Top Holdings Of Dividend ETFs (June 2018 Edition)

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Includes: AAPL, AFL, BUD, BXMT, CB, CMCSA, CMI, CTL, CVS, D, DGX, DIS, ES, GD, GE, GILD, HASI, HRL, LOW, MAIN, MRK, MSFT, NKE, NNN, NVDA, O, OHI, PEP, PFE, RDS.A, RDS.B, RTN, SBUX, SWK, TROW, TRV, TSM, UPS, VFH, VNQ, WBA, WFC, XEL, XLNX, XOM
by: FerdiS
Summary

By analyzing the top holdings of established dividend ETFs, one can compile a virtual portfolio consisting of the top 50 dividend growth stocks held in these ETFs.

Readers are invited to compare their own dividend growth portfolios with the top 50 holdings of dividend ETFs.

The June edition has XOM repeating as the highest-ranked stock. But MSFT and AAPL have replaced PG and JNJ in the #2 and #3 slot, respectively.

From time to time, I compile a virtual portfolio of dividend growth (DG) stocks by analyzing the holdings of Dividend ETFs, Real Estate ETFs, or even the public portfolio of DG Bloggers.

I find these exercises quite insightful and certainly worth the effort. Comparing my portfolio to the virtual portfolio is informative, as it helps me to identify candidate stocks for analysis and possible investment.

Below, I'll provide a brief summary of my approach. For a detailed description, please refer to the following (most recent) articles in each category:

These articles reference earlier editions (if any).

Dividend ETF Analysis

Dividend ETFs invest in stocks that regularly pay and increase dividends. The issuer of an ETF provides data about the ETF's holdings, typically the ticker symbol, company name, the percentage of assets under management allocated to each holding, and the market value of the holding. Below is an example from the Schwab U.S. Dividend Equity ETF (SCHD):

I collect data from established Dividend ETFs and compile a spreadsheet with tickers of the top 25 holdings in each ETF, along with the market value of each holding.

To rank the top holdings, I use the relative market value of each holding to score the corresponding ticker. This proportional scoring system favors larger investments over smaller investments within the same ETF.

Next, I assign weights to each ETF based on total assets under management. Rather than doing so proportionally, I use a log-based formula:

w = floor (log10 (assets in millions))

  • ETFs with assets under $100 million get a weight of 1
  • ETFs with assets under $1,000 million (but ≥ $100 million) get a weight of 2
  • ETFs with assets under $10,000 million (but ≥ $1,000 million) get a weight of 3
  • ETFs with assets under $100,000 million (but ≥ $10,000 million) get a weight of 4

With proportional scores assigned to each ticker per ETF and weights assigned to each ETF, I simply calculate a weighted sum to get an aggregate score for each ticker.

Sorting the aggregate scores in descending order determines the rank of each stock (ticker).

The Dividend ETF Database

To identify Dividend ETFs for this analysis, I used ETFdb's screener and limited the search to Dividend ETFs in North America that have positive three-year returns.

The following table lists the 38 ETFs I analyzed, sorted by assets under management (in millions of dollars). The data source is ETFdb and the data presented in the table were extracted on 29 May 2018:

Ticker

Exchange-Traded Fund

Asset
(Millions)

No. of
Holdings

3-Year
Returns

Annual
Dividend
Yield

Expense
Ratio

1

VTI

Vanguard Total Stock Market ETF

$97,099

1487

34.0%

1.68%

0.04%

2

VIG

Vanguard Dividend Appreciation ETF

$27,776

183

32.5%

1.84%

0.08%

3

VYM

Vanguard High Dividend Yield ETF

$21,010

378

30.5%

2.90%

0.08%

4

DVY

iShares Select Dividend ETF

$16,814

101

35.7%

3.10%

0.39%

5

SDY

SPDR S&P Dividend ETF

$15,350

113

25.4%

2.39%

0.35%

6

SCHD

Schwab US Dividend Equity ETF

$7,439

101

34.0%

2.58%

0.07%

7

HDV

iShares Core High Dividend ETF

$5,894

76

21.7%

3.55%

0.08%

8

PRF

PowerShares FTSE RAFI US 1000

$5,178

1001

27.1%

1.84%

0.39%

9

FNDX

Schwab Fundamental U.S.

