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High Dividend Yield ETFs

The U.S. economy is showing no respite, and signs of any recovery are diminishing according to the new economic data released by U.S. authorities. In its efforts to stimulate the economy, the Fed has decreased interest rates to their lowest through its 'Operation Twist' and maturity extension program. In the wake of a zero interest rate environment, investors looking for regular income don't have much investment options, but we have identified three opportunities for investors who are looking for regular income at lower risk. We have already covered REM, which is why only its risk and return measures are tabulated here. Compared to the broad market index, the S&P500, all ETFs offer higher total returns, albeit at a higher risk. Investors who are less risk averse are recommended the following ETFs to enhance their regular income through dividends.

 

DVY

IDV

DEM

REM

YTD

5.38%

0.40%

-0.16%

15.88%

Dividend Yield

3.44%

4.64%

4.09%

11.9%

Expense Ratio

0.40%

0.50%

0.63%

0.48%

Beta

0.75

1.06

0.9

0.77

Standard Deviation

13.00%

22.21%

20.54%

13.15

Dow Jones Select Dividend Index Fund (DVY)

Composition

The Dow Jones Select Dividend Index Fund is composed of largely U.S. stocks, and the sector-wise breakdown, as illustrated by the chart below, shows that utilities stocks are the major part of the composition of this ETF, followed by consumer goods stocks at 18.5%, industrials at 15.5%, and financials at 10%.

A stock-wise breakdown shows that Lorillard Inc. (LO) has the largest proportion of 4% in the overall holdings, while Lockheed Martin (LMT) and Kimberly Clark (KMB) constitute 2.8% and 2.1% of the entire portfolio, respectively.

Return & Expense Ratio

The EFT has appreciated 5.5% in market value since the beginning of this year. It also offers a handsome dividend yield of 3.4%. The ETF has a total annual fund operating expense of 0.4%.

Risk

Among the ETFs that we have picked, DVY has the least standard deviation (13%) and a beta of 0.75.

iShares Dow Jones International Select Dividend Index Fund (IDV)

Composition

A large part of the holdings that IDV is composed of are financials, which are 21% of the entire portfolio, followed by consumer services at 14.3% and utilities at 13.4%. The rest of the sector-wise breakdown is illustrated in the chart below.

A stock-wise breakdown reveals that 4.5% of the entire fund is composed of the Commonwealth Bank of Australia (NYSE:CBA), followed by Vtech Holdings at 3.8% and British American Tobacco (BTI) at 3.7%.

The fund is invested largely in Australian stocks (21%), followed by British (17.75%) and Hong Kong (7.5%) stocks.

Return & Expense Ratio

The EFT has appreciated by 100bps in market value since the beginning of the year, and provides investors, who are looking for regular income, a dividend yield of 4.6%. The yield is safely above the prevailing 10-year treasury yield. The expense ratio for the fund is 0.5%.

Risk

Investors who invest in the EFT will have to bear the risk of 22.2% standard deviation and 1.02 systematic risk. The EFT has the highest risk among the three selected.

WisdomTree Emerging Markets Equity Income Fund (DEM)

Composition

DEM, as illustrated by the chart below, seeks to invest largely in emerging markets, particularly in Taiwan; Taiwanese stocks have 26% of the entire holdings, followed by Russia and Brazil at 17% each.

A sector-wise breakdown reveals that the ETF has a large holding in the financial sector of emerging markets, with 24% of the holdings constituting financials, followed by energy and materials at 19% each.

Taiwan Semiconductor Manufacture (TSM) has the largest proportion in the fund, with 4% on the entire portfolio invested in the stock. This is followed by Companhia de Bebidas das Americas (ABV) and Banco do Brasil SA (BBAS3) at 3.4% and 2.6%, respectively.

Return and Expense Ratio

Although the combined market value of the holdings have not improved, with a -0.16% YTD performance, the EFT offers an attractive dividend yield of 4.09% for investors looking to enhance their regular income. Also, the EFT has an expense ratio of 0.63%, which is the highest among the ETFs being considered.

Risk

Investments in DEM have a combined risk, as measured by a beta and standard deviation of 0.9 and 20.94%.

Source: 3 High Dividend Yield ETFs For Income Investors