11 Top Dividend ETFs to Invest in Right Now
By: Ned Piplovic,
Exchange-traded funds (ETFs) are gaining prominence as preferred investment vehicles for part-time investors seeking a simple way to diversify their portfolio while focusing on their other interests and activities. However, the rise in the number of available funds increases the dificulties of selecting top dividend etfs in which to invest.
The top dividend ETFs below offer high dividend yields, along with potential for significant capital appreciation. In addition to their focus on total returns from diversified equities, ETFs combine advantages of stocks and mutual funds for the benefit of their investors.
Instead of investing in individual stocks, which carry high risk if that a stock’s share price falls, ETF investors have reduced risk exposure through diversification. However, reduced risk may be a welcome trade-off for investors who take a long-term approach and want to avoid losing money.
While mutual funds offer diversification, they cannot be traded throughout the day when the market is open the way that investors can do with stocks and ETFs. Plus, ETFs have much lower fees, which translates to higher total returns over extended periods.
Here are the 11 top dividend ETFs that offer high dividend yields,
Top Dividend ETFs #11. Invesco Zacks Multi-Asset Income ETF (NYSE:CVY)
Dividend Yield: 3.23%
This is a medium-sized value fund that tracks the performance of the Zacks Multi-Asset Income Index and invests at least 90% of its assets in the underlying index.
Financials is the top sector represented in the fund, with a 33.4% share. The fund’s top three holdings are Crestwood Equity Partners (NYSE:CEQP) with 1.51%, ViacomCBS Inc (NYSE:VIAC) with 1.41% and Innovative Industrial Properties (NYSE:IIPR) with 1.22%. Out of the current 151 holdings in the ETF, the top 10 holdings account for just 12.1% of the invested assets.
In addition to the fund’s 3.23% current yield, the share price declined 3.9% in the trailing 12 months, but is up 49.6% in the last five years.
Top Dividend ETFs #10. Invesco Variable Rate Preferred ETF (NYSE:VRP)
Dividend Yield: 4.3%
This fund invests at least 90% of its total assets in the securities that comprise the Wells Fargo® Hybrid and Preferred Securities Floating and Variable Rate Index. The market capitalization-weighted index tracks the performance of its holdings’ preferred stocks and other securities that are functionally equivalent to preferred stocks. The fund’s Total Expense Ratio is 0.50%.
JPMorgan Chase (NYSE:JPM), General Electric (NYSE:GE) and Charles Schwab (NYSE:SCHW) are the top three holdings and comprise approximately a 3% share of the fund’s assets. The top 10 holdings account for 18.3%. In addition to its 4.3% yield, the company is up 4.4% in the trailing 12-month period, bringing investors total returns of 7.7%.
Top Dividend ETFs # 9. Invesco Financial Preferred ETF (NYSE:PGF)
Dividend Yield: 4.9%
This fund tracks the performance – before fees and expenses – of the Wells Fargo® Hybrid and Preferred Securities Financial Index (WHPSF Index). It invests at least 90% of its total assets in the securities that comprise the underlying index. The fund is non-diversified but invested in 107 individual equities.
Its top ten holdings make up 21.91%, where the top 15 comprise 30.09%. In addition to its 4.9% dividend yield, the unit price has grown 4.1% in the last year, meaning the ETF had total returns of 9% for the trailing 12-month period.
Top Dividend ETFs # 8. Invesco Preferred ETF (NYSE:PGX)
Dividend Yield: 5.0%
Based on The ICE BofAML Core Plus Fixed Rate Preferred Securities Index, the fund generally invests at least 80% of its total assets in fixed rate preferred securities issued in the U.S. domestic market. More than 90% of the fund’s holdings are concentrated in just three sectors – Financials, Real Estate and Utilities – with the Financials sector’s share exceeding 70% by itself. As approved by the trust’s Board of Trustees, the fund changed its name on June 4, 2018, from PowerShares Preferred Portfolio to its new name of Invesco Preferred ETF (NYSE:PGX).
Nearly two-thirds of the fund’s holdings carry a BBB rating or higher, which is considered Investment Grade by Standard & Poor’s.
The fund managed to grow its share price by 3.9% over these last 12 months, and with a dividend yield of 5.0%, it delivered nearly 9% in total returns for investors. Its long-term growth is comparably modest but significant, growing 19.8% in three years and 33.6% in the last five.
Top Dividend ETFs # 7. First Trust Preferred Securities and Income ETF (NYSE:FPE)
Dividend Yield: 4.2%
Under normal market conditions, this Small Growth fund invests at least 80% of its net assets in preferred securities and income-producing debt securities including corporate bonds, high-yield securities and convertible securities.