Large Company Index ETF

$4,277

656

28.9%

1.93%

0.25%

10

FVD

First Trust Value Line Dividend Index

$4,054

192

31.6%

2.10%

0.70%

11

DGRO

iShares Core Dividend Growth ETF

$3,648

455

37.1%

2.12%

0.08%

12

NOBL

ProShares S&P 500 Aristocrats

$3,519

54

30.0%

1.85%

0.35%

13

DON

WisdomTree US MidCap Dividend ETF

$3,179

396

32.8%

3.97%

0.38%

14

SPHD

PowerShares S&P 500 High Dividend

Low Volatility Portfolio

$2,618

51

35.5%

3.60%

0.30%

15

SDOG

ALPS Sector Dividend Dogs ETF

$2,233

49

27.3%

3.47%

0.40%

16

DGRW

WisdomTree U.S. Dividend Growth Fund

$2,159

277

37.6%

1.78%

0.28%

17

DES

WisdomTree US SmallCap Dividend ETF

$2,078

727

33.9%

5.12%

0.38%

18

DLN

WisdomTree US LargeCap Dividend ETF

$1,951

298

28.7%

2.45%

0.28%

19

QDF

FlexShares Quality Dividend Index Fund

$1,801

134

32.5%

2.54%

0.37%

20

FDL

First Trust Morningstar Dividend Leaders

$1,479

97

30.2%

3.37%

0.45%

21

SPHQ

PowerShares S&P 500 Quality Portfolio

$1,367

100

34.7%

1.81%

0.29%

22

TILT

FlexShares Morningstar US

Market Factor Tilt Index Fund

$1,240

1910

32.1%

1.53%

0.25%

23

DHS

WisdomTree US High Dividend Fund

$998

446

23.4%

3.23%

0.38%

24

TDIV

First Trust NASDAQ Technology Dividend Index Fund

$888

95

37.9%

2.36%

0.50%

25

DTN

WisdomTree US Dividend ex-Financials Fund

$810

83

23.8%

3.19%

0.38%

26

PEY

PowerShares High Yield Equity Dividend Achievers

$757

51

42.5%

3.77%

0.54%

27

CDC

Victory CEMP U S EQ Income 100

Enhanced Volatility Weighted Index ETF

$708

101

36.2%

2.92%

0.35%

28

DTD

WisdomTree US Total Dividend ETF

$587

879

29.6%

2.47%

0.28%

29

RDIV

Oppenheimer Ultra Dividend Revenue ETF

$522

61

39.2%

4.14%

0.39%

30

RDVY

First Trust NASDAQ Rising Dividend Achievers ETF

$511

51

39.7%

1.33%

0.50%

31

DIV

Global X SuperDividend U.S. ETF

$400

50

7.7%

6.03%

0.45%

32

REGL

ProShares S&P MidCap 400 Dividend Aristocrats ETF

$380

52

38.7%

1.80%

0.40%

33

KBWD

PowerShares KBW High Dividend Yield

Financial Portfolio

$327

40

18.5%

9.18%

2.40%

34

QDEF

FlexShares Quality Dividend Defensive Index Fund

$312

147

30.9%

2.63%

0.37%

35

PFM

PowerShares Dividend Achievers

$289

266

26.2%

2.00%

0.55%

36

FNDB

Schwab Fundamental U.S. Broad Market Index ETF

$268

1466

29.1%

1.94%

0.25%

37

DGRS

WisdomTree U.S. SmallCap Dividend Growth Fund

$103

282

30.3%

2.11%

0.38%

38

QDYN

FlexShares Quality Dividend Dynamic Index Fund

$49

137

29.2%

2.66%

0.37%

Top 50 Holdings

The following chart presents the top 50 holdings ranked by aggregate score. The tickers are color-coded by GICS sector:

Exxon Mobil (XOM) is the clear winner, followed by Microsoft (MSFT) and Apple (AAPL).

XOM appeared in the top 25 holdings of 23 of the 38 Dividend ETFs. Here is a table of frequencies (of appearance) of the top 10 ranked stocks:

Rank

1

2

3

4

5

6

7

8

9

10

Ticker

XOM

AAPL

MSFT

VZ

T

PFE

CVX

JNJ

INTC

WFC

Frequency

23

15

13

21

18

19

18

15

12

15

MSFT and AAPL appear in fewer of the top 25's than VZ (and other lower-ranked stocks). The reason is that dividend ETFs have rather large MSFT and AAPL holdings, most probably due to the stellar performance of these stocks over the last year.

Top Holdings By Sector

Following is the entire list of holdings along with key statistics, organized by GICS sectors.

In each table, Rank is the stock's position when ranked by aggregate score, while Freq indicates the number of dividend ETFs containing Ticker in their top 25 holdings. Years are the number of consecutive years of dividend increases; Yield is the dividend yield as of the Closing Price on 29 May 2018; and 5-DGR is the compound annual dividend growth rate over a 5-year period, where available. Finally, M*FV is Morningstar's Fair Value Estimate. Stocks trading below Morningstar's fair value estimate are highlighted in the price column.

1. Consumer Discretionary

2. Consumer Staples

3. Energy

4. Financials

5. Healthcare

6. Industrials

7. Information Technology

8. Materials

None.

9. Real Estate

None.

