iShares’ 5 Best Dividend ETFs
By: Ned Piplovic,
As the availability of exchange-traded funds (ETFs) increases, income investors have a larger selection from which to choose and always seek the best dividend ETFs for their individual investing strategy.
While some investors look across the entire selection of available ETFs, others will develop a preference for a specific family of ETFs offered by a particular brokerage or investment provider and choose only from those funds. While that strategy might seem to limit investment choices, most providers have dozens and even hundreds of ETFs, which provide sufficient access to a variety of investment opportunities.
For instance, BlackRock, Inc. (NYSE:BLK) currently offers nearly 350 individual ETF options through its iShares™-branded family of funds. The list below includes the five best dividend ETFs in terms of yield and total return over the past 12 months.
iShare’s 5 Best Dividend ETFs #5:
iShares MSCI Global Energy Producers ETF (NYSE:FILL)
Based on the MSCI ACWI Select Energy Producers Investable Market Index, this fund seeks investments in companies primarily engaged in the business of energy exploration and production. Within the energy sector, the fund focuses primarily on companies that engage in the exploration and production of oil and gas, as well as the production and mining of coal.
As of October 26, 2018, the fund had nearly $45 million in assets distributed over 213 individual holdings. While the fund invests in companies engaged in exploration of multiple energy sources, oil & natural gas companies dominate the bulk share of total holdings and assets. The top 10 companies, which account for more than 57% of net assets, are all in the oil & natural gas exploration and production business. Furthermore, just the top five companies by share of the fund’s total net assets – Exxon Mobil Corporation (NYSE:XOM), 13.76%, Royal Dutch Shell plc (LSE:RSDA & RDSB). 10.83%, Chevron Corporation, (NYSE:CVX), 8.93%, BP plc (NYSE:BP), 5.93%, and Total SA (NYSE:TOT), 5.76% – combine for nearly 45% of total assets.
From a geographical diversification aspect, nearly half of the fund’s assets – more than 47% – remain invested in U.S. companies. An additional 17% is in the United Kingdom and 7% in Canada. Aside from these three countries, which account for more than 70% of assets, the fund’s remaining assets are spread across nearly 10 additional countries around the world.
The fund’s current annual distributions yield more than 3% and the unit price grew as well to offer a combined total return of 7.7% over the past 12 months and nearly 24% over the past three years.
With only two distributions per year, the fund’s next declaration should occur just after the middle of December with ex-dividend and pay dates scheduled just prior to the end of December 2018.
iShare’s 5 Best Dividend ETFs #4:
iShares Global Energy ETF (NYSE:IXC)
Like the previous fund on this list, this fund tracks an energy sector index – S&P Global 1200 Energy Sector Index™ – but has significantly higher net assets of nearly $1.4 billion spread across 73 total holdings. More than half of this fund’s assets – 53% – are invested in U.S. companies, with an additional 16% invested in U.K. companies and nearly 10% in Canadian companies.
The top five holdings – Exxon Mobil Corporation (NYSE:XOM), Royal Dutch Shell plc (LSE:RSDA & RDSB), Chevron Corporation (NYSE:CVX), Total SA (NYSE:TOT) and BP plc (NYSE:BP) – account for nearly 45% of the fund’s assets. However, in addition to the oil and natural gas producing companies, this fund also holds assets in energy storage, transportation refining, marketing, equipment and supporting services.
The fund’s current distribution yields 3.1% and the total return over the past year is 4.1%. The total return over the past three years was more than four-fold higher at nearly 17%. Since its inception, the fund experienced two periods of declining value – during the 2008 financial crisis and from 2014 to 2015 when the crude oil prices receded from the peak of nearly $140 per barrel. However, the fund’s total value rose nearly 50% since January 2016.
iShare’s 5 Best Dividend ETFs #3:
iShares Core High Dividend ETF (NYSE:HDV)
Based on the Morningstar Dividend Yield Focus Index, this fund seeks investments in companies that generally pay higher-than-average dividends. As of October 26, 2018, the iShares Core High Dividend ETF had more than $6 billion in assets distributed over 75 individual holdings.
The Energy (21.8%), Consumer Staples (21%) and Health Care (21%) sectors dominate the fund’s share of total assets and combine for almost 64%. The top five individual holdings – Exxon Mobil (NYSE:EXOM), 9.67%, Verizon Communications, Inc., 7.67%, Johnson & Johnson (NYSE:JNJ), 7.39%, Chevron Corporation (NYSE:CVX), 6.44% and Pfizer, Inc. (NYSE:PFE), 6.24% – account for more than 37% of total assets.
Since its formation in 2011, the fund failed to increase its total annual distribution only in 2016. However, the total annual distributions advanced 30% over the past two years. Since inception, the fund tripled its total annual distribution payout, which corresponds to a 17.3% average annual growth rate.
While the fund’s unit price encounters occasional volatility, the long-term average growth trend is quite steady. The fund’s current 3.6% yield is 4% higher than the 3.5% average yield over the past five years. Combined with share-price appreciation, HDV has produced a 4.5% total return over the past 12 months. The total returns over the past three and five years were significantly higher at 27% and 45%, respectively.
iShare’s 5 Best Dividend ETFs #2:
iShares MSCI Qatar ETF (NASDAQ:QAT)
For investors looking to invest in one of the economies in the Middle East, this ETF tracks the performance of the MSCI All Qatar Capped Index. Since Qatar is a small market, this ETF has only $51 million in total assets invested in only 27 individual holdings. The top two holdings account for more than 35% of total assets, and the top holding – Qatar National Bank (QSE:QNBK) – accounts for nearly quarter of the total assets by itself. Predictably, more than half of the fund’s assets are invested in financial institutions. Including the Industrial sector, with 18% of the fund’s assets, and Real Estate, with 12% of the assets, the top three sectors have more than 80% of the total assets among them.
The fund’s distributions for 2018 yield 4.1% and have increased more than 11% over the total payouts from 2017. The funds unit price declined steadily since inception in April 2014 until the beginning of 2016, when the price reversed trend and has been rising since then. Because of this trend reversal and distribution growth, the fund turned a 6% total loss over the past three years into a 25% total return in the past year.
iShare’s 5 Best Dividend ETFs #1:
iShares Commodities Select Strategy ETF (NASDAQ:COMT)
This ETF focuses on offering investors broad exposure to commodity investments through futures and commodity producer’s stocks. As of October 26, 2018, the fund’s 196 individual holdings totaled nearly $740 million in total assets. Cash and equity investments are approximately 83%, with cash accounting for more the than half of the ETF’s total assets.
The fund’s current annual distributions yield 5.5%. Despite a 6% drop during October 2018 along with the overall market pullback, the unit price is still 2.2% higher than one year earlier. The combined total return over the past 12 months is above 11% and more than 22% over the past three years.
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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.