10 High Monthly Dividend ETFs
By: Ned Piplovic,
Investors looking for investment vehicles that generate monthly income distributions, as well as an easy strategy for portfolio diversification, should consider monthly dividend exchange-traded funds (ETFs) – especially monthly dividend ETFs.
While mutual funds are certainly viable options for steady income payments, dividend ETFs have several advantages. Dividend ETFs can be traded throughout the day like stocks, but mutual funds can be traded only at the end of the trading day.
Unlike mutual funds that report their holdings quarterly, dividend ETFs are more transparent because they report their holdings daily. Furthermore, monthly dividend ETFs generally have substantially lower fees, which can significantly improve investors’ total returns over the long run.
Using the ETF Directory available at DividendInvestor.com, I selected the monthly dividend ETFs with the highest dividend yield that have not reduced their monthly dividend payout from the previous 12 months. The following 10 monthly dividend ETFs have dividend yields that exceed 5% and should provide steady monthly income distributions to complement any investment portfolio’s capital growth strategy.
10 Monthly Dividend ETFs: #10
iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca:HYG)
HYG ETF had nearly $16.4 billion in net assets and contained 1,000 individual holdings, as of September 7, 2018. The ETF invests in liquid, U.S. dollar-denominated, high yield corporate bonds for sale in the United States by tracking the performance of the underlying Markit iBoxx® USD Liquid High Yield Index. The fund might invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index.
The ETF charges a 0.49% fee and currently pays a $0.371 monthly dividend, which is equivalent to a 5.12% yield.
10 Monthly Dividend ETFs: #9
iShares Emerging Markets High Yield Bond ETF (Cboe BZX:EMHY)
The ETF’s current net assets are spread across 464 individual holdings and exceeded $500 million as of September 7, 2018. The underlying index benchmark is the Morningstar Emerging Markets High Yield Bond Index. This index tracks the performance of the below-investment-grade U.S. dollar-denominated emerging market sovereign and corporate high yield bond market.
On September 7, 2018, the ETF’s share price closed at $44.73 and the fund currently pays a $0.221 monthly dividend, which corresponds to a 5.25% forward dividend yield.
10 Monthly Dividend ETFs: #8
Invesco Global Short-Term High Yield Bond ETF (NYSEArca:PGHY)
This fund tracks the performance of the Deutsche Bank Global Short Maturity High Yield Bond Index and invests generally at least 80% of its total assets in U.S. and foreign short-term, non-investment grade bonds that comprise that index. Like the underlying index, the fund rebalances its holdings quarterly and re-weights annually. The ETF spreads its current total net assets of $230 million across 491 individual holdings, charges a 0.35% management fee and offers a 5.33% forward dividend yield.
10 Monthly Dividend ETFs: #7
SPDR® Bloomberg Barclays High Yield Bond ETF (NYSEArca:JNK)
This SPDR® fund provides a diversified exposure to US dollar-denominated high-yield corporate bonds with above-average liquidity. The fund’s investment mix corresponds generally with the composition of the Bloomberg Barclays High Yield Very Liquid Index. As of September 7, 2018, JNK had more than 88% of its nearly $10 billion in assets under management invested in the Industrial sector, with another 9.6% of assets in Financials and less than 3% in Utilities. The fund currently offers a 5.48% yield and has a 0.40% gross expense ratio.
10 Monthly Dividend ETFs: #6
VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca:HYEM)
The ETF uses the ICE BofAML Diversified High Yield US Emerging Markets Corporate Plus Index (EMLH) as the target for its performance goals. The fund invests in U.S. dollar-denominated bonds issued by non-sovereign emerging markets issuers that are rated below investment grade. As of September 7, 2018, the fund allocated its total net assets of $273 million across 469 individual holdings. Investments in HYEM’s top four countries – China, Brazil, Turkey and Argentina – account for nearly 40% of the fund’s total assets. The fund currently yields 5.86% and has a 0.40% gross expense ratio.
10 Monthly Dividend ETFs: #5
Global X SuperDividend® U.S. ETF (NYSEArca:DIV)
The DIV fund invests in 50 of the highest dividend-yielding equity securities in the United States and corresponds generally with the Indxx SuperDividend U.S. Low Volatility Index. As of September 7, 2018, DIV’s holdings comprised more than $420 million, which were spread relatively evenly across the fund’s 50 holdings. In addition to its current 6.09% yield, the fund’s share price has advanced 7.7% over the past six months.
10 Monthly Dividend ETFs: #4
First Trust Multi-Asset Diversified Income Index Fund (NYSEArca:MDIV)
The MDIV fund generally tracks the NASDAQ US Multi-Asset Diversified Income IndexSM. The ETF allocates its total net assets – more than $690 million as of Sept. 7 – across 126 individual holdings. Currently, the fund’s assets represent five equity classifications – equities, real estate investment trusts (REITs), preferred securities, master limited partnerships (MLPs) and high-yield corporate debt ETFs – each with approximately 20% share of assets. The fund currently offers a 6.58% yield and its share price rose 6.4% in the second half of the trailing 12 months.
10 Monthly Dividend ETFs: #3
WisdomTree Emerging Markets Local Debt Fund (NYSEArca:ELD)
With almost $170 million in assets under management spread across 125 individual holdings, ELD is an actively managed fund that invests in sovereign and corporate debt issued in over 10 different emerging markets. To minimize exposure to currency volatility, each country’s share can be no more than 20%. The fund’s 0.55% expense ratio offers investors an opportunity to invest in an emerging markets debt vehicle at low cost, which increases long-term total returns. The fund has a current yield of 6.62% and its annualized dividend payout is nearly 18% higher than the total dividend distribution in 2017.
10 Monthly Dividend ETFs: #2
Global X SuperIncome™ Preferred ETF (NYSEArca:SPFF)
The SPFF invests in 50 of the highest-yielding preferred stocks in North America, compared to the DIV’s focus on U.S. securities. SPFF tracks the S&P Enhanced Yield North American Preferred Stock Index and currently has nearly $200 million of net assets distributed across 50 securities. Equities in the Financials sector account for more than two-thirds of total assets. Including Real Estate and Energy, the top three sectors account for more than 88% of assets. The fund currently offers a 7.26% yield and its share price has reversed its 7.6% decline early in the trailing 12-month period into a slow-rising trend over the previous four months.
10 Monthly Dividend ETFs: #1
Global X Global X SuperDividend® ETF (NYSEArca:SDIV)
Like the related ETFs from Global X (SPFF and DIV), the SDIF fund invests in the highest-dividend-yielding equity securities. The difference is that SDIV invests in global equities and has 100 holdings – twice the number of holdings in the other two ETFs. SPFF tracks the performance of the Solactive Global SuperDividend Index. As of September 7, 2018, the SPFF fund comprised nearly $950 million in total assets, with its top five holdings representing less than 15% and the top 25 holdings accounting for approximately 30% of total assets. SDIV’s share price increased nearly 16% after its 52-week low in February, and the current yield is 7.51%.
The list of the top 10 Monthly Dividend ETFs above ranks the funds solely by their current forward dividend yield. Investors should conduct their own due diligence to confirm that the various funds’ other metrics, such as share-price trend, payout ratios, long-term and short-term total returns, etc., support their portfolio strategies and choose their investment equities accordingly.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.