U.S. bonds accounted for 23.7% of the fund’s holdings, where non-U.S. bonds occupied 14.6% of the total share. 28.4% of total assets are in preferred stocks, 30.8% are in convertible, and the remaining 2.5% is split between U.S. stock, cash, and other investment vehicles. Share price grew 5.2% in the trailing 12 months and 42.8% in the last five years. Total returns for the year came just under 10%.
Top Dividend ETFs # 6. iShares S&P US Preferred Stock Fund (NYSE:PFF)
Dividend Yield: 2.0%
This fund tracks the investment results of the S&P U.S. Preferred Stock Index and generally will invest at least 90% of its assets in the component securities of the underlying index. According to the Morningstar Style Box evaluation, this is a Small Growth fund.
The fund’s assets are primarily invested in the utilities sector, making of 78.4% of its total holdings. Industrials has a weight of 13.6%, and all remaining sectors occupy less than 4% each.
The current share price is 5.1% up from last year, meaning after adjusting for dividend income, investors received a total return of just over 7%.
Top Dividend ETFs # 5. Arrow Dow Jones Global Yield ETF (NYSE:GYLD)
Dividend Yield: 6.4%
The Arrow Dow Jones Global Yield ETF is a multi-asset class composite index comprised of equally weighted exposure across five global yield categories – Global Sovereign Debt, Global Equity, Global Corporate Debt, Global Real Estate and Global Alternative. The fund has more than $70 million in total assets distributed across more than 151 individual holdings.
The fund’s assets are largely split between the energy and real estate sectors, each comprising just over a third of total assets each. The share price fell 8.0% in the last year, but due to the ETF’s high dividend yield, investors’ losses were limited to a 1.6% decline.
Top Dividend ETFs # 4. Global X SuperDividend ETF (NYSE:SDIV)
Dividend Yield: 6.8%
The fund seeks to invest nearly $1 billion of its total assets in 100 of the highest-dividend-yielding equity securities in the world. As of January 2021, the fund had its assets diversified across 102 individual equities. Even the top holding – B&G Foods, Inc (NYSE:BGS) – accounted for just a 3.26% share of total assets. The top 10 holdings combined for less than 20% of total assets.
The fund lowered its dividend in the aftermath of the March 2020 financial crisis, reducing its $0.12 monthly payout to $0.08, but the fund still yields 6.8% and distributes an annual $0.90 payout. Its one-year returns had a meaningful loss of 17.4% in share price, but the company’s ability to continue paying a dividend in light of this is worth noting.
Top Dividend ETFs # 3. UBS ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (NYSE:DVYL)
Dividend Yield: 7.6%
This sole exchange-traded note (ETN) among the funds on this list is linked to the monthly compounded 2x leveraged performance of the Dow Jones U.S. Select Dividend Index. The ETN has more than $40 million in total assets spread across 100 individual holdings.
The ETN’s share price rose more than 9% in the past 12 months to combine with the dividend distributions for a total return of nearly 17% over the same period. The share price and dividend distributions rose in parallel to combine for total returns of 67% and 161% over the past three and five years, respectively.
Top Dividend ETFs # 2. YieldShares High Income ETF (NYSE:YYY)
The YieldShares High Income fund operates a “fund of funds” and tracks the performance of the ISE High Income Index, which provides exposure to the top closed-end funds measured by yield, discount to net asset value and liquidity. The fund had approximately $200 million in total assets spread across 32 individual holdings and cash. The current asset allocation is roughly 75% bonds and 25% stocks.
The ETF’s share price has grown a modest 0.3% in the trailing 12-month period, meaning investors have collected nearly 11% in total returns due to the fund’s high dividend yield.
Top Dividend ETFs # 1. Invesco PowerShares KBW High Dividend Yield Financial Portfolio (NYSE:KBWD)
Dividend Yield: 8.5%
The PowerShares KBW High Dividend Yield Financial Portfolio uses the KBW Nasdaq Financial Sector Dividend Yield Index as its basis. As of January 28, 2021, the fund had total assets of approximately $305 million allocated across 42 individual holdings.
The ETF suffered a 13.2% loss in share price in the last year, but combined with its robust dividend yield, investors were only subjected to a 4.7% loss. It has performed more favorably in the past, returning 49.6% in the trailing five-year period.
This list of 11 high-yield-dividend-paying funds shows how the payouts can make the difference between investing profitability or taking a loss, if not boosting already positive returns when share prices rise. Investors may not be able to predict how individual funds and stocks will perform but owning dividend-paying equities helps to reduce the fallout during rough market conditions and enhances total returns regardless of share-price fluctuations.