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Top 10 Dividend ETFs

 

This posting features a comprehensive review of the dividend-related ETF sector. There are over three dozen ETFs issued (including Elements not covered here) with more on the way in this sector to evaluate. To simplify matters for investors weâ¿¿ve whittled choices down to 10. The issues chosen represent a broad cross section of domestic, global, overseas, real estate (REITs) and other sectors from a variety of sponsors. Doing so makes sorting through the sector more manageable for most investors. Weâ¿¿re not necessarily recommending one issue over another; rather weâ¿¿re just trying to feature those issues that arenâ¿¿t repetitive, although we mention other choices within each brief review where applicable.

Within each category we filter them by placing importance on high assets under management, liquidity and/or strategies that make a difference the most critical tests. Newer issues tied to new indexes with long (over 5 years) of historical data may be worth investigating, featuring and using as a replacement if necessary.

As demographics in the developed world change with aging populations, the demand for income increases while risk avoidance increases. At the same time, many investors understand the need for growth continues given the potential for inflation. Keeping a portion of a portfolio in common stocks among other sector allocations is important; however, adding yield through dividends can help achieve the dual goal.

Remember just searching for the highest dividend yields can lead to troubled sectors where the ability to maintain the dividend is questionable.

XLU (SPDR Utilities Sector ETF) follows the Utilities Select Sector Index. This sector remains the historical first choice for investors seeking stable dividend income with the potential for long-term growth in value and increases in dividends. The fund was launched December 1998. The expense ratio is .20% AUM (Assets under Management) equal $6.2 billion and average daily trading volume is les than 10M shares. As of mid-September 2011 the annual dividend is $.69 making the current yield is 3.90% and YTD performance 8.42%.

Data as of September 2011

XLU Top Ten Holdings & Weightings

  1. Southern Co (SO): 8.58%
  2. Exelon Corp (EXC): 6.98%
  3. Dominion Resources Inc (D): 6.86%
  4. NextEra Energy Inc (NEE): 5.85%
  5. Duke Energy Corporation (DUK): 5.67%
  6. American Electric Power Co Inc (AEP): 4.57%
  7. FirstEnergy Corp (FE): 4.52%
  8. Public Service Enterprise Group Inc (PEG): 4.22%
  9. PG&E Corp (PCG): 4.14%
  10. PPL Corp (PPL): 4.09%

DVY (iShares Dow Jones Select Dividend ETF) follows the Dow Jones Dividend Select Index. The fund was launched in November 2003. The expense ratio is .40%. AUM equal $7 billion and average daily trading volume exceeds 1.6M shares. As of mid-September 2011 the current annual dividend is $.86 making the current yield 3.65% and YTD 1.75%.

Competitive issues could include DTD (Wisdom Tree Total Dividend Fund) and FDL (First Trust Morningstar Dividend Leader Index ETF)

Data as of September 2011

DVY Top Ten Holdings & Weightings

  1. Lorillard, Inc. (LO): 4.16%
  2. VF Corporation (VFC): 2.31%
  3. Chevron Corp (CVX): 2.20%
  4. Entergy Corp (ETR): 2.08%
  5. Kimberly-Clark Corporation (KMB): 1.98%
  6. McDonald's Corporation (MCD): 1.91%
  7. Integrys Energy Group Inc (TEG): 1.89%
  8. FirstEnergy Corp (FE): 1.83%
  9. ONEOK, Inc. (OKE): 1.69%
  10. DTE Energy Holding Company (DTE): 1.66%

VIG (Vanguard Dividend Appreciation ETF) follows the Broad Dividend Achievers Index which features constituent companies with a history of increasing dividends. It was launched in April 2004. The expense ratio is .18%. AUM equals $7.1 billion and an average daily trading volume of 1.3M shares. As of mid-September 2011 the annual dividend is $1.14 making the current yield 2.35% and YTD return -1.01%.

Data as of September 2011

VIG Top Ten Holdings & Weightings

  1. McDonald's Corporation (MCD): 4.35%
  2. Chevron Corp (CVX): 4.16%
  3. ConocoPhillips (COP): 4.15%
  4. PepsiCo Inc (PEP): 4.12%
  5. The Coca-Cola Co (KO): 4.11%
  6. United Technologies Corp (UTX): 4.11%
  7. International Business Machines Corp (IBM): 4.08%
  8. Exxon Mobil Corporation (XOM): 3.90%
  9. The Procter & Gamble Co (PG): 3.80%
  10. 3M Co (MMM): 3.61%

IYR (iShares Dow Jones U.S. Real Estate ETF) follows the index of the same name. Risks for the sector are higher due to most assets consist of REITs (Real Estate Investment Trusts) which are much more volatile and economically sensitive. Itâ¿¿s said that over the next 5 years REITs have $3 trillion in outstanding debts due or refinance. The fund was launched in June 2000. The expense ratio is .48%. AUM equal $3 billion while average daily trading volume is nearly 12M shares. As of mid-September 2011 the annual dividend is $1.06 making the current yield 3.3% and YTD 1.30%.  

