What 12 ETFs Pay the Highest Dividend Yield?
By: Ned Piplovic,
Exchange-traded funds (ETFs) are useful as investment vehicles that combine characteristics of stocks and mutual funds.
ETF shares trade like stocks and have additional advantages, such as liquidity and tax efficiency. They also provide the advantages of mutual funds by holding portfolios of varied underlying assets as an inexpensive and easy way for investors to diversify their portfolios.
But ETFs allow investors to trade shares throughout the day, which is not possible with mutual funds. Some ETFs are set up to track well-known market indices, such as the Dow Jones Industrials Index or the S&P 500 Index.
While investing in individual stocks could yield high dividend payouts, it also exposes investors to higher level of risk. Therefore, investors can minimize their risk by investing in dividend-paying ETFs and spreading that risk across all the holdings in the fund.
Some ETFs hold hundreds of company stocks and all those holdings can be dividend-paying equities. Other ETFs hold a combination of equites where some pay dividends and some equites do not pay dividends.
Additionally, exchange-traded notes (ETNs) have similar characteristics to ETFs, with few fundamental differences. ETNs are debt instrument issued by a financial institution. As such, ETNs faces additional risk in the event that the issuing institution’s credit rating incurs a downgrade, even if the underlying asset appreciates.
As this list has been updated, some of these equities may no longer be the highest paying and may have temporarily suspended their dividend. Here are the 12 ETFs and ETNs that currently pay the highest dividend yields.
Invesco PowerShares Financial Preferred Portfolio (NYSE:PGF) – Yield: 4.9%
This fund tracks the performance – before fees and expenses – of the FTSE Developed Asia Pacific Qual/Vol/Yield 5% Capped Factor Index. As of January 30, 2021, the fund’s investment in 108 individual equities equaled more than $1.7 billion in total assets.
The ETF’s share price rose 4.5% over the trailing 12-month period. Combined with the 4.9% dividend yield, it rewarded its investors with a 9.4% total return over the past year. Three-year and five-year total returns came in slightly higher at 19.9% and 31.6%, respectively.
WisdomTree SmallCap Dividend Fund (NYSE:DES) – Yield: 2.6%
This ETF’s main focus is exposure to a broad range of U.S. small-cap dividend-paying companies. As of January 30, 2021, the WisdomTree SmallCap Dividend Fund had just slightly more than $1.6 billion in total assets spread across 956 individual holdings. The top ten holdings account for a mere 12.04% share of total assets.
The ETF increased its share price 1.9% for a total return of 4.5% over the past year. Over the past three and five years, the total shareholder return was 1.1% and 54.3%, respectively.
WisdomTree Dividend Ex-Financials Fund (NYSE:DTN) – Yield: 3.6%
This ETF’s main focus is targeted exposure to U.S. large-cap equities from high dividend-yielding companies, excluding Financial sector companies. As of January 30, 2021, the WisdomTree SmallCap Dividend Fund had just slightly less than $527 million in total assets spread across 605 individual holdings. Only the top three holdings contribute individually more than 2% of total assets.
The ETF decreased its share price 3.5% for a total return of 0.1% over the past year. Over the past three and five years, the total shareholder return was 2.1% and 47.1%, respectively.
ETRACS Monthly Pay 2xLeveraged S&P Dividend ETN (NYSE:SDYL) – Yield: –
This exchange-traded Note (ETN) seeks to double of the monthly compounded leveraged performance of the S&P High Yield Dividend Aristocrats Index. The index is designed to measure the performance of the 60 highest dividend-yielding S&P Composite 1500 Index constituents, which have followed a managed-dividends policy of consistently increasing dividends every year for at least 25 consecutive years.
The ETF has suspended its dividend for the time being and lost 12.1% in share price in the last year. In the last five years, however, it has gained 76.9%.
