Surveying The Dividend ETF Landscape

Includes: DEM, DTN, DVY, DWX, HDV, SDY
by: Tom Lydon

Dividend exchange traded funds have attracted investors looking for yield and a tilt to more defensive stocks and sectors. However, as a result of different index approaches, the funds can offer varying exposures to dividend-paying equities.

Some dividend ETFs weigh individual stocks by their dividend yield, or simply by total dividend paid in dollar amounts. Still other dividend ETFs weigh companies by size or market cap.

Indices that follow a dividend yield-weighted methodology produce more income, but the strategy comes with greater risks.

Specifically, the funds would lean toward more distressed, high-yield and small-cap firms than other types of broad equity ETFs.

For example, a few dividend yield-weighted ETFs include:

  • SPDR S&P Dividend ETF (NYSEARCA:SDY): 2.82% 12-month yield
  • SPDR S&P International Dividend ETF (NYSEARCA:DWX): 6.30% 12-month yield
  • WisdomTree Dividend ex-Financials Fund (NYSEARCA:DTN): 3.88% 12-month yield

In contrast, ETF indices weighted by total dividends paid would lean toward large-caps since larger stocks would dish out the most overall dividends. Additionally, the large-cap tilt provides lower volatility in times of market distress.

For instance, some dividend weighted ETFs include:

  • iShares Dow Jones Select Dividend (NYSEARCA:DVY): 3.43% 12-month yield
  • WisdomTree Emerging Markets Equity Income Fund (NYSEARCA:DEM): 3.31% 12-month yield
  • iShares High Dividend Equity Fund (NYSEARCA:HDV): 3.22% 12-month yield

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.