10. Telecommunications Services

11. Utilities

Please note that no stocks in the Materials and Real Estate sectors are in the top 50 holdings of Dividend ETFs.

Also, note that I did not exclude non-dividend paying stocks (such as Amazon.com (AMZN)) or frozen dividend stocks (such as Ford (F)) from the list.

I find it quite interesting that AMZN is in the top 50 holdings of Dividend ETFs!

How Does Your Portfolio Compare?

Readers who manage their own dividend growth portfolios may find it interesting to compare their own portfolio to the top 50 holdings. Are there any surprises? How many of the top 10 stocks do you own? How about the top 25 stocks?

Comparing my DivGro portfolio of 66 different positions, I own 7 of the top 10, and 15 of the top 25 stocks:

Rank

1

2

3

4

5

6

7

8

9

10

Jun'18

XOM

MSFT

AAPL

T

PFE

VZ

JNJ

CVX

WFC

PG

DivGro?

Rank

11

12

13

14

15

16

17

18

19

20

Jun'18

INTC

MRK

CSCO

WMT

JPM

GE

BA

F

KO

IBM

DivGro?

Rank

21

22

23

24

25

Jun'18

PEP

HD

CTL

ABBV

TXN

DivGro?

Of the top 25 stocks I don't own, Pfizer, Wells Fargo, Merck, General Electric, PepsiCo, and CenturyLink are trading at discounts to Morningstar's fair value estimates.

Here is a list of stocks in DivGro that are ranked but fall outside the top 50 holdings of Dividend ETFs:

  • Aflac (AFL) - ranked #263
  • Chubb (CB) - ranked #214
  • Comcast (CMCSA) - ranked #53
  • CVS Health (CVS) - ranked #89
  • Dominion Energy (D) - ranked #95
  • Quest Diagnostics (DGX) - ranked #185
  • Disney (DIS) - ranked #266
  • General Dynamics (GD) - ranked #151
  • Gilead Sciences (GILD) - ranked #203
  • Hormel Foods (HRL) - ranked #119
  • Lowe's (LOW) - ranked #104
  • Nike (NKE) - ranked #56
  • National Retail Properties (NNN) - ranked #80
  • NVIDIA (NVDA) - ranked #260
  • Realty Income (O) - ranked #63
  • Raytheon (RTN) - ranked #269
  • Starbucks (SBUX) - ranked #128
  • Stanley Black & Decker (SWK) - ranked #197
  • T. Rowe Price (TROW) - ranked #81
  • Taiwan Semiconductor Manufacturing (TSM) - ranked #298
  • United Parcel Service (UPS) - ranked #51
  • Walgreens Boots Alliance (WBA) - ranked #132
  • Xcel Energy (XEL) - ranked #75

A few stocks barely missed making the top 50 list, notably UPS (#51), CMCSA (#53), NKE (#56), and O (#63).

The following stocks are nowhere to be found in any of the top 25's:

  • Anheuser-Busch InBev (BUD)
  • Blackstone Mortgage (BXMT)
  • Cummins (CMI)
  • Eversource Energy (ES)
  • Hannon Armstrong Sustainable Infrastructure Capital (HASI)
  • Main Street Capital (MAIN)
  • Omega Healthcare Investors (OHI)
  • Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B)
  • Travelers (TRV)
  • Xilinx (XLNX)

BXMT, HASI, and OHI are REITs (real estate investment trusts), which have their own category at ETFdb. There is a useful guide at ETFdb explaining the ins and outs of REIT ETFs.

MAIN is organized as a business development company, which also has its own category at ETFdb.

Concluding Remarks

Analyzing the holdings of dividend ETFs is an insightful exercise. Publicly-available data on the top holdings and assets under management allows one to rank these holdings and to create a list of dividend growth stocks worthy of consideration.

I'm not recommending any of the top 50 holdings of dividend ETFs. Many of these stocks are trading above fair value and may not be suitable for investment at this time. Before investing in any of these stocks, please do a thorough analysis to determine if the stocks are worthy of your investment dollars. I included Morningstar fair value estimates to help with a superficial value assessment.

As a bonus, here is a summary of key data and ratings of the ETFs used in this analysis. Except where otherwise indicated, the data source is ETFdb.

