Best and Worst Performing Dividend ETFs of August 2023

Dividend ETFs performed poorly in August, with only two ETFs producing positive returns as smaller-cap and cyclical stocks dragged down their portfolios. 

The worst-performing dividend exchange-traded fund in the month of August was the Invesco S&P Ultra Dividend Revenue ETF (RDIV), which lost 5.3% on the month, while the Invesco High Yield Equity Dividend Achievers ETF (PEY) returned 3.2%, according to etf.com data. Leveraged ETFs, inverse ETFs and ETFs with less than $50 million in assets under management were excluded from the list. 

While the market, represented by benchmark SPDR S&P 500 ETF Trust (SPY), was down 1.6% in August, dividend ETFs lagged even in comparison. Only 7 out of the 48 dividend ETFs considered for this article performed better than the broader market. Small-cap stocks and cyclical stocks, stocks that are more sensitive to economic conditions, are overrepresented in dividend ETFs, and both were out of favor in August.  

“The market traded in a risk-off fashion in August. Funds with a high-yielding focus would have worse performance in a risk-off environment,” Matt Bartolini, head of SPDR America research at State Street Global Advisors. 

Best Performing Dividend ETFs

Worst Performing Dividend ETFs

Why Dividend ETFs Were Down 

Bartolini, who is also Managing Director at State Street, says that because dividend ETFs often weigh their holdings by dividend yield and not market cap, they hold more small- and mid-cap stocks than the broader market. Small and mid-cap stocks tend towards volatility more than larger-cap stocks, which leads risk-averse investors to shun them. 

Exposure to cyclical sectors such as like finance or materials can also hurt dividend funds. Nancy Tengler, portfolio manager of the LAFFER|TENGLER Equity Income ETF (TGLR), a dividend-focused ETF that launched last month, said that the 32% weighting to financial stocks that RDIV had explains in part why it dropped over the month. 

Two Dividend ETFs with Positive Performance 

The two dividend funds that eked out positive returns were PEY and the WisdomTree Japan  

Hedged SmallCap Equity Fund (DXJS).  

PEY focuses on companies that have raised dividends for at least 10 straight years. Bartolini says that funds with a dividend sustainability focus on often end up with companies that report more regular earnings and stronger balance sheets; such businesses tend to do well in markets when investors are wary.  

DXJS concentrates on small-cap stocks in Japan. While small caps weighed down U.S. dividend ETFs in August, they did relatively well in Japan for the month. The iShares MSCI Japan Small-Cap ETF (SCJ) fell 1.0% in August compared to the general Japan-focused iShares MSCI Japan ETF (EWJ), which lost 2.8% 

Contact Gabe Alpert at [email protected]