Dividends Grow Amid Rising Rates

October 16, 2018

Other Dividend Screeners

The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) takes the high-yielding stocks in the S&P 500 to a different level than SPYD, by holding just 50 stocks and incorporating a semiannual low-volatility filter. Utilities (20% of assets) and real estate (17%) were the two largest here as well, though the weightings are different. Meanwhile, consumer staples (16% vs. 9% for SPYD) and industrials (5%) stocks, such as Philip Morris International (etf.com/stock/PM), were more represented.

While SPHD adds a price performance screen, dividend peer Oppenheimer S&P Ultra Dividend Revenue ETF (RDIV) incorporates a more fundamental input. RDIV invests in the highest-dividend-yielding stocks in the S&P 900 (large- and midcaps) weighted by revenue. Energy (19% of assets) is the largest, aided by holdings of Exxon (etf.com/stock/XOM) and Chevron (etf.com/stock/CVX), followed by utilities (16%) and consumer discretionary (15%). Duke Energy and Target are examples of stocks in these sectors. Health care (7%) and industrials (6%) are underrepresented in this ETF relative to some other dividend alternatives.

Limiting Sector Exposure

If the variety of sector exposures is too much, then the ALPS Sector Dividend Dogs ETF (SDOG) might be of interest. Though this ETF does not track an S&P index, the S&P 500 is the starting point. The ETF holds the five-highest-yielding stocks in each of the GICS sectors, and is reconstituted based on data as of the end of November. Health care (11%), energy (11%) and utilities (11%) were among the nine sectors that had between 10-11% of recent assets, with Scana and Eli Lilly examples of the ETF holdings.

The above ETFs have established long-term records, but additional S&P 500 based dividend ETFs have come out in the past year.

The AAM S&P 500 High Dividend Value ETF (SPDV) and the Global X S&P 500 Quality Dividend ETF (QDIV) combine the dividend factor with another one. While SPDV is like SDOG in owning five stocks in the each of the sectors with a focus on free cash flow yield, the high return on equity and low financial leverage screening criteria has QDIV leaning more toward consumer discretionary (17% of assets) and less toward materials (4%).

CFRA rates these and many other U.S. dividend ETFs such as  the iShares Core High Dividend ETF (HDV) and the Vanguard Dividend Appreciation Index (VIG) that do not have a connection to the prominent S&P 500 Index. Our ratings approach is based on a combination of holdings-level analysis and fund-specific attributes focused primarily on costs and technical trends.

Though past performance is not a driver of our ratings, we think the wide performance range between S&P-oriented ETFs highlights the importance of looking inside. The approximately 9% performance gap year-to-date through Oct. 9 between the top performer, RDIV, and the bottom performer, SPHD, is sizable.

At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him on Twitter @ToddCFRA.

Find your next ETF

Reset All