12 High Dividend ETFs
By: Ned Piplovic,
Exchange-traded funds — ETFs — continue gaining popularity because they combine favorable characteristics of stocks and mutual funds in addition to many offering high dividend yields for income-seeking investors.
ETF shares offer the convenience of trading easily like high dividend stocks on various exchanges and also have additional advantages, such as liquidity and tax efficiency. Additionally, ETFs offer the easy diversification generally associated with mutual funds, providing easy and convenient ways to invest in equities that offer simple and inexpensive opportunities for investors to diversify their portfolios.
While offering a similar level of diversification as mutual funds, ETFs allow investors to trade shares throughout the day like stocks, which is not possible with mutual funds. Many ETFs achieve diversification by tracking well-known market indices, such as the Dow Jones Industrials Index or the S&P 500 Index.
Investors could achieve higher yields by investing in individual equities. However, this approach also exposes investors to higher level of risk. Therefore, investing in dividend-paying ETFs minimizes total exposure by spreading risk across all the holdings in the fund.
ETFs can range from just a few to hundreds and thousands of individual equities. Additionally, while all dividend-focused ETFs can hold all dividend-paying equities, other ETFs hold a combination of equites where some pay dividends and some equites do not..
Compared to stocks, bonds, mutual funds and other investment vehicles, ETFs are relatively new. Mutual funds outnumbered ETFs more than 11,000-to-one when ETFs emerged in the late 1990s. However, while the total number of mutual funds increased approximately 20% over the past two decades, the number of ETFs increased nearly 65-fold in the same time frame. While mutual funds still outnumber ETFs, the margin is only approximately three-to-one and closing.
With more than 6,500 ETFs globally and more than 2,000 just in the United States, investors have a wide selection from which to choose and find funds best suited for their specific portfolio goals and strategies. The simplest way to choose ETFs for this list would be to just select top dozen funds sorted by high dividend yields.
Most ETFs offer market capitalizations that is significantly lower than large-cap companies and are not expected to compete on that size level. However, to be eligible for inclusion on the list of ETFs with high dividend yields below, a fund had to have at least $1 billion market capitalization. Also, each ETF had to have delivered at least four distributions in 2020.
With those two criteria in mind, here are the 12 ETFs that pay high dividend yields.
iShares Long-Term Corporate Bond ETF (NYSE:IGLB)
This fund tracks the performance of the CE BofA ML 10+ Year US Corporate Index. As of January 11, 2021, the fund’s 2,784 individual equities equaled over $2.5 billion in total assets. The ETF’s share price rose more than 9% over the trailing 12-month period. Combined with the 3.1% dividend yield, the ETF has rewarded its investors with a 12.4% total return over the past year. Unlike the smooth rise over the past year, the share price experienced more volatility in the previous few years which limited the three-year and five-year total returns to just 27.4% and 53.5%, respectively.
Invesco S&P 500 High Dividend Low Volatility ETF (NYSE:SPHD)
The Invesco S&P 500® High Dividend Low Volatility ETF tracks the composition and results of the S&P 500 Low Volatility High Dividend Index. The fund allocated nearly $2.6 billion across 50 individual holdings. Only two holdings — Huntington Bancshares Incorporated (NASDAQ:HBAN) and Dow, Inc. (NYSE:DOW) — had shares of assets that exceeded 3%.
Although the ETF is down 7.1% in the trailing 12 months, it used its asset appreciation and steady dividend distribution to reward its stakeholders with 46.6% in the last five years.
Invesco Fundamental High Yield® Corporate Bond ETF (NYSE:PHB)
The Invesco Fundamental High Yield® Corporate Bond ETF (Fund) is based on the RAFI® Bonds US High Yield 1-10 Index (Index). The fund’s 205 individual holdings combine for nearly $786 million in total assets. Additionally, the top three sectors — Financial, Utility and Industrial combine for over 99% of the fund’s total assets. Over the past year the funds dividend income distribution and capital gains offered a one-year total return in excess of 8.5%. The three-year total return was more than 15% and the five-year combined returns are approaching 40%.
iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB)
This ETF tracks the composition and performance of the J.P. Morgan EMBI Global Core Index. As of January 12, 2021, the fund had approximately $19 billion in total assets allocated across 524 individual equities. No individual equity accounts for more than 1.15% of total assets. Furthermore, even aggregated by the country of issuance, only three — Mexico (5.55%), Indonesia (4.79%) and Saudi Arabia (4.42%) — of the 59 countries represented in the fund account individually for more than 4% of total assets.
After trading relatively flat from 2015 to 2018, the share price has experienced a modest growth in the trailing 12 months and given investors 7% in total returns. These returns were closer to 12.5% over the last three years and over 36% in the last five years.
