Stock Investing 101 – Dividend Yield

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Contents

101 High Yielding ETFs For Every Dividend Investor

With interest expected to stay at near-zero levels for the foreseeable future, many investors have found it challenging to secure meaningful yields from asset classes that were once the core of income strategies. Gone are the days of Treasuries and high quality corporates yielding in excess of 5%; in the new era, sub-1% yields are increasingly common.

While finding high-yielding asset classes is challenging, it certainly isn’t impossible. There are dozens of ETFs (and ETNs) that offer potential for some big payouts, including some of the usual suspects as well as some lesser-known strategies. Below, we profile 101 high yielding ETFs across 10 different categories [for more ETF news and analysis subscribe to our free newsletter]:

US Dividend Stock ETFs

1. SmallCap Dividend Fund (DES)

DES
12-Month Yield 3.5%
Dividend Rating A+
Expense Ratio .38%
200-Day Volatility 12.4%

DES tracks a fundamentally weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. dividend-paying market. Its focus on both dividend yield and small-cap firms provides investors with potential growth opportunities as well as meaningful current income flows.

Yield

DES currently boasts an annual distribution yield that is in the neighborhood of 3.41%, making it the highest-yielding ETF in its category.

Portfolio

DES’ portfolio consists of roughly 611 individual holdings, with no single stock accounting for more than 2.1% of total assets, making it both deep and relatively well-balanced. The fund is, however, significantly biased towards financial equities, which account for over a third of the portfolio. Other significant allocations include real estate equities and industrials.

Verdict

This ETF’s focus on both yield and small-cap firms makes it an intriguing pick for investors wanting to enhance their portfolio’s current return and potential growth opportunities. It’ heavy allocation towards financials, a segment that often exhibits high volatility, may deter those with lower risk tolerances.

2. WisdomTree Equity Income Fund (DHS)

DHS
12-Month Yield 3.9%
Dividend Rating A
Expense Ratio .38%
200-Day Volatility 9.8%

This ETF from WisdomTree offers exposure to U.S. large cap equities, one of the most poplar asset classes, with a twist. Unlike most competitors in the space which rely on a market capitalization-weighted methodology, DHS is linked to a fundamentally weighted benchmark that selects and ranks its underlying holdings based on dividend yield [Download 7 Simple & Cheap ETF Model Portfolios].

Yield

DHS currently features an annual yield of around 3.85%, which isn’t the “juiciest” distribution on the list given the fund’s focus on U.S. large cap stocks.

Portfolio

This fund holds close to 350 individual securities, however its deep portfolio is a bit top-heavy; the top ten holdings in DHS account for nearly one half of total assets, potentially increasing the company specific-risk associated with this ETF. DHS makes big allocations to well-known industry giants like AT&T, General Electric and Pfizer, resulting in a portfolio that is dominated by well-known value stocks. From a sector breakdown perspective, this ETF is fairly well-balanced; healthcare, consumer defensive and communication services stocks hold the top three positions, while utilities and industrials also receive a fair amount of exposure.

Verdict

Overall, this ETF is pretty “plain vanilla”; DHS holds a portfolio of well-known, U.S. large cap industry leaders and features a middle-of-the-road dividend yield. The fund’s yield-weighted strategy is certainly worth a closer look from value investors looking to steer clear of traditional, market cap-weighted products.

3. LargeCap Dividend Fund (DLN)

DLN
12-Month Yield 2.8%
Dividend Rating A
Expense Ratio .28%
200-Day Volatility 10.8%

DLN grants exposure to the large cap dividend payers in the U.S. by selecting the 300 largest firms by market cap from the WisdomTree Dividend Index. The fund includes the who’s who of U.S. firms with names like AT&T, Exxon Mobil and General Electric making appearances in the top ten holdings.

Yield

The fund is currently paying out 2.72% to its investors, giving a nice solid income stream on top of a solid performance; the fund has jumped more than 50% in the trailing three years.

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Portfolio

As mentioned earlier, the fund offers exposure to approximately 300 holdings, with the top ten companies accounting for 30% of total assets. While this is not the best diversity in the space, it is certainly not the worst, as there are plenty of other funds that are far more top-heavy. DLN also does well to spread its assets across a number of vital segments, giving it a relatively strong diversity.

Verdict

With a healthy track record, good diversity and solid yield, DLN certainly presents itself as a strong option for your portfolio. It should come as no surprise that the fund has more than $1.2 billion in assets as investors have been quick to adopt this large cap strategy.

4. MidCap Dividend Fund (DON)

DON
12-Month Yield 2.8%
Dividend Rating A+
Expense Ratio .38%
200-Day Volatility 11%

DON tracks an index that is designed to select dividend-paying stocks from the mid-capitalization segment of the U.S. equities market. Investing in mid cap equities may be appealing to investors who are seeking out the potential for significant capital appreciation and current income while still maintaining relatively “safe” exposure.

Yield

This ETF has an annual dividend yield of about 2.73%, making it the highest yielding fund in the mid cap value equities category.

Portfolio

DON’s portfolio consists of roughly 350 individual holdings, with no single stock accounting for more than 2.28% of total assets, making it both deep and relatively well-balanced. The fund, however, has heavy allocations in the real estate, financial services and utilites sectors, which together account for more than half of total assets.

Verdict

DON’s expense ratio of 0.38%, while not very high, makes it one of the more expensive funds in its category. Its deep, well-balanced portfolio combined with its juicy dividend yield, however, certainly warrants investors to take a closer look at this mid cap option.

5. Total Dividend Fund (DTD)

DTD
12-Month Yield 2.8%
Dividend Rating A-
Expense Ratio .28%
200-Day Volatility 10.8%

DTD takes a unique approach to providing exposure to U.S. dividend payers. Its underlying index measures the performance of companies that pay regular cash dividends and that meet other liquidity and capitalization requirements established by WisdomTree.

Yield

The fund is currently paying out 2.73% to its investors, which falls on the lower end of the scale of dividend-focused products, but is still a decent yield.

Portfolio

DTD offers exposure to more than 900 securities, making it one of the deeper portfolios out there. The top 10 assets account for just 24.5% of holdings, meaning that the fund has strong diversity. Investors will also note that the product does a great job of spreading its assets across a number of sectors.

