7 High Dividend ETFs to Buy for 2021
By: Ned Piplovic,
While exchange-traded funds (ETF) are convenient investment vehicles to pursue capital growth and diversification without the need to analyze and select individual stocks, income-seeking investors can benefit from a wide selection of high dividend etfs.
Even though they have not existed as long as mutual funds, ETFs have some advantages. ETFs, unlike mutual funds, can be traded like stocks throughout a trading session.
Plus, ETFs have much smaller management fees than mutual funds. In addition, ETFs report changes to their holdings daily, whereas mutual funds are allowed by the Securities and Exchange Commission (SEC) to take 60 days after their quarter ends to file their holdings with the agency. Certain mutual fund companies choose to report their holdings more frequently, even as often as monthly. But reporting with such frequency requires much effort and significant costs.
Finally, ETFs can provide tax advantages compared to mutual funds. With minimal changes in underlying holdings, ETFs are less likely to trigger taxable events the way mutual funds do. Mutual funds with high holdings turnover can generate tax liability for the investors, even if the fund itself records a loss. ETFs are generally index-based and usually do not carry tax liability caused by holdings turnover.
While ETFs distributed dividend income from underlying equities since the beginning, specific funds focused on investing in high-dividend securities are widely available today.
Here are seven high dividend ETFs to consider.
High Dividend ETFs for 2021: #7
Horizons S&P 500 Covered Call ETF (NYSE:HSPX)
Dividend Yield: 1.86%
This fund tracks the price and yield performance of the CBOE S&P 500 2% OTM BuyWrite Index (BXY Index). HSPX writes 2% out-of-the money call options, exposing the fund to any potential upside growth of the S&P 500 index. As an income source, the fund has paid distributions of up to 0.94% per month since its inception in 2013.
The fund hiked its annual distribution over the past three consecutive years and four out of the last five years. Additionally, the share price has more than doubled since the beginning of 2016. Its dividend yield of 1.86% may appear low, but this is only due to its continuous capital appreciation. The share price rose more than 10% in the trailing 12-month period and currently trades at $2,822.25, as of January 15, 2021.
High Dividend ETFs for 2021: #6
ProShares Global Listed Private Equity ETF (NASDAQ:KBWY)
Dividend Yield: 8.1%
The ProShares Global Listed Private Equity ETF tracks the performance of the LPX Direct Listed Private Equity Index, which consists of up to 30 qualifying listed private equity companies. To qualify for the index, the equity company’s direct private equity investments must represent more than 80% of the company’s total assets.
As of January 15, 2021, the top three holdings – the GEO Group Inc (NYSE:GEO) with 6.5%, American Finance Trust Inc (NASDAQ:AFIN) with 5.67% and Office Properties Income Trust Inc (NASDAQ:OPI) with 5.2% – comprise over 17% of the Index’s total holdings.
Due to a considerable loss in March 2020, the fund reported a loss of 24.6% in share price in the trailing 12 months, bringing its three-year returns down with it to a 22% decline. In the last five years, however, the fund has returned 8.8% in capital appreciation alone, and despite the lack of growth in recent periods, KBWY still increased its annual dividend payout more than 10% this year.
High Dividend ETFs for 2021: #5
GraniteShares HIPS US High Income ETF (NYSE:HIPS)
Dividend Yield: 9.3%
This ETF tracks the performance of the TFMS HIPS 300 Index and has almost $23 million in assets spread across hundreds of individual holdings, 80% of which are stocks and 14% of which are bonds. The remaining 6% is divided between other equities and cash.
As of January 15, 2021, the fund’s top three holding accounted for almost 9% of total assets combined – Clough Global Opportunities (NYSE:GLO), 3.05%; Western Asset High Inc Fund II (NYSE:HIX), 2.93%; and Advent Convertible & Income Fund (NYSE:AVK), 2.92%. The top 10 holdings account for more than 28% of total assets.
Since its inception in 2015, the fund has paid a monthly distribution equivalent to an annualized amount of $1.32 per share. The share price currently trades at $13.81 and is down 11.4% in the trailing 12 months. After adjusting for dividend yield, however, we see that investors only lost 2.1% of their investment — total returns in the last three years are still positive, and in the last five years they close in on 45.6%.