A competitive choice would be VNQ (Vanguard REIT ETF) which was launched September 2004 and tracks the MSCI U.S. REIT Index. AUM equal $9.2 billion and average daily trading volume is 1.8M shares. As of mid-September 2011 than annual dividend is $1.08 making the current yield roughly 3.54% and YTD return 3.31%. The expense ratio is a low .12% which is understandably the primary attraction given similar index constituents. .

Data as of September 2011

IYR Top Ten Holdings & Weightings

  1. Simon Property Group Inc (SPG): 8.75%
  2. Equity Residential (EQR): 4.58%
  3. Public Storage (PSA): 4.44%
  4. Annaly Capital Management, Inc. (NLY): 4.22%
  5. Vornado Realty Trust Shs of Benef Int (VNO): 4.03%
  6. Boston Properties Inc (BXP): 3.86%
  7. HCP Inc (HCP): 3.85%
  8. Ventas Inc (VTR): 3.57%
  9. AvalonBay Communities Inc (AVB): 3.13%
  10. ProLogis Inc (PLD): 2.94%

RWX (SPDR Wilshire International Real Estate ETF) follows the Dow Jones Global ex-U.S. Real Estate Securities Index which basically consists of REITs in developed and emerging markets. It was launched in December 2006. AUM equal $2 billion while average daily trading volume is over 412K shares. As of mid-September 2011 the annual dividend is $2.94 making the current yield 10.21% and YTD return -10.25%. 

Data as of September 2011

RWX Top Ten Holdings & Weightings

  1. Unibail-Rodamco Se (UL): 6.68%
  2. Westfield Group (WDC): 6.25%
  3. Brookfield Asset Management, Inc. (BAM): 5.62%
  4. Mitsui Fudosan Co., Ltd. (8801): 4.98%
  5. Land Securities Group PLC (LAND): 3.10%
  6. Hang Lung Properties Ltd. (00101): 2.79%
  7. Westfield Retail Trust (WRT): 2.73%
  8. Link Real Estate Investment Trust (00823): 2.63%
  9. British Land Co PLC (BLND): 2.62%
  10. Hongkong Land Holdings Ltd. (H78): 2.43%

 

PID (PowerShares International Dividend Achievers ETF) follows international companies that have increased their annual dividends for five or more consecutive years. The fund was launched in September 2009. The expense ratio is .50%. AUM equal $482 million and average daily trading volume is around 165K shares. As of mid-September 2011 the annual dividend was $.32 making the current yield 3.38%. Again in the international space currency issues should always be a consideration.

Other ETFs to consider within this space include IDV (iShares International Select Dividend ETF) which follows the Dow Jones International Select Dividend ETF), DWX (SPDR International Dividend ETF) and DWM (Wisdom Tree DEFA ETF). In addition, Global X just issued SDIV (Solactive Global Super Dividend ETF).

Data as of September 2011

PID Top Ten Holdings & Weightings

  1. Partner Communications Company, Ltd. ADR (PTNR): 4.79%
  2. Telefonica SA ADR (TEF): 4.26%
  3. Philippine Long Distance Telephone ADR (PHI): 3.55%
  4. Teekay LNG Partners L.P. (TGP): 3.47%
  5. Enbridge, Inc. (ENB): 3.30%
  6. National Grid PLC ADR (NGG): 3.12%
  7. Vodafone Group PLC ADR (VOD): 2.77%
  8. GlaxoSmithKline PLC ADR (GSK): 2.64%
  9. Telefonos de Mexico SAB de CV ADR (TMX): 2.60%
  10. AstraZeneca PLC ADR (AZN): 2.60%

VYM (Vanguard High Dividend Yield ETF) follows the FTSE High Dividend Yield Index which consists of large-cap issues from global companies ex-REITs. The fund was launched in November 2006. The expense ratio is .18%. AUM equals $1.5 billion and average daily trading volume is roughly 364K shares. As of mid-September 2011The quarterly dividend is $.59 making the current yield 3.33% and YTD return .92%.

