7 High Dividend ETFs to Buy for 2018
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 2018: #7
Horizons S&P 500 Covered Call ETF (NYSE:HSPX)
Dividend Yield: 6.82%
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 rose 25% since the beginning of 2016. The share price rose more than 7% in the first half of the trailing 12-month period and peaked above $52 in mid-December 2017. After encountering some volatility in early 2018, the share price dropped nearly 10% by the beginning of April 2018. However, the share price recovered and closed on July 5 at $50, which was less than 4% short of the 52-week peak from December 2017.
High Dividend ETFs for 2018: #6
ProShares Global Listed Private Equity ETF (NASDAQ:KBWY)
Dividend Yield: 7.04%
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 June 29, 2018, the top three holdings – the Onex Corporation (TSX:ONEX) with 10.31%, the Ares Capital Corporation (NASDAQ:ARCC) with 10.29%, and 3I Group plc (LSE:III) with 9.5% – comprise 30% of the Index’s total holdings of nearly $9 billion.
Since a 21% loss in March, the share price recovered 70% of its losses and closed on July 5, 2018 at $36.51. The ETF’s current 7.04% yield is more than 16% above the funds five-year average yield of 5.9%.
High Dividend ETFs for 2018: #5
GraniteShares HIPS US High Income ETF (NYSE:HIPS)
Dividend Yield: 7.51%
This ETF tracks the performance of the TFMS HIPS 300 Index and has almost $7.8 million in assets spread across 299 individual holdings.
As of June 29, the fund’s top three holding accounted for almost 11% of total assets combined – Blackstone Group L. P. (NYSE:BX), 6.18%; Simon Property Group, Inc. (NYSE:SPG), 5.82% and Enterprise Products Partners L. P. (NYSE:EPD), 4.30%. The top 10 holdings account for more than 31% total assets. However, a full 80% – 240 out of 300 – of the fund’s bottom holdings are needed to equal a 31% share of assets.
Since its inception in 2015, the fund has paid a monthly distribution equivalent to an annualized amount of $1.29 per share. The share price has been trading between $16 and $18 over the past 18 months. Over the past 90 days, the share price has been trending upwards and has gained more than 8% since late March 2018.
High Dividend ETFs for 2018: #4
Global X SuperDividend® Alternatives ETF (NASDAQ:ALTY)
Dividend Yield: 7.67%
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 20% of total assets is the Global X Superdividend RE (SDIV). The next two largest holdings by share of total assets – Eaton Vance T/M Buy-Write Fund (NYSE:ETV) and Eaton Vance Risk-Managed Fund (NYSE:ETJ) – account for just 2.7% each. While the top three holdings above account for more than a quarter of all the assets and the top 10 holdings combine for more than 43% of total assets, the bottom 10 of the 45 holdings account for less than 10.5% of assets.
The fund’s monthly distributions over the past three years have been fluctuating between $0.09 and $0.18. Additionally, the share price has been climbing again and has gained 4.1% since its 52-week low on March 23, 2018.
High Dividend ETFs for 2018: #3
Global X SuperDividend REIT ETF (NASDAQ:SRET)
Dividend Yield: 8.35%
This fund seeks to invest in 30 of the highest dividend yielding REITs globally and tracks the Solactive Global SuperDividend REIT Index.
As of July 5, 2018, the top three holdings – Dream Global Real Estate (TSX:DRG.UN) with 3.77%, Redwood Trust, Inc. (NYSE:RWT) with 3.76% and Global Net Lease, Inc. (NYSE:GNL) with 3.75% – account for slightly more than 11% of total assets. The fund’s top 10 holdings account for a little more than 36% and the bottom 10 holdings total just below 30% of total assets.
The share price dropped almost 12% below its December 2017 peak to reach its 52-week low of $13.24 on March 1, 2018. However, the share price has embarked on an uptrend since its February bottom and closed on July 5, 2018 at $15.44, which was just 2% short of the 52-week high from December 2017.
High Dividend ETFs for 2018: #2
iShares Mortgage Real Estate ETF (BATS:REM)
Dividend Yield: 10.00%
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 July 5, 2018, 96.23% of the fund’s total assets were in Mortgage REITs, with remainder allocated in Diversified REITs (1.27%), Specialized REITs (0.46%) and the remaining 2.04% allocated in cash and cash derivatives. Annaly Capital Management REIT, Inc. (NYSE:NLY) was the single highest individual holding, 16.75%, with the AGNC Investment REIT Corporation (11.04%) and the New Residential Investment REIT Company (8.30%) rounding out the top three holdings.
After a 7% drop between its 52-week high of $47.45 in mid-October 2017 and its 52-week low of $40.58 February 8, 2018, the share price recovered almost half of its losses and closed at $44.42 on July 5, 2018.
High Dividend ETFs for 2018: #1
ProShares Global Listed Private Equity ETF (BATS:PEX)
Dividend Yield: 20.28%
The fund tracks the performance of the LPX Direct Listed Private Equity Index. As of March 29, 2018, 93.3% of the fund’s total assets were in Financials, 4.78% in Information Technology and 1.91% in other sectors. North American equities comprise 54% of total assets with European equities adding another 44% and the remaining 2% allocated to other countries.
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 $18.8 million in assets.
While the fund raised its total annual distributions for the past three years, the majority of the fund’s yield increase from the 10.9% average over the past five years to the current 20.28% yield is due to a share price decline, more specifically a 14% one-day drop in late December 2017. The share price has been trading in the $35.50 to $36.50 range since the December drop and closed on July 5 at $36.13.
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.