Given the increased volatility in broader markets, investing for passive income via dividends is as popular as ever—maybe moreso. Research suggests a large number of retail investors prefer dividends, and that “high dividend payments may reduce the volatility of future cash flows” of firms.
There are scores of dividend-focused exchange-traded funds (ETFs) listed on US exchanges. Today we take a look at three.
1. JPMorgan Equity Premium Income ETF
- Current Price: $61.84
- 52-Week Range: $53.96 - $62.77
- Dividend Yield: 6.87%
- Expense Ratio: 0.35% per year
The JP Morgan Equity Premium Income ETF (NYSE:JEPI) seeks to generate current income and achieve capital appreciation. The fund mainly invests in stocks with lower volatility levels than the S&P 500 index.
JEPI, which currently holds 103 stocks, began trading in May 2020. Its net assets stand at $5.1 billion.
Portfolio weights of major sectors are as follows: industrials get the biggest share, with 11.9%, followed by health care (11.6%), information technology (11.4%) and consumer staples (10.4%).
Among the leading stocks on the roster are transportation carrier Old Dominion Freight Line (NASDAQ:ODFL); strategy and consulting services giant Accenture (NYSE:ACN), Microsoft (NASDAQ:MSFT), business and financial management software developer Intuit (NASDAQ:INTU); and Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG).
The fund is up 10.9% this year. The current price supports a dividend yield of 6.87%. JEPI hit a record high in late August. We like the diversity of the fund and believe it deserves to be on your watchlist.
2. Invesco KBW High Dividend Yield Financial ETF
- Current Price: $20.50
- 52-Week Range: $16.12 - $21.65
- Dividend Yield: 7.06%
- Expense Ratio: 0.35% per year
The Invesco KBW High Dividend Yield Financial ETF (NASDAQ:KBWD) gives access to US financial stocks with competitive dividend yields. The fund started trading in December 2010.
KBWD, which has 39 holdings, tracks the KBW High Dividend Yield Financial Index. The top 10 names make up about 40% of its $500.4 million in net assets.
In terms of sectors, asset management and custodian banks have the largest slice, with 44.27%. Next in line are mortgage real estate investment trusts or mREITs (31.82%), thrifts and mortgage finance institutions (6.16%) and regional banks (4.86%).
Leading holdings include Orchid Isla (NYSE:ORC), which invests in residential mortgage-backed securities; the closed-end management investment names Newtek Business Services (NASDAQ:NEWT) and FS KKR Capital (NYSE:FSK); real estate investment trust Prospect Capital (NASDAQ:PSEC), which invests in middle-market privately held companies; and Annaly Capital (NYSE:NLY), which specializes in mortgage finance and corporate middle market lending.
KBWD returned 23.8% so far in 2021, and hit a multi-year high in June. The fund’s forward P/E and P/B ratios stand at 13.06x and 1.71x. Interested readers could consider buying around current levels.
Yesterday we outlined how the US financial industry could potentially do well during Fed Chair Jerome Powell’s second term.
3. WisdomTree International Dividend ex-Financials Fund
- Current Price: $41.51
- 52-Week Range: $39.47 - $45.17
- Dividend Yield: 5.60%
- Expense Ratio: 0.58% per year
The WisdomTree International Dividend ex-Financials Fund (NYSE:DOO) invests in shares of high-dividend-yielding firms outside the financial sector in the developed world excluding the US and Canada. The fund was first listed in June 2006.
DOO currently invests in 92 different stocks. In terms of sectors, its holdings are in the following: utilities (14.26%), materials (14.17%), communication services (12.84%), industrials (10.33%) and real estate (10.00%).
Almost a quarter of the companies are based in Japan, followed by the UK (12.41%), Australia (12.19%), Germany (9.68%) and Hong Kong (9.33%). The top 10 holdings comprise almost a fifth of its net assets of $139.55 million.
Norway-based oil and gas group Equinor ASA (NYSE:EQNR); Spanish energy name Naturgy Energy Group (OTC:GASNY); Finlandia-based energy group Fortum Oyj (OTC:FOJCY); Australian iron ore miner Fortescue (ASX:FMG) Metals (OTC:FSUGY); and Japan-based Canon (NYSE:CAJ), known for office equipment and imaging systems, lead the stocks on the roster.
Year-to-date, DOO returned 2.3%, and the current price supports a dividend yield of 5.6%. Investors looking for exposure to shares outside the US and Canada as well as the financial sectors could consider buying DOO.