Alternative choices in this sector include among others HDV (iShares High Dividend ETF) and PFM (PowerShares Dividend Achievers ETF).  

Data as of September 2011

VYM Top Ten Holdings & Weightings

  1. Exxon Mobil Corporation (XOM): 6.86%
  2. Microsoft Corporation (MSFT): 3.72%
  3. Chevron Corp (CVX): 3.51%
  4. General Electric Co (GE): 3.42%
  5. AT&T Inc (T): 3.17%
  6. Johnson & Johnson (JNJ): 3.11%
  7. The Procter & Gamble Co (PG): 3.03%
  8. Pfizer Inc (PFE): 2.77%
  9. The Coca-Cola Co (KO): 2.62%
  10. Wal-Mart Stores Inc (WMT): 2.36%

PEY (PowerShares High Yield Dividend Achievers ETF) follows the Dividend Achiever 50 Index which is based on dividend yield and consistent growth in dividends. The fund was launched December 2004. The expense ratio is .50%. AUM equal $200 million and average daily trading volume is roughly 155K shares. As of mid-September 2011 the current monthly dividend is $.03 making the current yield is over 3.90% and YTD return -4.73%.

Data as of September 2011

PEY Top Ten Holdings & Weightings

  1. CenturyLink Inc (CTL): 3.42%
  2. Pitney Bowes Inc (PBI): 3.09%
  3. Mercury General Corporation (MCY): 2.88%
  4. Altria Group Inc. (MO): 2.80%
  5. Cincinnati Financial Corporation (CINF): 2.66%
  6. Old Republic International (ORI): 2.65%
  7. Enterprise Products Partners LP (EPD): 2.64%
  8. AT&T Inc (T): 2.61%
  9. Universal Corporation (UVV): 2.55%
  10. PPL Corp (PPL): 2.49%

DEM (WisdomTree Emerging Markets Equity Income ETF) is a fundamentally weighted index featuring the highest yielding stocks from the WisdomTree Emerging Market Dividend Index. The fund was launched July 2007. The expense ratio is .63%. AUM $1.6 billion and average daily trading volume is just under 390K shares. As of mid-September 2011 the annual dividend was $1.01 making the current yield 2.1% and YTD return -9%.

An alternative choice may be EDIV (SPDR S&P Emerging Market Dividend ETF) issued recently in February 2011.

 

CVY (Guggenheim Multi-Asset Income ETF) follows the Zacks Multi-Asset Income Index which is designed to identify and track companies with high income and positive risk/reward characteristics. The fund was launched in September 2006. The expense ratio is .60%. AUM equal $416M and average daily trading volume exceeds 271K shares. As of mid-September 2011 the dividend is currently $.47 making the current yield 2.35% and YTD return .15%.

Alternative choices include DEF (Guggenheim Defensive Equity ETF) and DHS (WisdomTree High-Yielding Equity ETF)

Data as of September 2011

CVY Top Ten Holdings & Weightings

  1. Seadrill Ltd (SDRL): 1.45%
  2. Chevron Corp (CVX): 1.43%
  3. ConocoPhillips (COP): 1.41%
  4. Linn Energy LLC (LINE): 1.40%
  5. McDonald's Corporation (MCD): 1.21%
  6. Wells Fargo & Co, San Francisco Ca Pfd: 1.15%
  7. Bristol-Myers Squibb Company (BMY): 1.12%
  8. PPL Corp (PPL): 1.11%
  9. American Electric Power Co Inc (AEP): 1.10%
  10. Abbott Laboratories (ABT): 1.09%

As with other income oriented sectors, ETFs structured with higher dividends as a priority are much in demand given aging demographics in developed countries. With these issues growth opportunities in overall asset appreciation and increases in dividends are present. Nevertheless, as yields are now quite low historically, investors must remember that low yields will not protect them in a rising interest rate environment or any significant stock market corrections.

As stated with other sectors, remember ETF sponsors must issue and their interests arenâ¿¿t aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

For further information about portfolio structures using technical indicators like DeMark and other indicators see www.etfdigest.com . You may follow us on Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has positions in Lazy Portfolios with VIG, VNQ and VYM.

(Source for data is from ETF sponsors and various ETF data providers.)

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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SYM TRADE IT LAST %CHG
DVY $78.59 -0.14%
PID $18.46 -0.38%
XLU $44.74 0.29%
VYM $69.65 -0.03%
VIG $80.99 -0.45%

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