Dividend ETFs Outperforming The S&P 500

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Includes: DON, DXJ, GULF, KBWD, KBWY, SDOG, SDY
by: Tom Lydon

Dividend investors typically give up on fast growth in favor of steady income. However, some dividend exchange traded funds have been outpacing the broader S&P 500 so far this year.

Of the almost 50 dividend-focused ETFs on the market, 18 are outperforming the S&P 500, reports Juan Carols Arancibia for Investor's Business Daily.

Top outperforming dividend-yield weighted ETFs include:

  • PowerShares KBW Premium Yield Equity REIT Portfolio (NASDAQ:KBWY). KBWY is based on the KBW Premium Yield Equity REIT Index, which tracks around 24 to 40 small- and mid-cap equity REITs in the U.S. The ETF has a 4.02% 12-month yield, a 0.35% expense ratio, and it is up 29.6% year-to-date.
  • SPDR S&P Dividend ETF (NYSEARCA:SDY). SDY tracks the S&P High Yield Dividend Aristocrats Index, which follows the highest dividend yielding S&P Composite 1500 index components that have consistently increased dividends every year for at least 20 consecutive years. The fund has a 2.66% dividend yield, a 0.35% expense ratio, and it is up 21.1% year-to-date.
  • PowerShares KBW High Dividend Yield Financial Portfolio (NASDAQ:KBWD). KBWD tries to reflect the performance of the KBW Financial Sector Dividend Yield Index, which tracks 24 to 40 listed financial companies that engage in the business of providing financial services and products, including banking, insurance and diversified services. The ETF has a 7.52% 12-month yield, a 1.48% expense ratio, and it is up 18.7% year-to-date.

Indices that follow a dividend yield-weighted methodology generate more income, but the funds lean toward more distressed, high-yield and small-cap firms than other types of broad equity ETFs.

Top outperforming dividend weighted ETFs include:

  • WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ). DXJ tracks dividend-paying companies incorporated in Japan that are tilted toward global revenue base. The fund also hedges against depreciation in the yen currency. The ETF has a 1.16% 12-month yield, a 0.48% expense ratio and it is up 41.4% year-to-date.
  • WisdomTree Middle East Dividend Fund (NASDAQ:GULF). GULF tracks Middle East companies weighted based on cash dividends paid. The ETF has a 4.11% 12-month yield, a 0.88% expense ratio, and it is up 21.8% year-to-date.
  • WisdomTree MidCap Dividend Fund (NYSEARCA:DON). DON holds U.S. mid-cap dividend stocks. The fund has a 0.38% expense ratio, a 3.23% 12-month yield, and it is up 21.3% year-to-date.

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.

Additionally, the actively managed ALPS Sector Dividend Dogs (NYSEARCA:SDOG) has also been outpacing the broader markets. SDOG selects stocks from the S&P 500 that have the highest dividend yield in their respective sectors. The well-known "Dogs of the Dow" theory is applied to S&P sectors. The active ETF has a 0.40% expense ratio, a 3.97% 30-day SEC yield, and it is up 22.0% year-to-date.

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.