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 fundemental 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.
Here are the 12 ETFs and ETNs that currently pay the highest dividend yields.
Invesco PowerShares Financial Preferred Portfolio (NYSE:PGF) – Yield: 5.64%
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 2, 2018, the fund’s investment in 87 individual equities equaled more than $1.6 billion in total assets.
The ETF’s share price rose 2.5% over the trailing 12-month period. Combined with the 5.64% dividend yield, it rewarded its investors with a 9.54% total return over the past year. Three-year and five-year total returns came in slightly higher at 18.6% and 30.6%, respectively.
WisdomTree SmallCap Dividend Fund (NYSE:DES) – Yield: 5.89%
This ETF’s main focus is exposure to a broad range of U.S. small-cap dividend-paying companies. As of January 2, 2018, the WisdomTree SmallCap Dividend Fund had just slightly more than $2 billion in total assets spread across 749 individual holdings. The top five holdings account for a mere 6.44% share of total assets.
The ETF paid a rising dividend over the past four consecutive years and increased its share price 3.4% for a total return of 9.1% over the past year. Over the past three and five years, the total shareholder return was 33.9% and 87.1%, respectively.
WisdomTree Dividend Ex-Financials Fund (NYSE:DTN) – Yield: 6.65%
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 2, 2018, the WisdomTree SmallCap Dividend Fund had just slightly less than $900 million in total assets spread across 84 individual holdings. Only the top three holdings contribute individually more than 2% of total assets.
The ETF distributed rising dividends over the past four consecutive years and increased its share price 9.2% for a total return of 14.5% over the past year. Over the past three and five years, the total shareholder return was 26.4% and 78.2%, respectively.
ETRACS Monthly Pay 2xLeveraged S&P Dividend ETN (NYSE:SDYL) – Yield: 6.65%
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 ETN hiked its annual dividend payout every year since its inception more than five years ago. Over that period, the ETN nearly doubled its annual dividend distribution. The ETN’s share price grew 22.6% over the past year. Additionally, the ETN rewarded its investors with a 28.2% total return in 12 months.
Global X Superdividend etf (NYSE:SDIV) – Yield: 6.71%
The ETF invests in 100 of the highest dividend-yielding equity securities in the world. As of January 2, 2018, the fund had approximately $1 billion in total assets allocated across 106 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 been paying a steady annual dividend of approximately $1.45 over the past five years. Over the last year, the ETF’s share price grew 3.1% and, combined with the dividend distributions for the year, provided its investors with a 9.9% total return.
Arrow Dow Jones Global Yield ETF (NYSE:GYLD) – Yield: 7.44%
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 2, 2018, the ETF held almost $90 million in total assets allocated across 162 individual holdings.
The fund paid rising dividends during the first four years, but the annual dividend distributions fell each of the last three years. After falling for almost the entire 2017, the share price surged in the last week of 2017 and pulled even with its share price from one year earlier. Therefore, the 6.7% dividend yield is the entire total return for the past 12 months.
Invesco PowerShares KBW High Dividend Yield Financial Portfolio (NYSE:KBWD) – Yield: 8.01%
The PowerShares KBW High Dividend Yield Financial Portfolio uses the KBW Nasdaq Financial Sector Dividend Yield Index as its basis. As of January 2, 2018, the fund had total assets of approximately $322 million allocated across 40 individual holdings.
The ETF distributed rising dividend for the past two years and its share price fell 1.4% over the past year. The combined total returns were 7.4% over the past 12 months, 16% over the past three years and 41% over the past five years.
YieldShares High Income ETF (NYSE:YYY) – Yield: 8.17%
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 2, 2018, the fund had approximately $221 million in total assets spread across 30 individual holdings and cash. The current asset allocation is 74% bonds and 26% stocks.
The ETF’s annual dividend amount dropped two out of the past three years. The share price rose 4.2% over the past 12 months and together with the dividend income offered shareholders a 13.4% total return in the last year, a 16.7 total return over the past three years and 28% over the past five years.
ALPS Cohen & Steers Global Realty Majors ETF (NYSE:GRI) – Yield: 8.46%
The ALPS Cohen & Steers Global Realty Majors ETF seeks investment results that correspond generally to the performance – before fees and expenses – of the Cohen & Steers Global Realty Majors Index. As of September 2017, the fund had almost $75 million in assets distributed across 75 equities.
The fund’s dividend for 2017 was 7.3% higher than the previous year, which combined with a 4.7% share price appreciation for an 11.7% total return over the past year. The total returns over three and five years were 13.3% and 28.42%, respectively.
O’Shares FTSE Europe Quality Dividend ETF (NYSE:OEUR) – Yield: 8.70%
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 2, 2018, the fund had almost $50 million in assets invested in a portfolio of 188 equities.
The fund’s 2017 dividend was 5.4% higher than the dividend paid out in 2016 and the share price rose 17.4% over the same 12-month period for a combined total return of 24.5% in one year and almost 80% over the past three-year period.
UBS E-TRACS Linked to the Wells Fargo Business Development Company Index (NYSE:BDCS) – Yield: 8.72%
The ETRACS Linked to the Wells Fargo Business Development Company Index ETN due April 26, 2041, is designed to track an investment in the Wells Fargo Business Development Company Index. As of January 3, 2018, this ETN had almost $90 million in assets invested across 43 equities.
Even an 8.72% dividend yield could not over come a 10% share-price drop and the ETN finished the trailing 12-month period with a total loss of 2.2%. Total returns for the most recent three and five years were 11.6% and 15.2%, respectively.
UBS ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (NYSE:DVYL) – Yield: 10.22%
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’s share price rose almost 20% in the past 12 months to combine with the double-digit yield for a total return of nearly 30% in one year. Over the last three-year period, the total return was almost 70% and over the last five years the total return was more than 215%.
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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.