Invesco Emerging Markets Sovereign Debt ETF (NYSE:PCY)
The Invesco Emerging Markets Sovereign Debt ETF tracks the composition and results of the DBIQ Emerging Market USD Liquid Balanced Index. As of January 12, 2021, the ETF held almost $3 billion in total assets allocated across 104 individual holdings. All countries represented in the fund are below the 2% level, with a significant percentage of its assets distributed in South America. Share price volatility delivered one and three-year total returns at very close levels of 4.2% and 10.3%, respectively. However, the longer-term returns over the past five years offered nearly 33%.
iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG)
The iShares iBoxx $ High Yield Corporate Bond ETF uses the Markit iBoxx USD Liquid High Yield Index as its basis. As of January 12, 2021, the fund had total assets of almost $25 billion allocated across 1,215 individual holdings.
After eight years of declining annual dividends, the ETF stabilized its annual payout and assisted by asset appreciation, growing 4% in its shareprice and delivering a total return of 8.6% over the last year. The three-year total return came in at more than 16% and the five-year total return is approaching 42%.
Invesco Senior Loan ETF (NYSE:BKLN)
Based on the S&P/LSTA U.S. Leveraged Loan 100 Index, the fund normally invests at least 80% of its total assets in the component securities that comprise the Index. Its $5.15 billion in total assets is spread across 122 individual securities. While he majority of its components are below 2% share, the top 10 components combine for a 27% cumulative share of total assets. The 3%-plus dividend income yield provided most of the 5.2% one-year total returns. The share price traded mostly sideways for the past few years and limited the three and five-year total returns to 10.5% and 24%, respectively.
VanEck Vectors Fallen Angel High Yield Bond ETF (NASDAQ:ANGL)
The fund attempts to replicate the price and yield performance of the ICE BofA ML U.S. Fallen Angel High Yield Index. The fund’s 328 holdings combine for nearly $4.2 billion in total assets. Among the holdings, 85% are United States securities. The remaining holdings comprise investments in Italy, United Kingdom, Japan, Germany, Canada, Sweden, China, Finland and Ireland.
The fund has experienced steady growth over the last several years — its 12-month total return was 17%, where its three-year and five-year returns were 24.3% and 73.8%, respectively.
iShares Preferred & Income Securities ETF/iShares Trust (NASDAQ:PFF)
This ETF uses the ICE Exchange-Listed Preferred & Hybrid Securities Index as a benchmark. As of January 12, 2021, had nearly the $20 billion of the fund’s total assets distributed across 516 individual holdings. The included components represent more than 95% of United States-based equities and barely 1% are equities based in the United Kingdom. Individually, only Broadcom, Inc. (NASDAQ:AVGO) has more than a 2% share of total assets. The top 10 equities represent cumulatively only 13.26% of total assets.
The rising share price and the dividend income distributions combined to deliver a 6.6% total return over the trailing one-year period. The three-year total return exceeded 16%. Furthermore, the total return was 28.3% over the last five years.
iShares 0-5 Year High Yield Corporate Bond ETF (NYSE:SHYG)
The SHYG ETF had more than $5.8 billion in net assets and contained 719 individual holdings, as of January 12, 2021. The iShares 0-5 Year High Yield Corporate Bond ETF seeks to track the investment results of Markit iBoxx USD Liquid High Yield 0-5 Index, which invests in U.S. dollar-denominated, high-yield corporate bonds with remaining maturities of less than five years.
The top 10 equities by share account for approximately 9.5% of the entire fund. The combined total return over the trailing 12-month period was nearly 8% and the three-year return is approaching 13%. Also, the total return over the last five years exceeded 35%.
JP Morgan Emerging Mkts Loc Currency Bond ETF (NYSE:EMLC)
With nearly $4 billion in assets under management, the VanEck Vectors J.P. Morgan EM Local Currency Bond ETF seeks to replicate the price and yield performance of the J.P. Morgan GBI-EM Global Core Index. The index comprises bonds issued by emerging market governments and denominated in the local currency of the issuer. The top ten of the ETF’s 267 current holding account for 18.9% of the fund’s total assets. The fund has a current yield combined with a recovering share price to deliver a 7% total return over the past year and a 32% five-year total return.
Global X SuperDividend ETF (NYSE:SDIV)
Global X SuperDividend ETF seeks investment results that mimic the performance of the Solactive Global SuperDividend Index. It invests over 80% of its assets in the underlying index, which tracks the performance of 100 equally-weighted companies that consistently rank among the highest dividend-yielding equities on the market.
The fund has its $780 million assets spread among 103 individual holdings. It invests in securities from around the globe, with only 22.4% of its assets in United States based companies. The next two largest countries are Hong Kong (14.99%) and South Africa (10.23%). Its returns have suffered in the last year, with total returns down 12% in the trailing 12 months, but it has mostly traded sideways in the last five years, and its share price has grown 4.5% in that time while paying its comparably huge dividends all the while.
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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.