Global X Superdividend etf (NYSE:SDIV) – Yield: 7.72%
The ETF invests in 100 of the highest dividend-yielding equity securities in the world. As of January 30, 2021, the fund had approximately $766 million in total assets allocated across 110 individual equities. Every individual equity accounted for less than 2% of total assets.
After paying rising annual dividends for the first three years after its inception, the ETF has reduced its dividend to a monthly payout of $0.08, corresponding to an annual distribution of $0.90.
Arrow Dow Jones Global Yield ETF (NYSE:GYLD) – Yield: 6.5%
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. As of January 30, 2021, the ETF held almost $40 million in total assets allocated across 151 individual holdings.
The fund’s share price dropped 9.0% in the trailing 12-month period, but the majority of that loss was absorbed by the ETF’s dividend yield, meaning investors loss less than 3% of their investment in GYLD. The 3-year returns are similar, but over a 5-year span, the fund has returned 19.6%
Invesco PowerShares KBW High Dividend Yield Financial Portfolio (NYSE:KBWD) – Yield: 8.7%
The PowerShares KBW High Dividend Yield Financial Portfolio uses the KBW Nasdaq Financial Sector Dividend Yield Index as its basis. As of January 30, 2021, the fund had total assets of approximately $300 million allocated across 42 individual holdings.
The ETF witnessed its share price falling 15.7% in the last year, but over half of that loss was absorbed by its dividend distribution. The combined total returns were a loss of 7% over the past 12 months and 4.3% over the past three years, and a gain of 41.4% over the past five years.
YieldShares High Income ETF (NYSE:YYY) – Yield: 9.75%
The YieldShares High Income fund tracks the performance of the ISE High Income Index, which provides exposure to the top 30 closed-end funds measured by yield, discount to net asset value and liquidity. As of January 30, 2021, the fund had approximately $276 million in total assets spread across 30 individual holdings and cash.
The ETF’s annual dividend amount has kept a steady $0.13 monthly distribution value while the share price has slightly dropped. Taking a loss of 1.3%, investors still came up positive in total returns after adjusting for dividend yield, profiting 8.4%, The the last three years, the fund returned 9.5%, and in the last five, 51.4%
ALPS REIT Dividend Dogs ETF (NYSE:RDOG) – Yield: 5.1%
The ALPS REIT Dividend Dogs ETF seeks investment results that correspond generally to the performance – before fees and expenses – of the S-Network REIT Dividend Dogs Index. As of January 2021, the fund had almost $28 million in assets distributed across 43 equities.
The fund lost 10.2% in share value over the course of the trailing 12 months, and its 5.1% dividend yield cut the loss in half for investors. It returned 3.6% in the trailing 3-year period and 23% in the trailing 5-year period.
O’Shares FTSE Europe Quality Dividend ETF (NYSE:OEUR) – Yield: 3.7%
The O’Shares FTSE Europe Quality Dividend ETF seeks investment results that correspond generally to the performance – before the fund’s fees and expenses – of the Cohen & Steers Global Realty Majors Index. As of January 2021, the fund had almost $22 million in assets invested in a diversified portfolio.
The fund’s meager loss of 0.2% did little to eat into investors dividend returns, with total returns for the year of 3.5%. In the last three years, the fund has returned 3.6% and in the last five years, 29%.
UBS E-TRACS Linked to the Wells Fargo Business Development Company Index (NYSE:BDCS) – Yield: –
The ETRACS Linked to the Wells Fargo Business Development Company Index ETN is designed to track an investment in the Wells Fargo Business Development Company Index.
The ETF recently suspended its dividend distribution in late 2020.
UBS ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (NYSE:DVYL) – Yield: –
This ETN is linked to the monthly compounded 2x leveraged performance of the Dow Jones U.S. Select Dividend Index. The ETN has nearly $40 million in total assets invested across 100 individual holdings.
The ETN suspended its dividend in March 2020 in response to the financial crisis surrounding COVID-19.
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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.