Many investors are paying a lot of attention to dividend-focused equity ETFs this year, and with good reason. As yields across the fixed-income universe remain compressed globally, stocks are the asset class meeting investors’ demand for yield.
Nick Colas, head of research at Convergex in New York, put it best in a research note Monday, July 18:
“With the S&P 500 trading at 18x, the science of historical trading patterns clearly says U.S. stocks are fully valued. Stocks have one thing in their favor at any price: dividend yields cannot go negative, unlike the payout on bonds. How appealing is that feature? It all depends on how long you think global interest rates will remain under pressure. More scientific catalysts – the S&P 500 earnings more than $120/share, for example – seem far away indeed. Bottom line: stocks are the new bonds. For now.”
So what are the ETFs in this segment delivering the highest total returns—comprising both price appreciation and dividend yield?
Here are the top five, and they are not the largest, most well-established ETFs in this category listed in the U.S. They are all rather smaller, more narrowly focused funds. (The list excludes leverage/inverse strategies):
- The Guggenheim Canadian Energy Income ETF (ENY | C-77), with total returns of 26.8% YTD
This is the best-performing dividend-focused ETF so far this year, excluding leverage and inverse strategies, and it’s not even a U.S. equity fund. ENY focuses on Canadian energy names. It tracks an index that’s a multifactor-weighted composite of Canadian royalty trusts and Canadian oil sands companies.
The fund tilts toward oil and gas companies focused on exploration, production and services at the expense of refining and marketing names. Since it came to market in 2007, it has gathered only $30 million in total assets, and has an expense ratio of 0.71%.
The 31-security portfolio has a 12-month distribution yield of 3.22%, and a 30-day yield of 2.82%, according to Guggenheim data.
- The Guggenheim S&P High Income Infrastructure ETF (GHII | F-36), with total returns of 25.7% YTD
GHII tracks an index of roughly 50 high-yielding, infrastructure-themed global stocks. The fund not only owns high-dividend-paying stocks, it also weights securities by yield, delivering some of the highest yields in the segment.
From a sector perspective, the fund allocates to three sectors—energy, utilities and industrials. And it delivers strong yields. According to Guggenheim data, GHII’s 12-month yield sits at 4.87%, and its most recent 30-day yield hit 5.37%.
But GHII, with an expense ratio of 0.45%, is still extremely small—less than $3 million in total assets after being on the market for about a year.