Verdict

DTD has a strong record of performance and one of the deeper portfolios in the dividend-focused world. All of this is offered at a cost of just 28 basis points, making the fund an extremely enticing buy.

6. Dow Jones Select Dividend Index Fund (DVY)

DVY
12-Month Yield 3.5%
Dividend Rating A-
Expense Ratio .40%
200-Day Volatility 9.9%

This ETF is one of several options available to investors looking to focus equity exposure on U.S. dividend-paying stocks. The underlying index screens the equity universe by factors such as dividend per share growth rate, dividend payout percentage rate, dividend yield and average daily dollar trading volume.

Yield

DVY has distribution yield in excess of 3.4%, representing a payout that is considerably higher than many other large cap value equity ETFs.

Portfolio

DVY’s portfolio consists of roughly 100 individual securities, and it is relatively well-balanced with only 20% of total assets lying in the top ten holdings. The fund has a heavy bias towards utilities equities, which account for a third of the portfolio, while consumer defensive and industrials sectors also receive significant allocations. The majority of the holdings are large and mid cap firms, giving it a nice tilt towards “safer” stocks.

Verdict

This ETF’s unique methodology and attractive dividend yield makes it a nice pick for investors looking to add U.S. equity exposure. While DVY can certainly be used as a core component within a long-term portfolio, it can also be effective as a tactical tool, shifting assets towards companies that will often exhibit lower volatility in certain environments.

7. ETRACS Monthly Pay 2x Leveraged Dow Jones Select Dividend Index ETN (DVYL)

DVYL
12-Month Yield 8.18%
Dividend Rating N/A
Expense Ratio .35%
200-Day Volatility 21.6%

This leveraged dividend product falls on the riskier side of things, but a leveraged strategy means a handsome dividend yield. The fund screens stocks by dividend per share growth rate, dividend payout percentage rate and average daily dollar trading volume, and stocks are selected based on dividend yield.

Yield

As a leveraged product, DVYL is able to pay out a massive 8% to its investors, allowing some to write off the risks associated with leveraged ETF investing in order to gain access to the high yield.

Portfolio

The portfolio mainly focuses on U.S. large cap stocks, which may offer some peace of mind to investors looking into the product. It should be noted that through its first five months on the market, this fund’s strategy attracted just $11 million in assets, a figure that if maintained, will likely force the product to shutter in the coming years.

Verdict

The product is still pretty young, but investors do not seem to be hopping on the bandwagon, as it has had trouble garnering assets. For those wary of investing in newer ETFs, you may be better served with another leveraged dividend product, as there are several options out there.

8. Morningstar Dividend Leaders Index Fund (FDL)

FDL
12-Month Yield 3.5%
Dividend Rating A
Expense Ratio .45%
200-Day Volatility 10.1%

This ETF is linked to the Morningstar Dividend Leaders Index, which offers exposure to large and mega cap firms that have shown dividend consistency and dividend sustainability in years past. The focus on both yield and consistency makes for a unique risk/return profile for this ETF [sign up for a free trial to Dividend.com Premium for more dividend investing ideas].

Yield

FDL has an annual dividend yield in excess of 3.3%, making it one of the highest yielding products in the large cap value equity space.

Portfolio

FDL maintains a portfolio of about 100 stocks, with nearly two-thirds of total assets lying in the top ten holdings. In regards to sector allocations, the fund invests half of its assets in healthcare and utilities equities, while a meaningful allocation is also given to the communication services sector. The majority of the holdings are giant and large cap firms, though mid-cap stocks account for a small share of the portfolio.

Verdict

This ETF’s focus on both dividend sustainability and yield makes it an appealing option for investors seeking both consistency and higher current income. Its rather top-heavy portfolio may deter some investors as nearly 40% of FDL’s performance relies on only four individual holdings.

9. Value Line Dividend Index Fund (FVD)

FVD
12-Month Yield 2.8%
Dividend Rating A-
Expense Ratio .70%
200-Day Volatility 9.9%

This First Trust product has been around since late 2003 and has been able to scrape up half a billion in assets. FVD also trades more than 100,000 shares each day, giving it a nice liquidity. Its strategy picks stocks based on First Trust’s Value Line Safety Ranking System.

Yield

This ETF is currently paying out 2.77%, which is not the strongest of the dividend products, but it is certainly nothing to complain about.

Portfolio

The fund grants equal weight to its 150+ holdings, ensuring that no single stock is able to dominate the overall performance of the fund. FVD focuses the vast majority of its assets on U.S. stocks, but does set aside about a tenth of its assets for companies based abroad. From a sector perspective, this product weights utilities, consumer defensive and industrials over others.

Verdict

The equal weight strategy is certainly a compelling feature, but some may be warded off by FVD’s tendency to stick to a few major sectors rather than spread out over many different ones. The fund does, however, do a nice job of investing in companies of all different market cap sizes, so its overall diversity is still decent. The biggest drawback to this ETF is that it charges 70 basis points for investment, putting its fees on the higher range of the ETF universe.

10. High Dividend Equity Fund (HDV)

HDV
12-Month Yield 3.3%
Dividend Rating B+
Expense Ratio .40%
200-Day Volatility 9.8%

This iShares ETF makes for an appealing income-generating tool as it looks to measure the performance of U.S. stocks with a history of providing high dividend yields on a consistent basis. HDV offers exposure to well-known large cap value equities with a twist; this ETF features minimal exposure to the financials sector, which is a common plague among other dividend-focused products.

Yield

This ETF boasts an annual distribution yield of 3.24%, offering an attractive source of current income for those looking to tap into the large cap equities asset class.

Portfolio

HDV invests in 75 individual securities, with over half of its total assets going to the top-ten holdings alone. Given its market cap-weighted approach it is not terribly surprising to see that this fund is dominated primarily by giant and large cap size stocks; top holdings including well-known industry behemoths like AT&T, Pfizer and Johnson & Johnson. HDV separates itself from competitors through its sector breakdown; instead of focusing on the financials sector, this ETF makes major allocations to healthcare, consumer defensive and communication services.

