Risk Aversion Abates in Dividend ETFs

by: MyPlanIQ

International REITs (NYSEARCA:RWX) and U.S. REITs (IYR, ICF) continue to retain their top spots in performance trend ranking. They are followed by several U.S. stock dividend ETFs. For more details, please refer to the table below and performance page here.

Assets Class Symbols 01/05






SPDR DJ Wilshire Intl Real Estate RWX 10.69% 13.5% v
iShares Dow Jones US Real Estate IYR 10.4% 10.75% v
SPDR S&P 500 SPY 10.32% 10.45% v
PowerShares HighYield Dividend Achievers PEY 9.46% 10.44% v
Vanguard High Dividend Yield Indx VYM 9.04% 9.83% v
iShares MSCI Emerging Markets Index EEM 9.0% 9.75% v
Vanguard Dividend Appreciation VIG 8.2% 9.46% v
iShares Dow Jones Select Dividend Index DVY 8.17% 9.16% v
PowerShares Intl Dividend Achievers PID 7.18% 9.84% v
SPDR S&P Dividend SDY 7.07% 7.94% v
First Trust Value Line Dividend Index FVD 6.76% 7.75% v
iShares Dow Jones Intl Select Div Idx IDV 5.19% 8.86% v
iShares MSCI EAFE Index EFA 4.89% 7.9% v
iShares S&P U.S. Preferred Stock Index PFF 3.77% 3.63% ^

Though several U.S. stock dividend ETFs (PEY, VYM) are ranked close to the top, we also observe that some of them, like SDY and FVD, have lower trend scores. Looking into this further, we make the following observations:

  1. The dividend ETFs that hold cyclical stocks, such as financials, are doing well right now, compared with those overweighting in more stable stocks, such as consumer staples. For example, the on PowerShares High Yield Dividend Achievers (NASDAQ:PEY) has 34.4% financial stock holding whilethe SPDR S&P Dividend ETF's (NYSEARCA:SDY) top sector holdings are in consumer staples (19.84%).
  2. Taking a longer term view, we noticed that SDY's five year annualized return is around 2.78%, compared with PEY's -6% (as of 1/6/2011).
  3. Similarly, the bottom ranked First Trust Value Line Dividend Index (NYSEARCA:FVD) has five year annualized return is 6.31%. Its top holdings include 21.3% utilities, 15.4% industrial materials and 15.3% consumer staples.

To summarize, as in major asset classes, dividend ETFs also exhibit increasing risk appetite. Furthermore, not all of the dividend ETFs are created equal. It is thus important to have a systematic strategy to decide what ETFs should be invested, as in the Retirement Income ETFs investment plan.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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