5 High-Yield Dividend ETFs for Your Portfolio
By: Ned Piplovic,
Since their introduction in the mid-1990s, the number of exchange-traded funds (ETFs) has expanded exponentially. As a result, income investors can now choose from thousands of high-yield dividend ETFs to bolster their dividend income.
As an established investment form, the total number of mutual funds increased by 17% between 1999 and 2017. As the number of ETFs increased, the annual growth rate fell below 10%. However, that growth rate was still more than three times higher than the growth rate for new mutual funds.
The variety of available ETFs allows investors to choose funds that offer sector specific ETFs, ETFs that are diversified across sectors, ETFs that seek high capital gains or ETFs that target above-average dividend income distributions like high dividend ETFs.
As with every investment decision, individual investors must conduct their own equity analysis and due diligence to ensure that the selected high-dividend ETFs align well with his or her individual portfolio strategy. Sorted in ascending order by their current forward dividend yield, here are five high-yield dividend ETFs to consider.
5 High-Yield Dividend ETFs for Your Portfolio #5
iShares Global REIT ETF (NYSE:REET)
Dividend Yield: 5.1%
The iShares Global REIT ETF seeks to track the investment results of an index composed of global real estate equities in developed and emerging markets. As of Oct. 7, the fund had more than $2.26 billion in net assets allocated across 307 individual holdings. Two-thirds of the fund’s holdings comprise equities from the United States. With the addition of holdings from Japan and the United Kingdom, the top three countries account for 80% of the fund’s total assets. Retail REITs represent nearly 20% of assets, with residential and office REITs contributing more than 15% each.
This ETF’s annual distribution amount has increased every year since the fund’s formation in 2014. The current annualized distribution of $1.45 corresponds to a 5.1% forward yield. Because of some volatility and a share price drop in late 2018, dividend growth outpaced asset appreciation over the past five years. Therefore, the current 5.1% yield is almost 10% higher the fund’s own 4.63% five-year yield average. The share price and rising dividend income distributions have combined to produce a total return of nearly 14% over the trailing one-year period. Over the past three years, the total return has topped 26%.
5 High-Yield Dividend ETFs for Your Portfolio #4
iShares Preferred and Income Securities ETF (NYSE:PFF)
Dividend Yield: 5.23%
With nearly $18 billion in total net assets, this fund offers exposure to U.S. preferred stocks, which have the characteristics of bonds – which pay a fixed dividend — and stocks – which represent ownership in a company. This ETF seeks to provide investment results that correspond generally to the total return performance of the Wells Fargo Hybrid and Preferred Securities Aggregate Index before fees and expenses.
As of Feb. 9, the fund’s assets were allocated across 486 individual holdings. Asset allocation is fairly balanced across individual holdings. Only one holding — Broadcom, Inc. — accounts for more than 2% of the ETF’s asset shares, and the top 10 holdings account collectively for less than 14% of total net assets.
After a brief pullback in late 2018, the share price’s double-digit-percentage growth combined with dividend distributions to deliver a total return of nearly 11% over the trailing 12 months. This ETF’s three-year total return was just slightly higher at 15%. However, over the past five years, the ETF has offered a total return of almost 23%.
5 High-Yield Dividend ETFs for Your Portfolio #3
iShares 0-5 Year High Yield Corporate Bond ETF (NYSE:SHYG)
Dividend Yield: 5.25%
This bond ETF seeks to track the investment results of the Markit iBoxx USD Liquid High Yield 0-5 Index, which is comprised of U.S. dollar-denominated, high yield corporate bonds with remaining maturities of less than five years. As of February 19, 2020, the fund had 632 individual holdings representing aggregate total assets of nearly $4.7 billion. Equities from the Consumer Goods (26%), Communications (19%) and Energy (12%) sectors account for more than half of total assets.
With a 1.89% asset share, the Sprint Corporation (NYSE:S) just edged out the 1.88% share of DISH Network Corporation (NASDAQ:DISH) for the top spot. The top five individual holdings accounted for approximately 8.5% of this ETF’s total assets. Furthermore, the top 10 equities, when combined, make up just slightly more than 15% of total assets.
The fund’s current dividend yield of 5.25%, when combined with marginal capital gains, has delivered a total return of nearly 6% over the trailing 12-month period. The total returns over the last three and five years are approaching 14% and 21%, respectively.
5 High-Yield Dividend ETFs for Your Portfolio #2
VanEck Vectors J.P. Morgan Emerging Markets Local Currency Bond ETF (NYSE:EMLC)
Dividend Yield: 6.3%
VanEck Vectors J.P. Morgan Emerging Markets Local Currency Bond ETF targets the composition, the price and yield performance of the J.P. Morgan GBI-EM Global Core Index before any fund fees and expenses. The index is denominated in the local currency of the issuer and invests in bonds that issued by emerging market governments.
As of Feb. 19, the fund had $43 billion in total assets distributed across 301 individual holdings. Government bonds from Brazil, Indonesia and Mexico accounted for 9.1% to 9.6% of total assets. With the addition of Thailand and South Africa, the top five countries in this fund accounted for nearly 45% of the fund’s total assets. In addition to government bonds that account for more than 95% of the assets, the fund holds approximately 4% in cash and fractional shares in corporate bonds in the Financials, Industrials, Utility and Energy sectors.
Although it is only in its third year, the fund’s monthly distributions should deliver an annualized payout of more than $2.10, which corresponds to a 6.3% forward dividend yield. This ETF’s short-term share price decline offset some of the income payouts to limit the one-year total return to 4.55%. However, the total return was twice that amount over the past three years.
5 High-Yield Dividend ETFs for Your Portfolio #1
SPDR Dow Jones International Real Estate ETF (NYSE:RWX)
Dividend Yield: 8.83%
The SPDR Dow Jones International Real Estate ETF seeks to provide investment results that correspond generally to the total return performance of the Dow Jones Global ex-U.S. Index. Mirroring the underlying index, the SPDR Dow Jones ETF invests its funds in publicly traded real estate securities in countries other than the United States.
As of February 19, the fund’s combined 127 holdings represent $1.84 billion in total assets. Equities from Japan accounted for nearly 32% of the fund’s total assets. This share was nearly three times higher than the next two countries — United Kingdom and Australia — with 10.3% each. Because Japan has the highest share by far, it should not be surprising that the individual equity with the highest share of assets at 4.57% is from Japan as well — Mitsui Fudosan Co. Ltd.
Nevertheless, the top five equities by asset share, which account for more than 16% of total assets, are well diversified and represent five different countries. In addition to Japan in the top spot, Hong Kong, Australia, Germany and the Netherlands round out the top five.
The fund’s annualized $3.47 distribution amount corresponds to an 8.83% forward dividend yield. After a decline in 2017, the ETF’s annual distribution amount rose over the past two consecutive years and reached its highest level in 2019.
Asset appreciation added a few percentage points and combined with distribution payouts for a total return of more than 12% during the trailing 12-month period. The total return over the past three years exceeded 22.4%.
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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.