Verdict

For those looking to target large cap value U.S. stocks, while avoiding concentrations in the financials sector, HDV presents itself as a viable instrument that warrants a closer look.

11. PowerShares KBW High Dividend Yield Financial Portfolio (KBWD)

KBWD
12-Month Yield 10.2%
Dividend Rating A+
Expense Ratio .35%
200-Day Volatility 12.6%

This ETF targets high-yielding stocks in the financial sector, offering exposure to a relatively narrow portfolio that has the potential to make some significant payouts. Given the focus on high-yielding financial stocks, KBWD obviously brings some significant risk to the table; when stocks slide, this fund often realizes meaningful declines. But for those looking to buy some beaten down names in the financial sector and capture a hefty yield while doing so, KBWD can be a very useful tool.

Yield

As the name suggests, this ETF focuses specifically on financial stocks with the highest dividend yields. Further, the use of a dividend-yield-weighted methodology gives the biggest weightings to the highest yielders, further boosting the payout potential. Currently, this ETF has a yield of more than 10%, making it one of the highest non-leveraged options out there.

Portfolio

Though KBWD is a member of the Financials Equities ETFdb Category, it maintains a portfolio with little overlap to many of its peers. Instead of holding the Wall Street titans that are common in funds such as XLF, thie ETF consists of smaller, sometimes more speculative financial stocks.

Verdict

Like many of the ETFs on our list of “Heavy Hitters”, this ETF comes with the potential to generate huge cash flows through hefty distribution payments. The risk in this case relates in part to the sector represented; smaller financial stocks tend to be quite volatile. KBWD probably shouldn’t be a huge allocation in your portfolio unless you possess an abnormally high risk tolerance, but minor weightings to this ETF can make a meaningful impact on total yield.

12. High Yield Dividend Achievers (PEY)

PEY
12-Month Yield 4.1%
Dividend Rating A+
Expense Ratio .50%
200-Day Volatility 10.5%

This ETF can be classified as somewhat of a hybrid dividend product, as PEY focuses on both dividend yield and consistent growth in dividends. Another unique feature of this ETF is that it is one of the oldest monthly dividend-paying funds on the market.

Yield

PEY has a distribution yield of about 4%. Its concentration on both yield and consistent dividend growth is one of the reasons why this ETF does not boast a higher dividend yield.

Portfolio

This ETF holds a basket of 50 securities with roughly one-third of its total assets in the top ten holdings alone, resulting in a relatively top-heavy portfolio. All of the equities included in PEY’s underlying index are U.S.-listed, with the majority of holdings being mid and small cap stocks. This ETF allocates one-third of its total assets to utilities equities and a quarter to financials. Other significant sector allocations include consumer defensive, industrials and basic materials equities.

Verdict

For investor looking to enhance their portfolio’s current return, but who also want consistency, PEY is certainly worth a closer look. And while its tilt towards small and mid cap stocks may be too risky for some investors, the fund’s resulting risk/return profile may provide a unique growth opportunity.

13. Dividend Achievers Fund (PFM)

PFM
12-Month Yield 2.2%
Dividend Rating B+
Expense Ratio .50%
200-Day Volatility 10%

This ETF uses a unique strategy to invest in companies that fall under the dividend achievers umbrella. Dividend achievers are defined as companies that have increased their annual dividend for ten or more consecutive fiscal years.

Yield

PFM pays out a yield of just 2.15%, a relatively low dividend for a targeted fund. But investors should also note that its yield is among the most solid out there and is likely never to go anywhere considering the strength of its underlying holdings.

Portfolio

The portfolio consists of about 200 stocks, but the top 10 receive nearly 45% of the fund’s assets. PFM tends to favor the consumer defensive and energy sectors and also keeps most of its assets in giant and large cap firms. Overall its diversity would not be considered weak, but it certainly is not the strongest.

Verdict

The yield may seem paltry at first glance, but when you consider the fact that these are some of the most stable dividend payers out there, PFM looks a bit more enticing. Investors will notice that the expense ratio of 0.5% is relatively high for a fund that simply invests in U.S. large cap stocks.

14. US Dividend Equity ETF (SCHD)

SCHD
12-Month Yield 2.4%
Dividend Rating B+
Expense Ratio .07%
200-Day Volatility 10.1%

Making its debut in 2020, this fund was able to gather over $540 million in its first year on the market. Its strategy is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios

Yield

SCHD is paying out 2.37% to its investors, falling around the average of most broad-based equity products.

Portfolio

SCHD has a portfolio of approximately 100 securities, but grants more than 40% of its assets to its top 10 components. Adding to diversity woes is its overweighting of the consumer defensive sector. Finally, the fund focuses primarily on giant and large cap firms, with lower market capitalizations almost entirely absent.

Verdict

Its diversity leaves something to be desired, but for an investor looking to make a play on large cap U.S. dividend payers, SCHD has gotten off to a nice start. Perhaps the fund’s most attractive feature is its expense ratio of just seven basis points, making it one of the cheapest ETFs period.

15. ALPS Sector Dividend Dogs ETF (SDOG)

SDOG
12-Month Yield 4.6%
Dividend Rating N/A
Expense Ratio .40%
200-Day Volatility 10.9%

SDOG implements a strategy that is similar to the popular “Dogs of the Dow” approach to dividend investing, but with a slightly larger focus. Instead of targeting only the highest-yielding stocks from the 30 Dow components, SDOG holds a portfolio comprised of the highest yielders in the S&P 500. The result is a portfolio that has substantial overlap with broad-based index funds, but a considerably higher dividend yield than ETFs such as IVV or SPY.

Yield

SDOG has a dividend yield in the neighborhood of 5%, more than twice the yield of the S&P 500 (from which all securities are selected).

Portfolio

SDOG is unique in that it features an equal sector allocation; high-yielding stocks from each of the ten primary sectors are included, meaning that the portfolio avoids some of the traditional biases towards utilities and telecoms that are often present in dividend-focused ETFs. Because the index selects from the S&P 500, SDOG holds a portfolio of large, blue chip stocks–including many household names.

