3 High-Yield ETFs for Dividend Investors The stock market has been gyrating wildly since the beginning of the year on investor concerns about multi-decade high inflation, the Federal Reserve's interest rate increases, unabating supply chain disruptions,...
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The stock market has been gyrating wildly since the beginning of the year on investor concerns about multi-decade high inflation, the Federal Reserve's interest rate increases, unabating supply chain disruptions, and the possibility of an economic recession. High-yield ETFs offer instant diversification and ensure a steady income stream amid heightened market volatility. So, we think betting on high-dividend-yielding ETFs Vanguard High Dividend (VYM), SPDR Portfolio S&P (SPYD), and JPMorgan Equity (JEPI) could be wise. Read on.
San Francisco Fed President Mary Daly yesterday stated her support for aggressive interest rate hikes to reduce inflationary pressure yesterday. "We need to do that expeditiously, and I see a couple of 50 basis point hikes immediately in the next couple of meetings to get there," she said. Forty-year-high inflation, lingering supply chain disruptions, and recent geopolitical crises have evoked fear that the Fed's tighter monetary policy to combat price increases will push the U.S. economy into recession.
The equity markets have enjoyed a mini rally over the past few days. However, the market retreated again yesterday as economic data increased the possibility of more extensive interest rate increases, while JPMorgan's Jamie Dimon warned investors of an "economic hurricane." Amid the volatile scenario, high-yield ETFs are considered attractive investments because they can hedge against market uncertainties and generate a regular income stream.
To dodge the intense market volatility, we believe high-yield ETFs Vanguard High Dividend Yield ETF (VYM), SPDR Portfolio S&P 500 High Dividend ETF (SPYD), and JPMorgan Equity Premium Income ETF (JEPI) could be ideal additions to one's portfolio.
Vanguard High Dividend Yield ETF (VYM)
VYM offers exposure to dividend-paying large-cap companies that exhibit value characteristics within the U.S. equity market. Investors with a longer horizon should consider investing in large-cap value stocks because they could add benefits, including dividends and rock-solid stability, to any well-balanced portfolio. The companies in this ETF are considered safe and tend to be in more stable industries. The fund is tilted heavily towards consumers and energy.
VYM tracks the FTSE Custom High Dividend Yield Index. It has a 0.06% expense ratio, versus the 0.50% category average. It has 444 holdings in total. The fund's major holdings include Johnson & Johnson (JNJ) with a 3.35% weighting, followed by Procter & Gamble Company (PG) and Exxon Mobil Corporation (XOM) with 2.72% and 2.52% weightings, respectively. VYM has $46.70 billion in assets under management. And over the past six months, its fund flows came in at $5.11 billion and $6.83 billion over the past year. It has a 0.91 beta.
The fund pays a $3.10 annual dividend, which yields 2.28% at its prevailing share price. Its dividend payouts have increased at a 5.4% CAGR over the past three years and a 7.1% CAGR over the past five years. VYM has improved 4.9% over the past six months and 3.2% over the past year to close the last trading session at $110.53. It had a $110.52 NAV as of June 1, 2022.
VYM's strong fundamentals are reflected in its POWR Ratings. The ETF has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
VYM has an A grade for Buy & Hold and a B for Trade and Peer. The fund is ranked #19 among 86 ETFs in the A-rated Large Cap Value ETFs group.
To access all POWR Ratings for VYM, click here.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
SPYD tracks an index that picks the top 80 dividend-yielding companies in the S&P 500. The fund is placed in the large-cap segment, and the stocks included are equally weighted. It is part of State Street's low-cost core funds and is among the cheapest dividend funds available. Thus, SPYD is suitable for investors who want dividend-paying stocks at an ultra-low price.
SPYD tracks the S&P 500 High Dividend Index. It has a 0.07% expense ratio, compared with the 0.50% category average. It has a total of 81 holdings. The fund's major holdings include Valero Energy Corporation (VLO) with a 1.99% weighting, followed by Marathon Petroleum Corporation (MPC) and Chevron Corporation (CVX) with 1.72% and 1.66% weightings, respectively. It has $8.64 billion in assets under management. SPYD's fund flows came in at $2.80 billion over the past six months and $3.55 billion over the past year. It has a 1.11 beta.
The fund pays a $1.57 annual dividend, which yields 5.86% at the prevailing share price. SPYD has advanced 13.9% over the past six months and 5.3% over the past year to close the last trading session at $44.34. It had a $44.33 NAV as of June 1, 2022.
SPYD's POWR Ratings reflect a strong outlook. The ETF has an overall A grade, which equates to Strong Buy in our proprietary rating system.
SPYD has an A grade for Peer, Trade, and Buy & Hold. The fund is ranked #4 among 86 ETFs in the same group.
To access all SPYD ratings, click here.
JPMorgan Equity Premium Income ETF (JEPI)
JEPI is an actively managed fund that invests in large-cap U.S. stocks and equity-linked notes (ELNs). It is designed to provide current income while maintaining prospects for capital appreciation. The fund invests in S&P 500 stocks that exhibit low volatility and value characteristics and generates revenue by selling options on these stocks.
JEPI has a 0.35% expense ratio, versus the 0.50% category average. It has $9.90 billion in assets under management. It has 105 holdings in total. The fund's major holdings include progressive Corporation (PGR) with 2.01% weighting, Bristol-Myers Squibb Company (BMY) with a 1.88% weighting, AbbVie, Inc. (ABBV) with a 1.81%, and Coca-Cola Company (KO) with a 1.80% weighting. JEPI's fund flows came in at $5.52 billion over the past six months and $8.79 billion over the past year. Its NAV was $57.26 as of June 1, 2022.
The ETF pays a $4.76 dividend annually, yielding 9.67% at its current price. JEPI has declined marginally over the past month and closed the last trading session at $57.28. It has a 0.64 beta.
JEPI's strong outlook is reflected in its POWR Ratings. The ETF has an overall B rating, which translates to Buy in our proprietary rating system.
It has a B for Peer Grade and Buy & Hold Grade. Among the 167 ETFs in the All Cap Equities ETFs group, it is ranked #10.
To get additional POWR Ratings (Trade Grade) for JEPI, click here.
VYM shares rose $1.36 (+1.23%) in premarket trading Thursday. Year-to-date, VYM has declined -0.82%, versus a -13.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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