bank of America Corp8
Invesco KBW High Dividend Yield Financial ETF
Net Assets as of 8/24/20: $167 million
Total Expense Ratio: 1.58%
Yield (12 mo.): 12.80%
Price as of 8/24/20: $13.939
Based on one of the prestigious Keefe, Bruyette & Woods NASDAQ indexes, the Invesco KBW High Dividend Yield Financial Portfolio ETF (KBWD) fund's large dividend yield is pretty tempting. KBWD is heavily weighted (at least 90%) towards publicly held financial companies, which should perform better in a rising interest rate environment. The fund, however, has an extremely high expense ratio of 1.58%.10
Holdings include:
Orchid Island Capital Inc
Apollo Investment Corp
ARMOUR Residential REIT Inc
Dynex Capital Inc9
iShares Preferred and Income Securities ETF
Net Assets as of 8/24/20: $16.6 billion
Total Expense Ratio: 0.46%
Yield (12 mo.): 5.47%
Price as of 8/24/20: $36.6911
The iShares Preferred and Income Securities ETF (PFF) is a viable alternative for investors seeking high yields. PFF seeks to mirror the performance and yield of the S&P U.S. Preferred Stock Index. The portfolio is well-diversified, with no security weighted more than 2.14%. However, it does tend to favor banks, diversified financials, and utilities. Some of the main holdings include:11
Broadcom Inc
Wells Fargo & Co
Bank of America Corp
Becton Dickinson & Co11
SPDR Dow Jones Industrial Average ETF Trust
Net Assets as of 8/24/20: $23.3 million
Total Expense Ratio: 0.16%
10-year Average Annual Return: 12.29%
Price as of 8/24/20: $283.1612
The SPDR Dow Jones Industrial Average ETF (DIA) does not offer the highest yield, but investors who prefer some capital appreciation potential with their income might find its portfolio attractive. Launched in January 1998 (making it one of the oldest ETFs still standing), the fund is one of the few to directly play the Dow Jones Industrial Average (DJIA)—itself the grandpa of stock indexes, composed of 30 of the bluest blue chip companies.12 It's holdings include:
Apple Inc
UnitedHealth Group Inc
Home Depot Inc
Boeing Co12
The Bottom Line
High-dividend ETFs offer a cheap, easy way to add an extra stream of income to the portfolios of retirees and new investors alike. As always, it is important to do your due diligence on any fund before committing your hard-earned cash