Verdict

For investors looking to maintain exposure to large cap U.S. stocks but looking to upgrade their yield profile from the “plain vanilla” S&P 500, the Sector Dividend Dogs ETF might be an interesting option. Though a bit more expensive than the broad-based S&P ETFs, investors will be rewarded with a materially higher distribution rate.

16. SPDR S&P Dividend ETF (SDY)

SDY
12-Month Yield 3.2%
Dividend Rating A-
Expense Ratio .35%
200-Day Volatility 10.8%

This SPDR ETF is one of the top five largest funds in the large-cap value U.S. equities space. SDY’s underlying index is comprised of the 50 highest dividend yielding constituents of the stocks of the S&P Composite 1500 Index that have increased dividends every year for at least 25 consecutive years, giving the resulting portfolio both capital growth and dividend characteristics [see our Pure Value ETFdb Portfolio].

Yield

SDY has a distribution yield in excess of 3.1%, representing a payout that is considerably higher than many other large cap value equity ETFs.

Portfolio

SDY’s portfolio consists of roughly 80 individual securities, with about 22% of total assets lying int the top ten holdings. The fund has a heavy bias towards consumer defensive equities, which accounts for almost a quarter of the portfolio, while industrials, financial services and consumer cyclicals sectors also receive significant allocations. The majority of the holdings are large and mid cap firms, giving it a nice tilt towards “safer” stocks.

Verdict

This ETF’s unique selection methodology and attractive yield make it an appealing options for investors looking for both dividend growth and yield. SDY’s heavy tilt towards consumer defensive equities, however, may deter some investors.

17. ETRACS Monthly Pay 2x Leveraged S&P Dividend ETN (SDYL)

SDYL
12-Month Yield 6.57%
Dividend Rating N/A
Expense Ratio .30%
200-Day Volatility 24.7%

This ETN offers monthly leveraged exposure to an index comprised of domestic dividend payers. That strategy results in increased volatility, while providing an opportunity to generate big distributions.

Yield

SDYL has an annualized distribution yield of about 6.6%, a huge upgrade over non-leveraged dividend ETFs. Of course, that impressive figure is attributable in large part to the leverage employed (which amplifies the volatility as well).

Portfolio

SDYL is linked to the same index on which SDY is based; the underlying basket of stocks includes names such as Avon Products, Pitney Bowes, AT&T and Johnson & Johnson.

Verdict

If you’re willing to take on the risk that comes with explicit 2x monthly leveraged, there is plenty of return potential offered by SDYL. In bull markets, this ETN should perform extremely well, while losses will be exacerbated in bear markets.

18. Dividend Appreciation ETF (VIG)

VIG
12-Month Yield 2.1%
Dividend Rating B+
Expense Ratio .13%
200-Day Volatility 11.2%

This unique fund invests in “Dividend Achievers,” or companies that have increased their payouts for at least ten consecutive years. Launching in 2006, the fund charges just 0.13% for investment, allowing it to rake in nearly $12 billion in total assets.

Yield

VIG pays out a distribution of just 2.11%, relatively low for a broad-based U.S. fund, but investors may be enticed by its payout consistency and reliability.

Portfolio

VIG invests in more than 100 U.S. stocks, the majority of which fall under the large or giant cap umbrella. The ETF grants more weight to both the consumer defensive and industrials sectors than others, meaning it will not be quite as diverse as some of the other options out there.

Verdict

The fund has a solid strategy and charges barely anything for investors to buy in. It may not be the flashiest or most diverse set of holdings, but the dividend achievers are a sought-after asset class and VIG represents them well.

19. High Dividend Yield ETF (VYM)

VYM
12-Month Yield 3%
Dividend Rating A
Expense Ratio .13%
200-Day Volatility 10.7%

VYM tracks an index that is derived from the U.S. component of the FTSE Global Equity Index Series (GEIS), targeting stocks with the highest dividend yield. Its expense ratio of 0.13% is one of the lowest of the funds offering exposure to this corner of the market.

Yield

This ETF currently maintains an annual dividend yield of 2.96%, representing one of the top ten payouts in the large cap value equity category.

Portfolio

VYM invests in nearly 440 individual securities, but roughly 35% percent of total assets lie in the top ten holdings, making the portfolio both deep, yet considerably top-heavy. In terms of sector allocations, VYM offers exposure to a wide variety of industries, but heavy weightings are allotted to consumer defensive, industrials, energy and healthcare equities.

Verdict

While its yield is not as high as others in its category, VYM offers investors broad exposure to dividend-paying companies, giving investors a much wider net than the other dividend focused firms in the space.

20. S&P 500 High Dividend Portfolio (SPHD)

SPHD
12-Month Yield 2.4%
Dividend Rating B+
Expense Ratio .07%
200-Day Volatility 10.1%

As the name suggests, this ETF offers exposure to components of the S&P 500 that have historically offered both high dividend yields and low volatility. As a result, SPHD maintains a dividend yield considerably higher than the broad S&P 500.

Yield

This ETF currently maintains a distribution yield of about 2.4%, making it a viable, although perhaps not the most attractive option, for dividend-seeking investors.

Portfolio

The SPHD portfolio consists of about 50 names, no one of which makes up more than about 3% of the total portfolio. CenturyLink, People’s United Financial and Windstream are among the largest components. From a sector perspective, utilities, consumer staples and financials get the biggest allocations.

Verdict

The upgrade in yield from SPY to SPHD is significant; for investors looking to boost their dividend yield without straying from large cap U.S. stocks, SPHD can be an efficient tool to use.

21. NASDAQ Technology Dividend Index Fund (TDIV)

TDIV
12-Month Yield 2.8%
Dividend Rating N/A
Expense Ratio .50%
200-Day Volatility N/A

TDIV combines two corners of the market that may seem incongruous to many investors: dividend paying stocks and the tech sector. While this combination doesn’t yield a sky-high yield, it’s an interesting strategy that may appeal to investors looking to pick out companies poised to grow their dividends.

Yield

The underlying index has a dividend yield of about 2.8%. While that is lower than many ETFs on this list, it’s considerably greater than the distribution rate for tech indexes in general.