High Dividend ETFs for 2021: #4
Global X SuperDividend® Alternatives ETF (NASDAQ:ALTY)
Dividend Yield: 7.8%
This ETF tracks the Indxx SuperDividend Alternatives Index and provides investors exposure to alternative investments, which include Master Limited Partnerships (MLPs), real estate, infrastructure, fixed income and derivative strategies.
The single largest holding with more than 18% of total assets is the Global X Superdividend RE (SDIV). The next two largest holdings by share of total assets – Stone Harbor Emerging Mkts Income (NYSE:EDF) and Nuveen S&P 500 Buy-Write Income (NYSE:BXMX) – account for roughly 3% each. While the top three holdings above account for more than a quarter of all the assets and the top 10 holdings combine for nearly 43% of total assets.
The fund’s monthly distributions over the past three years have been fluctuating between $0.08 and $0.18. Its current annual payout is on the low end of that spectrum at $0.93, coinciding with its drop in share price in the trailing 12 months. The company lost 11.7% in capital, but broke even in the trailing three years and is up 40% in the last five years.
High Dividend ETFs for 2021: #3
Global X SuperDividend REIT ETF (NASDAQ:SRET)
Dividend Yield: 7.4%
This fund seeks to invest in 30 of the highest dividend yielding REITs globally and tracks the Solactive Global SuperDividend REIT Index.
As of January 15, 2021, the top three holdings – Annaly Capital Management Inc (NYSE:NLY) with 5.41%, Omega Healthcare Investors Inc (NYSE:OHI) with 5.22%, and KKR Real Estate Finance Trust Inc (NYSE:KREF) with 4.8% – account for slightly more than 15% of total assets. The fund’s top 10 holdings account for a little more than 45% of total assets.
The share price dropped 36.9% in the trailing 12 months as well as 25.3% in the last three years. Its long term returns, however, are still solid with returns of 12.4%.
High Dividend ETFs for 2021: #2
iShares Mortgage Real Estate ETF (BATS:REM)
Dividend Yield: 7.8%
The fund tracks the investment results of the FTSE NAREIT All Mortgage Capped Index – an index composed of U.S. REITs that hold U.S. residential and commercial mortgages. As of January 15, 2021, 98.82% of the funds total assets were tied to the real estate industry, with the remaining 1.18% in the financial services sector. Its quarterly dividend payout varies considerably, but the current $0.53 annual distribution corresponds to a $2.46 annual payout in the trailing 12 months.
The fund returned a loss of 22.2% in share price, meaning total returns were an approximate 15% loss for the year, but the fund’s five-year returns were much more attractive, rewarding investors with 43.1% in capital appreciation despite the dip in the recent year.
High Dividend ETFs for 2021: #1
ProShares Global Listed Private Equity ETF (BATS:PEX)
Dividend Yield: 5.4%
The fund tracks the performance of the LPX Direct Listed Private Equity Index. As of January 15, 2021, 93.94% of the fund’s total assets were in Financials, 2.65% in Healthcare, 2.84% in Industrials and 0.46% in Technology. The top third of the fund’s 30 holdings accounts for more than 63% of total assets. Conversely the bottom third of holdings account for less than 14% of the fund’s $20 million in assets.
The fund’s quarterly distributions vary from season to season — its December payout in 2020 was $0.47 where in September, the quarter just before, it was nearly double at $0.95. The total annual distributions for 2020 came to $1.76, bring the fund’s current yield to 5.4%.
ProShares Global Listed Private Equity ETF had a total return in the trailing 12 months of 5.6%. In the last three years it returned 6.1%, and in the last five years it brought a far more amicable number, rewarding shareholders with 51% in capital appreciation.
These seven high dividend ETFs focus on offering investors a source of steady income flow. Because investments with high dividend income and high capital gains are more difficult to find, investors should consider allocating a portion of their portfolio into high dividend ETFs and a portion into high capital gains funds or stocks. That strategy can yield a portfolio with balanced income and asset growth features, while allowing for a greater variety of equity selections.