The Wall Street mood is greatly buoyant and investors who are assured of bigger profits to enter their pockets are equally aware of the risks involved. The bull market is the current norm and ideal term to describe the investor sentiment in American capital markets but the surge comes with a fair amount of volatility, capable enough to wipe out the principal investments even in a bull run.
The reason for the investor loyalty towards the US dividend stocks exist for the very same reason and they offer quite a bit of solace amid the choppy markets due to their proven regular pay outs while maintaining a stable character.
In order to further curtail the risks in the asset class, broader markets offers an ETF route to cover the best high yielding US stocks with one single move while the operational expenses are as low as 0.50% on the annual transactions.
A US dividend mutual fund although a rare breed to date but suffices to the very core of the basic investment objective of protecting the principal and enabling portfolio growth through monthly payouts no matter where the markets are headed. A very recent addition to this is a pure play from the stables of New York based Global X funds, which in March this year introduced Global X Super Dividend US ETF which operates on NYSE under the ticker- DIV ETF and yields as per the best fifty US dividend stocks.
Investors seeking to retire during their pre-retirement phase/age or the ones yearning for a rising portfolio and regular & stable incomes are the ones that are most uncomfortable when markets tend to go up, for right reasons such folk may prefer high yielding US stocks but even better is an exposure to the Super Dividend US fund that will further decrease company wise risks due to a standardised exposure and has sector wise capping investments as well; generally not exceeding more than twenty five percent.
Along-side globally, inflation figures are cheerfully low but this leads to not so happening and low rate of interests. Many investors are forced to look for unconventional asset classes that promise big cash pay outs as the more conventional income generating securities have taken a back seat.
The American top yield ETFs put in faith in bonds (bonds share an inverse relation with interest rates and are mostly given an unfavourable handling when it comes to taxing them vis-à-vis dividends) while the payout funds aim at playing the stock market and are advisable to hold on with a long term perspective. These also provide a hedging choice to counter inflation.
In past records the dividends have accounted for more than 45 % of stock market gains. Also recent bear markets have reiterated the fact that dividends are the form of profits investors can always rely upon. Further firms that are churning out regular cash pay outs are the ones that are subjected to very less volatility. As these are well managed and the need to produce steady pay outs, makes them work for more and more profitability. Also these companies are capable to increase their dividends on a consistent basis working under well managed teams.
A visible downside is that sometimes the procured net yield is not enough to outperform the inflation levels hence failing to hedge against it or that a company that is paying dividend could slash or remove it altogether. Although the latter problem is addresses in the US dividend mutual fund as any dividend cut forecast results in removing the equity from the asset basket which is reviewed every quarter and expects to pay out monthly.
Global X Super Dividend US ETF [DIV] delivers as per the INDXX Super Dividend Low Volatility Index post the annual expenses of 0.45%. DIV ETF was launched as recently as March 2013 but has delivered a 30 day SEC yield of 6.61% in the first month. The assets acquired are diversified in terms of sectors and close to 75% of the holdings are spread over sectors such as REITs, Utilities, MLPs and Telecommunication.