Portfolio

The TDIV portfolio includes a number of well known names, such as Oracle, Qualcomm, IBM, Microsoft, Intel and HP, among the big names. You won’t find any GOOG or FB stock here, however, as those tech giants don’t offer a dividend to shareholders (at least not yet).

Verdict

If you want to maximize yield, this might not be the best option. But if you’re looking for a way to play the tech sector but avoid companies who refuse to pay out cash to their shareholders, this ETF could be a nice addition to a portfolio.
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Emerging Market Dividend Stock ETFs

22. WisdomTree Dividend China Ex-Financials ETF (CHXF)

CHXF
12-Month Yield 2.8%
Dividend Rating N/A
Expense Ratio .63%
200-Day Volatility

This ETF is currently the only dividend-focused China ETF on the market, presenting an option for investors interested in Chinese stocks and looking to lower volatility by focusing on dividend payers and excluding banks. Though it targets the same market as many other ETFs in the China Equities ETFdb Category, CHXF is very different than most of the other funds on the market–both in its potential return and risk factors [see also How To Pick The Right ETF Every Time].

Yield

CHXF is linked to an index that has a dividend yield just south of 3%. While that isn’t a massive distribution opportunity, it generally represents a meaningful step up from the payouts offered by other China ETFs.

Portfolio

Perhaps the most unique element of the CHXF portfolio is not the focus on dividend-paying stocks, but the avoidance altogether of the financial sector. Many China ETFs, including the ultra-popular FXI, are dominated by banks (which can make up to 50% of assets). CHXF features a portfolio that is generally balanced from a sector perspective.

Verdict

CHXF’s distribution isn’t massive by any means–it’s currently about 3%. As such, this tool may be more useful for those looking to capture the benefits of dividend-paying stocks beyond the absolute yield; CHXF offers a unique way to play China’s stock market through a technique that delivers more balanced diversified exposure and may yield lower volatility over the long haul.

23. Emerging Markets Equity Income Fund (DEM)

DEM
12-Month Yield 3.7%
Dividend Rating A-
Expense Ratio .63%
200-Day Volatility 16.4%

This ETF tracks a fundamentally weighted index that is designed to measure the performance of the highest-yielding stocks from the world of emerging market equities, a potentially lucrative segment of the market. Companies that pass the market capitalization and liquidity requirements are weighted based on annual cash dividends paid.

Yield

This ETF boasts an annual dividend yield of 3.61%, making it one of the most appealing options for investing in emerging markets.

Portfolio

DEM’s portfolio is comprised of roughly 235 individual holdings with about a third of total assets going towards its top ten assets. In terms of specific country allocations, heavy allotments are given to Taiwan, China and Brazil. The majority of stocks are giant and large cap, but there is a meaningful allocation towards mid and small cap stocks. In regards to DEM’s sector breakdown, there is a heavy tilt towards financial services, energy and communication services sectors.

Verdict

While DEM does not offer quite as high of a dividend yield as EDIV, it does hold a much deeper portfolio that ranges across more emerging market countries. For investors looking to add more emerging market diversification, DEM is a compelling option.

24. Emerging Markets SmallCap Fund (DGS)

DGS
12-Month Yield 3.3%
Dividend Rating A-
Expense Ratio .64%
200-Day Volatility 13.8%

This ETF offers exposure to the performance of the highest-yielding stocks from the world of small-cap emerging market equities, a potentially lucrative segment of the market. Its focus on small-cap stocks makes DGS differentiate itself from other emerging equity funds, which often allocate a significant amount of assets towards giant and large cap companies.

Yield

This ETF boasts an annual dividend yield of 3.25%, making it one of the most appealing options for investing in emerging markets.

Portfolio

DGS’s portfolio is comprised of roughly 532 securities, with each individual holding receiving a weighting no higher than 1.32%. The extremely deep and well-balanced fund is also nicely spread out across different sectors, including allocations to industrials, consumer cyclicals, technology and basic materials equities. DGS is largely dominated by Asian equities, with stocks from Taiwan making up about a quarter of the fund’s total assets. And while the fund’s objective is to target small-cap firms, it is important to note that mid-cap companies account for over two-thirds of the portfolio.

Verdict

While DGS does not offer quite as high of a dividend yield as EDIV and DEM, it does maintain a much deeper and more well-balanced portfolio. In addition, DGS’s focus on small-cap equities also makes it an appealing buy for those wishing to add potential growth opportunities to their portfolios.

25. Emerging Markets Dividend Index Fund (DVYE)

DVYE
12-Month Yield 4.54%
Dividend Rating B
Expense Ratio .49%
200-Day Volatility 14.7%

This fund launched in early 2020, but was able to resonate with investors, as its unique strategy combined dividends along with the high growth potential offered by emerging markets. DVYE’s strategy invests in the top 100 dividend-paying firms domiciled in emerging markets.

Yield

DVYE is sporting a nice yield of about 4.5%, a very impressive figure given the emerging market focus that this fund holds.

Portfolio

As promised, the fund invests in approximately 100 securities with just 23% of total assets dedicated to the top 10 holdings–a very nice level of diversity. It may be a surprise, but the fund spreads out its investments over multiple sectors as opposed to the energy and financial focus that many emerging market products feature. The only caveat is that Taiwan accounts for 21% of the fund; many consider Taiwan to be either quasi-developed or fully developed at this point in time.

Verdict

This fund has a solid strategy, solid yield, and got off to a strong start as far as investor interest is concerned. Given the investment methodology, DVYE features a solid diversity and will be a good option for anyone looking to combine income streams with emerging economies.

26. SPDR S&P Emerging Markets Dividend ETF (EDIV)

EDIV
12-Month Yield 6.1%
Dividend Rating A
Expense Ratio .59%
200-Day Volatility 16%

This ETF, as the name suggests, follows an index that holds the highest dividend-paying securities of publicly-traded companies in emerging markets. The fund differentiates itself with its unique weighting methodology. Instead of weighting stocks according to the amount of cash dividends paid, EDIV weighs their securities by annual dividend yields, total market capitalization, average daily trading volumes, and earnings growth and profitability data.

Yield

This ETF boasts an annual dividend yield of about 6%, making it one of the most appealing options for investing in emerging markets. And in comparison to other emerging market ETFs, EDIV dividend payout is the highest in the category.

