3 High Dividend ETFs That Shine in a Low-Yield Market

See three high dividend ETFs that compete with T-bills in the latest installment of etf.com's Dividend Content Series.

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Reviewed by: Kent Thune
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Edited by: Lou Carlozo

An often-used phrase in investing (and the title of a smoking Les McCann and Eddie Harris song) is “Compared to what?” As T-bills continue to yield rates we haven’t seen in more than a decade, I used the etf.com screening tool to identify dividend funds whose yields exceeded those of 3-month U.S. Treasury bills. Those instruments currently offer a 5.22% annualized return as of Jan. 19. But here’s the funny thing: In hunting for high dividend ETFs, there just wasn’t a lot of dividend to be had. 

That’s not the screener’s fault, of course. It has everything to do with a pair of long-term market factors. First, stocks have generally risen in price for more than a decade. And second, companies have increasingly chosen to buy back stock rather than raise dividend payouts. That has created a yield-starved market of sorts.

High Dividend ETFs Can Come With Risk

While attaining above 5.45% on an equity ETF is quite possible, we must assume an above average risk in most cases.  A risk to U.S. investors seeking high dividend ETFs is that non-U.S. stocks hold the yields these days, relative to their American counterparts. To be sure, U.S. sectors such as mortgage REITs and Energy Master Limited Partnerships have yields well above those of T-bills. 

But when it comes to broad-based equity funds, investors and investment advisors must essentially invest in a global mix of stocks. These investments take different routes in trying to solve that same issue: equity yield in a market environment where T-bills offer so much competition. 

First Trust Dow Jones Global Select Dividend Index Fund

The First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a 100-stock global portfolio weighted by yield, so the highest-yielding stocks get the largest allocations at each fund rebalance date. At $626 million in assets it flies a bit under the radar, despite its 6.5% dividend yield. With a weighted average market capitalization under $10 billion, FGD bypasses the biggest, lower-yielding stocks to work the middle part of the market cap spectrum. Only 24% of this ETF is invested in U.S. and Canadian stocks.

Global X SuperDividend U.S. ETF 

The Global X SuperDividend U.S. ETF (DIV) turns 11 in March and is of similar size to FGD, at just above $600 million in assets. It yields a hefty 7.2% and its portfolio sells at 12x trailing earnings per share. Not surprisingly, its weightings to growth sectors such as tech, consumer cyclical and healthcare stocks combine for less than 10% of the fund. DIV invests its 48-stock portfolio entirely in U.S. stocks, but has a very uneven history given the high-yield nature of its holdings. It has posted negative total returns in four of the last six years. It lost about 8% in 2023, but its 10% loss in 2022 beat the S&P 500, which plunged 18%.

iShares International Select Dividend ETF

As the name suggests, the iShares International Select Dividend ETF (IDV) is a 100% non-U.S. ETF. The closest it gets to the United States geographically is a 10% allocation to Canada, which has some high-yielding stocks in banking and other sectors. More than half is allocated to Europe, and another 18% to Japan and Australia combined. That leaves very little space for China and emerging markets – but given China’s political and economic issues, IDV might attract advisors and investors.

High Dividend ETFs Offer Alternative to Treasuries 

Three-month T-bills are near their highest yields since… wait for it… the year 2000! That means stiff competition for stocks unless the market rises but it has spent two years breaking even or worse for most stocks. That naturally prompts a hunt for yield well above the S&P 500’s approximately 1.5% in 2024.  

These three ETFs indicate that the yields are out there and investment advisors and investors who do their homework can find the ones that fit their individual needs – and answer the market’s musical question with “Compared to this.” 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.