6 Monthly Dividend ETFs for your Investment Portfolio
By: Ned Piplovic,
Unlike professional investors who have the time and resources to perform in-depth market analysis, many individual investors look for easy diversification, steady returns and low fees. Exchange-traded funds (ETFs) provide all three benefits and monthly dividend ETFs offer the desired cash flow for income-seeking investors.
Some investors will undoubtedly look towards mutual funds as potential investment options. While mutual funds certainly offer the desired diversification, ease of investing and steady income payments, monthly dividend etfs have several advantages – which makes them a superior investing opportunity overall.
While mutual funds can be traded only after the close of trading each day, ETFs can be sold and bought continuously throughout the trading session just like stocks. Additionally, ETFs offer investors much greater transparency. Even if fund managers trade underlying securities, mutual funds still report their holdings only once every quarter, which means that the investors can work with information that is more than two months old when selecting their investments. However, the ETF information is always current as such funds report their holdings on a daily basis.
Furthermore, mutual fund management fees can be significantly higher than the fees that ETFs charge. While fees are only small fractions of the fund’s value, even a small percentage difference in fees can result in significantly higher total returns when compounded over long periods.
Using the ETF Directory at DividendInvestor.com, I searched for monthly dividend ETFs with above-average dividend yield and reliable dividend income flow. Most of the ETFs have raised their annual dividend payouts for the past several years.
6 Monthly Dividend ETFs for your Investment Portfolio: #6
Vanguard Long-Term Corporate Bond ETF (NASDAQ:VCLT)
The ETF invests primarily in high-quality, investment-grade corporate bonds and comprises 2,385 individual bond holdings as of January 25, 2021. The fund currently yields 3.1% and has a 0.05% gross expense ratio, which is 91% lower than the average expense ratio of funds with similar holdings. The fund’s share price has grown notably in the last year, giving investors returns of 8% in capital appreciation and 11.1% in total returns. In the last three and five years, respectively, the fund has returned 29.6% and 58.9%.
6 Monthly Dividend ETFs for your Investment Portfolio: #5
iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB)
EMB ETF had nearly $20 billion in net assets and contained 528 individual holdings as of January 25, 2021. The EMB ETF tracks the investment results of the J.P. Morgan EMBI Global Core Index composed of U.S. dollar-denominated, emerging market bonds. The ETF charges a 0.39% fee and currently pays a $0.40 monthly dividend, which is 3.2% higher than last month and is equivalent to a 4.2% yield. It has grown 3.4% i the trailing 12 months, 13.7% in the trailing 3 years, and 38.1% in the trailing 5 years.
6 Monthly Dividend ETFs for your Investment Portfolio: #4
iShares Morningstar Multi-Asset Income ETF (BATS:IYLD)
The IYLD fund seeks to track the investment results of the Morningstar Multi-Asset High Income Index. The fund has a portfolio with an asset allocation of 5.6% US Stock, 21.3% Non-US Stock, 45.3% US Bond, 12.7% Non-US Bond, and 13.8% Preferred Stock. It has roughly $270 million distributed among just 12 holdings.
The fund’s current monthly payout is $0.13, which has continuously fluctuated in the trailing 12 months for an annual distribution of $1.05 and a yield of 4.4%. In the last year, its total returns were 1.3%, where in the last five, they were 36%.
6 Monthly Dividend ETFs for your Investment Portfolio: #3
iShares iBoxx High Yield Corporate Bond ETF (NYSE:HYG)
As of January 25, 2021, the HYG ETF had more than $23.4 billion in net assets and contained 1,232 individual holdings. The ETF invests in liquid, U.S. dollar-denominated, high yield corporate bonds for sale in the United States. While generally tracking the performance of the Markit iBoxx® USD Liquid High Yield Index, the fund might also 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.
Nearly all of its assets are in the Energy sector, making up 95.3% of the fund’s total asset allocation. It currently pays a relatively consistent monthly dividend of $0.36, fluctuating by a few pennies from month to month. This payout corresponds to a 4.9% dividend yield and $4.31 annual distribution. It has grown in the recent past, having returned 4.2% in capital appreciation alone in the trailing 12 months and as high as 43.5% in the last five years.
6 Monthly Dividend ETFs for your Investment Portfolio: #2
iShares Emerging Markets High Yield Bond ETF (CBOE BZX:EMHY)
The ETF’s current net assets of more than $330 million were spread across 541 individual holdings. This ETF invests in below-investment-grade U.S. dollar-denominated emerging market sovereign debt and the corporate high yield bond market by tracking the performance of the Morningstar Emerging Markets High Yield Bond Index. The ETF’s share price closed at $45.91 on January 25, 2021, having mostly traded sideways for the last two years.
The fund pays a $0.28 monthly distribution, equivalent to a $2.52 annual payout when accounting for volatility. It yields 5.5% and has grown its dividend payout at a rate of 19.3% per year for the last three years.
6 Monthly Dividend ETFs for your Investment Portfolio: #1
ProShares High Yield—Interest Rate Hedged ETF (NYSE:HYHG)
This ETF seeks the return potential of a diversified portfolio of high-yield corporate bonds. The fund tracks the performance of the FTSE High Yield (Treasury Rate-Hedged) Index and targets zero interest rate risk by including a built-in hedge against rising rates by using short positions in U.S. Treasury futures. Additionally, the fund offers even less interest rate sensitivity than short-term bonds by targeting a duration of zero. As of January 25, 2021, the HYHG fund comprised nearly $71 million in total assets, the plurality of which exist in the Technology (24.2%), Healthcare (13.6%) and Financial Services (13.5%) sectors.
HYHG’s share price has grown 1% in the trailing 12 months. In the last three and five years, it has grown 8.3% and 40.5%, respectively. The fund pays a monthly dividend of $0.27, which corresponds to an annual payout of $3.26 and a dividend yield of 5.2%
The list of the top 6 Monthly Dividend ETFs to consider for your portfolio above ranks the funds primarily by their current forward dividend yield. Investors should conduct their own due diligence to confirm that the 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.