Portfolio

EDIV’s portfolio is comprised of roughly 125 individual holdings, with about a third of total assets going towards its top ten assets. In terms of specific country allocations, heavy allocations are given towards Brazilian stocks and Taiwan, while other significant weightings are in Turkey, South Africa and Poland. There is some exposure to the quasi-developed markets of Taiwan and South Korea, which combine to make up about 20% of the portfolio. The majority of the holdings are large cap stocks, with a tilt towards financial services, basic materials, communication services and utilities sectors.

Verdict

While EDIV does not offer quite the depth of exposure maintained by some broad-based emerging markets ETFs, and its portfolio includes the controversial quasi-developed economies of Taiwan and South Korea, its competitive expense ratio and high yield may be the best fit for income-seeking investors who want to get their feet wet in this corner of the market.

27. EGShares Low Volatility Emerging Markets Dividend ETF (HILO)

HILO
12-Month Yield 3.3%
Dividend Rating B+
Expense Ratio .85%
200-Day Volatility 13.3%

This ETF features a unique methodology as its underlying index is dividend-yield weighted; HILO is designed to deliver higher yields and lower volatility than comparable broad-based market cap-weighted emerging market funds like EEM and VWO.

Yield

This ETF boasts an annual dividend yield of around 3%; while this distribution is rather paltry compared to others on the list, HILO does boast lower expected volatility, giving it greater appeal among risk-averse investors.

Portfolio

HILO holds a basket of approximately 30 securities selected based on a variety of criteria. This ETF employs a screening process that filters out companies that were forced to eliminate distributions during the most recent recession or ones that feature a yield upwards of 10%. HILO also applies a filter to identify companies with a low correlation to broad-based indexes like the MSCI Emerging Markets Index, resulting in a well-diversified basket of securities that may deliver uncorrelated returns. In terms of sector allocations, HILO is dominated by telecommunications companies; the remainder of the portfolio consists of oil and gas, transportation infrastructure, and independent power producers. Top holdings by country include: Brazil, South Africa, Malaysia and China.

Verdict

HILO can serve as a valuable complimentary holding in a number of portfolios as it offers unparalleled access to emerging markets; this ETF focuses on high-yield, low-volatility companies, and it is well-balanced across countries, industries and market capitalization levels.

International / Global Dividend Stock ETFs

28. Guggenheim ABC High Dividend ETF (ABCS)

ABCS
12-Month Yield 5%
Dividend Rating A
Expense Ratio .65%
200-Day Volatility 18.1%

This one-of-a-kind ETF seeks to replicate a rules-based index that consists of common stocks and U.S. exchange-listed American depository receipts of companies from three of the most important commodity-producing economies: Australia, Brazil and Canada [see our Easy-As-ABC ETFdb Portfolio].

Yield

This ETF features an annual dividend yield of 4.90%, offering an attractive current income stream for commodity-focused investors.

Portfolio

ABCS holds a basket of 30 securities with roughly two-thirds of its totals assets in the top ten holdings alone, resulting in a top-heavy portfolio that may turn away investors seeking more diversified exposure to dividend-paying companies. This ETF allocates half of its total assets to Brazilian equities, Australian companies make up the next largest chunk at roughly one-third, and Canadian equities account for just under a fifth of the portfolio. ABCS offers excellent diversification across companies of all sizes, and its holdings are split fairly even between giant/large caps and mid/small caps. This ETF is also well-rounded from a sector breakdown perspective; consumer discretionary, utilities and telecommunication services each receive fairly equal allocation. Investors should also note that financial companies account for a very minimal portion of the portfolio, a distinguishing trait among dividend-focused ETFs.

Verdict

For investor looking to enhance their portfolio’s current return, ABCS is certainly worth a closer look as it offers a juicy yield along with several distinguishing features that separate it from the pack. Ultimately, ABCS is less than ideal for those in search of one-stop shop dividend exposure given the greater degree of risk associated with investing in commodity-based economies.

29. Australia Dividend Fund (AUSE)

AUSE
12-Month Yield 4.8%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 17.2%

This ETF is one of the most popular and unique options for establishing exposure to Australia. AUSE tracks a fundamentally-weighted index that only invests in the 10 largest Australian dividend-paying companies from each sector. And while most Australia funds focus on stocks that are engaged in the production and exploration of the country’s abundance of natural resources, AUSE is tilted instead towards financials.

Yield

AUSE features an annual dividend yield of 4.8%, presenting itself as a viable option for income-hungry investors looking to diversify their equity component with exposure to Australia.

Portfolio

This ETF holds over 60 individual securities, the majority of which are mid-capitalization stocks. Heavy weighing is given towards financials, which make up for roughly a quarter of the fund’s total assets. Significant allocations are also given to consumer and basic materials sectors.

Verdict

AUSE is an appealing option for investors who want exposure to Australia, but don’t want to be heavily tilted towards the riskier commodity-producing equities.

30. WisdomTree Asia Pacific ex-Japan Fund (AXJL)

AXJL
12-Month Yield 3.5%
Dividend Rating B+
Expense Ratio .48%
200-Day Volatility 15.3%

This one-of-a-kind ETF tracks a fundamentally-weighted index that measures the performance of dividend-paying companies in the Asia Pacific region with a twist; AXJL entirely excludes exposure to Japanese stocks. While this region is generally characterized by favorable demographic trends and robust potential, many have been wary of investing in Japan as this developed behemoth has had lackluster economic growth over the past several years.

Yield

This fund recently featured an annual dividend yield of 3.5%, serving up a viable way to enhance current income by avoiding the least promising economy in an otherwise rapidly growing region.

Portfolio

This ETF boasts a deep portfolio of approximately 200 individual securities, with roughly one-third of total assets going to the top ten holdings alone. From a market capitalization perspective, AXJL is dominated by giant and large cap securities, featuring extremely minimal exposure to smaller companies. Top holdings by sector include communication and financial services; exposure is also spread across the energy, basic materials and consumer discretionary sectors. Australian stocks hold the greatest weight in this portfolio from a geographic perspective, followed by major allocations to China and Taiwan as well. Countries like Singapore, Hong Kong, South Korea and Malaysia are also represented, although they account for a much smaller portion of total assets.