Ticker

Assets (Millions)

Annual Yield

ETFdb.com Rating

ETF.com Rating

XTF Rating

YTD Return

3-Yr Returns

Expense Ratio

1

VTI

$97,099

1.68%

A

A

9.6

1.84%

33.99%

0.04%

2

VIG

$27,776

1.84%

A-

A

8.7

-0.02%

32.45%

0.08%

3

VYM

$21,010

2.90%

A+

A

8.4

-1.95%

30.48%

0.08%

4

DVY

$16,814

3.10%

B

A

8.8

-0.68%

35.74%

0.39%

5

SDY

$15,350

2.39%

B+

A

7.6

-2.25%

25.39%

0.35%

6

SCHD

$7,439

2.58%

A

A

8.1

-3.31%

33.97%

0.07%

7

HDV

$5,894

3.55%

A-

A

6.9

-5.82%

21.71%

0.08%

8

PRF

$5,178

1.84%

A-

A

7.8

-1.06%

27.10%

0.39%

9

FNDX

$4,277

1.93%

A-

A

9.1

-0.37%

28.88%

0.25%

10

FVD

$4,054

2.10%

B+

B

5.3

-2.46%

31.62%

0.70%

11

DGRO

$3,648

2.12%

A-

A

8.2

-0.90%

37.05%

0.08%

12

NOBL

$3,519

1.85%

B+

A

7.8

-2.63%

29.98%

0.35%

13

DON

$3,179

3.97%

A

B

5.9

0.27%

32.83%

0.38%

14

SPHD

$2,618

3.60%

B+

A

6.9

-4.52%

35.45%

0.30%

15

SDOG

$2,233

3.47%

B

A

7.9

-2.81%

27.33%

0.40%

16

DGRW

$2,159

1.78%

B+

A

7.8

-0.55%

37.59%

0.28%

17

DES

$2,078

5.12%

A

A

7.7

0.68%

33.93%

0.38%

18

DLN

$1,951

2.45%

A

A

6.9

-2.40%

28.74%

0.28%

19

QDF

$1,801

2.54%

A-

B

9.4

0.80%

32.46%

0.37%

20

FDL

$1,479

3.37%

B

A

7.2

-5.21%

30.22%

0.45%

21

SPHQ

$1,367

1.81%

B+

A

7.4

-0.68%

34.70%

0.29%

22

TILT

$1,240

1.53%

A-

A

7.8

0.93%

32.05%

0.25%

23

DHS

$0,998

3.23%

A-

A

5.1

-4.70%

23.39%

0.38%

24

TDIV

$0,888

2.36%

A

A

6.2

3.44%

37.92%

0.50%

25

DTN

$0,810

3.19%

B+

A

6.3

-2.22%

23.80%

0.38%

26

PEY

$0,757

3.77%

B+

A

4.9

-1.77%

42.51%

0.54%

27

CDC

$0,708

2.92%

B+

-

7.2

-0.87%

36.22%

0.35%

28

DTD

$0,587

2.47%

A

B

5.0

-2.13%

29.64%

0.28%

29

RDIV

$0,522

4.14%

B

B

9.3

2.76%

39.19%

0.39%

30

RDVY

$0,511

1.33%

B-

A

8.3

0.53%

39.74%

0.50%

31

DIV

$0,400

6.03%

B

B

6.2

-1.59%

7.71%

0.45%

32

REGL

$0,380

1.80%

C+

-

6.1

-0.95%

38.73%

0.40%

33

KBWD

$0,327

9.18%

B-

D

6.4

2.60%

18.45%

2.40%

34

QDEF

$0,312

2.63%

B+

B

7.5

0.87%

30.92%

0.37%

35

PFM

$0,289

2.00%

B

B

2.7

-3.58%

26.24%

0.55%

36

FNDB

$0,268

1.94%

A-

A

7.9

0.01%

29.09%

0.25%

37

DGRS

$0,103

2.11%

A

B

6.1

1.32%

30.34%

0.38%

38

QDYN

$0,049

2.66%

B+

B

4.9

-1.03%

29.15%

0.37%

Since publishing my first Top Holdings article in December 2016, I've added several ETFs to my DivGro portfolio, mainly to benefit from the additional diversification that ETFs offer.

I'm long SCHD and VYM, as well as the sector-focused Vanguard Financials ETF (VFH) and Vanguard Real Estate ETF (VNQ). These ETFs have low expense ratios and offer reasonable yields.

Thanks for reading! If you liked this article and would like to read similar articles in future, please click the Follow link at the top of this article. And, if you're already following me, I sure would appreciate it if you click on the Like button below!

Disclosure: I am/we are long AAPL, ABBV, AFL, AMZN, BUD, BXMT, CB, CMCSA, CMI, CRM, CSCO, CVS, D, DGX, DIS, ES, F, FB, GD, GILD, GOOG, HASI, HRL, IBM, INTC, JNJ, KO, LMT, LOW, MAIN, MCD, MMM, MO, MSFT, NFLX, NKE, NNN, NVDA, O, OHI, PG, QCOM, RDS.B, RTN, SBUX, SCHD, SWK, T, TROW, TRV, TSM, TXN, UNH, UPS, VFH, VLO, VNQ, VYM, VZ, WBA, WMT, XEL, XLNX, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.