Verdict

This ETF is a great tool for income-oriented investors who are eager to round out their portfolio’s equity component with international exposure, but are wary of investing in the sluggish Japanese economy. As such, this ETF can help investors tap into Asian markets while at the same time focusing on dividend-paying stocks outside of the slowest growing economy in the region.

31. WisdomTree Commodity Country Equity Fund (CCXE)

CCXE
12-Month Yield 3.7%
Dividend Rating A-
Expense Ratio .58%
200-Day Volatility 18.2%

This ETF is linked to a fundamentally-weighted benchmark that measures the performance of dividend-paying stocks from commodity producing countries. This strategy may appeal to income investors who also wish to favorably position themselves in anticipation of the global recovery picking up steam and bolstering demand for natural resources in developed and emerging markets alike.

Yield

This ETF currently boasts an annual dividend yield of 3.7%, giving investors an opportunity to tap into lucrative current income sources from commodity-centric economies.

Portfolio

This ETF holds roughly 130 stocks from countries that rely on producing and exporting natural resources. CCXE is primarily tilted towards giant and large cap stocks, although mid -ap securities also receive a major allocation. Top holdings from a sector breakdown perspective include financial services and energy; this ETF also makes fairly equal allocations to the communication services and basic materials sectors. From a region perspective, CCXE is split 50/50 between developed and emerging markets. Top holdings by country include: New Zealand, Norway, Australia, Canada, Chile, Brazil, South Africa and Russia.

Verdict

This ETF offers a creative strategy that should appeal to dividend investors with a bullish outlook on natural resource prices. Investors should note, however, that stocks from commodity-centric nations may exhibit exaggerated price swings given the inherently volatile nature of commodity futures prices.

32. Global Equity Income Fund (DEW)

DEW
12-Month Yield 4.1%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 15.5%

This ETF targets dividend-paying stocks from developed markets around the globe, including the United States. Index components are weighted by several fundamental factors such as dividend yield and market capitalization.

Yield

DEW currently holds an annual dividend yield of 4.05%, nearly 4.0% lower than its competitor LVL’s attractive distribution yield.

Portfolio

The DEW portfolio has a meaningful weight put towards the United States, United Kingdom and Australia, which account for more than a third of the fund’s total assets. Other allocations are titled towards Western European countries, but a small weighting is given towards Asian equities from China, Japan and Taiwan. Given the criteria for inclusion in the index, it is not surprising to find DEW’s portfolio dominated by giant and large cap stocks, which are generally known for their stability. The fund is, however, slightly biased towards financial services stocks, which make up roughly a quarter of DEW’s total assets. Despite this slight tilt, the remainder of DEW’s portfolio is nicely spread out across multiple sectors including communication services, energy, healthcare and utilities.

Verdict

For investors who can tolerate significant allocations towards European equities, DEW may be a solid pick. And although there is significant risk associated with investments in European markets, the fund does compensate its holders rather handsomely.

33. Europe SmallCap Dividend Fund (DFE)

DFE
12-Month Yield 3.7%
Dividend Rating A-
Expense Ratio .58%
200-Day Volatility 19.2%

DFE is another niche WisdomTree ETF , targeting small cap European stocks that pay dividends. That makes it an interesting option for those looking to express a bullish view on European markets; if the continent bounces back, DFE should perform well.

Yield

DFE has an annual dividend yield of about 3.7%, which is higher than many broad-based Europe ETFs.

Portfolio

The underlying DFE portfolio includes more than 300 individual holdings, though most of them are probably unfamiliar to U.S. investors. Industrials, consumer discretionaries and financial stocks are the biggest sector allocations [see our Small Cap ETFdb Portfolio].

Verdict

For investors looking to invest in small cap European dividend payers, DFE offers a way to express a very specific viewpoint. This fund has risk related to the European exposure in the current environment, but maintains considerable return potential as well.

34. Japan SmallCap Fund (DFJ)

DFJ
12-Month Yield 2.3%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 13.3%

DFJ is a niche fund from WisdomTree that hones in on Japanese equities, specifically small caps. The fund removes the 300 largest firms from the WisdomTree Japan Dividend Index, and chooses the remaining companies for inclusion.

Yield

The fund pays out 2.3% annually, which is a relatively strong yield considering the nature of this product. Small-cap firms often pay smaller dividends or none at all given that they often do not have the cash to spare.

Portfolio

Though this product is very targeted, it features an extremely deep portfolio of approximately 400 securities. The top 10 assets account for around 7% of total holdings, making DFJ an extremely diverse product. The product grants a bit more weight to industrials and consumer cyclicals, but it does not come as a surprise to see such a targeted fund feature such a tilt.

Verdict

Given the objective of this fund, DFJ features a nice diversity and a healthy yield for interested investors. The only issue is that its hyper-targeted strategy will make it a binary option for most investors, as it is probably not an essential buy for most portfolios.

35. WisdomTree International MidCap Dividend Fund (DIM)

DIM
12-Month Yield 3.4%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 17.7%

Similar to DOL, this WisdomTree fund offers a creative way to geographically round out your portfolio’s equity component while still focusing on generating meaningful yield. DIM tracks a dividend-weighted benchmark that includes mid-cap securities from developed markets around the globe with the exception of the United States and Canada.

Yield

DIM currently pays out a 3.41% annual dividend distribution, making it one of the lower-yielding products covered in this report.

Portfolio

This ETF features a deeper, more well-balanced portfolio compared to its large cap brethren DOL; DIM is comprised of approximately 500 securities and the top ten holdings receive less than 10% of total assets. The focus on mid-cap size stocks also results in a different sector breakdown, with industrials accounting for the biggest chunk of exposure followed by financial services and consumer cyclical. Investors should also note that despite being called a “mid cap” fund, DIM allocates a little over one-third of total assets to large cap securities. Top holdings by country include equities from Japan, the United Kingdom, Australia, France and Sweden.

Verdict

DIM offers an attractive strategy given its focus on mid-cap securities, an asset class which has demonstrated the potential to deliver better risk-adjusted returns than large caps in certain environments. However, like DOL, this ETF is also weighted based on annual cash dividends paid, which results in a lower yield than some of the alternatives covering this space.

36. WisdomTree International SmallCap Dividend Fund (DLS)

DLS
12-Month Yield 3.8%
Dividend Rating A-
Expense Ratio .58%
200-Day Volatility 15%

This WisdomTree ETF covers perhaps the “riskiest” segment of the international equity market, focusing on small caps from around the globe with the exception of the United States and Canada. Similar to its mid and large cap focused counterparts, DOL and DIM respectively, this ETF is also weighted based annual cash dividends paid instead of market capitalization.

Yield

DLS currently features an annual distribution yield of around 3.81%, presenting itself as a viable tool for those looking to round out their equity component while still generating current income.

Portfolio

DLS features an incredibly well-balanced basket of holdings; this ETF is made up of over 600 individual securities and the top ten holdings account for well under 10% of total assets. The top two allocations by sector, industrials and consumer cyclicals, account for close to half of the entire portfolio; however, DLS also rounds out exposure to financial services, basic materials and, surprisingly, technology stocks, which receive little to no attention from most other dividend-focused ETFs. Although DLS is listed as a “small cap” ETF, investors should note that its portfolio is actually split about 50/50 between mid and small caps. Top holdings by country include equities from Japan, the United Kingdom, Australia, Singapore and Italy.

Verdict

For those looking to tap into riskier, high-growth opportunities in developed markets outside of the United States and Canada, DLS presents itself as a compelling investment vehicle. Furthermore, because this ETF is focused on the biggest small-cap dividend payers, it offers a way to generate income and potentially rake in big capital gains.

37. WisdomTree International LargeCap Dividend Fund (DOL)

DOL
12-Month Yield 3.6%
Dividend Rating A-
Expense Ratio .48%
200-Day Volatility 16.9%

This ETF offers a creative way to geographically round out your portfolio’s equity component while still focusing on generating meaningful yield. DOL offers exposures to a dividend-weighted benchmark that includes large cap securities from developed markets around the globe with the exception of the United States and Canada [see our High Yield ETFdb Portfolio].

Yield

DOL currently pays out a 3.6% annual dividend distribution, making it an excellent tool for dividend investors seeking out stability.

Portfolio

DOL features a deep, well-balanced portfolio; this ETF is made up of roughly 200 stocks and it allocates no more than one-fifth of total assets to the top ten holdings alone. Instead of relying on a traditional market-cap-weighted methodology, this ETF weighs its underlying holdings based on annual cash dividends paid and, as such, features a tilt towards the biggest “dividend payers,” which are not necessarily the highest-yielding securities. From a sector perspective, financial services take the number one spot, followed by communication services, energy and consumer defensive stocks. Top holdings by country include equities from the United Kingdom, Australia, France, Japan and Germany.

Verdict

DOL is attractive in that it offers ex-U.S. exposure while still maintaining a focus on dividend-paying stocks. However, because it weighs holdings based on cash dividends, it will inherently remain tilted towards safer, giant cap securities, which may be less than ideal for those looking to seriously beef up their portfolio’s current income.

38. International Dividend ex-Financials Fund (DOO)

DOO
12-Month Yield 4.7%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 18.2%

This ETF targets high-yielding stocks from around the globe, excluding those in the financial sector. Furthermore, DOO only invests in dividend-paying companies from outside of the United States and Canada.

Yield

This ETF currently boasts an annual dividend yield of 4.7%, providing those with a niche investment objective of avoiding both financials and the United States a meaningful yield.

Portfolio

DOO’s underlying index invests in approximately 90 individual securities. Exposure is nicely spread out across a wide array of sectors, including communication services, utilities, energy and consumer stocks. DOO only invests in giant and large cap stocks, making it an appealing option for those with lower risk tolerances. In regards to specific country allocations, the fund is relatively well-balanced, with similar weighting given to the United Kingdom, France, Germany, Australia and Japan.

Verdict

This ETF is a nice pick for those looking to avoid exposure to the risky financial sector, but who also want a nice boost to their portfolios. Additionally, its focus on stocks from outside the United States and Canada adds yet another level of diversification to one’s equity holdings.

39. DEFA High-Yielding Equity Fund (DTH)

DTH
12-Month Yield 4.4%
Dividend Rating A
Expense Ratio .58%
200-Day Volatility 17.1%

This ETF offers exposure to developed markets outside of the United States and Canada, particular the EFA region. DTH aims to measure the performance of high dividend yielding companies from this region that have a market cap of at least $200 million and an ADV of at least $200,000.

Yield

This ETF boasts an annual dividend yield upwards of 4.3%, one of the best payouts from the foreign large cap ETF space.

Portfolio

DTH’s portfolio consists of over 300 individual securities, with the top ten holdings making up only about 20% of the fund’s total assets. Because the fund’ selection methodology mandates that companies included in the index have at least $200 million in assets, the resulting portfolio is largely dominated by giant and large cap stocks. In regards to sector allocations, DTH allocates roughly a quarter of its assets towards financials; the remainder is nicely spread out over a wide array of sectors, including communication services, energy, healthcare, industrials and utilities. Although DTH is focused on the entire EFA region, it is heavily tilted towards Western European countries; the fund’s top allocation goes to the United Kingdom at roughly 20%. The fund does, however, have a hefty weighting in Australian equities. Investors should note that DTH has more than 7% of its assets in the debt-ridden and risky countries of Italy and Spain.

Verdict

DTH’s focus on foreign large cap stocks from developed nations outside of the United States and Canada allows investors to diversify their portfolio while at the same time maintaining stability by establishing a tilt towards larger and safer companies.

40. Asia/Pacific Dividend 30 Index Fund (DVYA)

DVYA
12-Month Yield 5.03%
Dividend Rating B-
Expense Ratio .49%
200-Day Volatility 17.4%

Making its debut in February of 2020, this product aims to offer exposure to the 30 highest dividend paying companies in the Asia/Pacific region, which includes Australia, Hong Kong, Japan, New Zealand and Singapore [sign up for a free trial to Dividend.com Premium for more dividend investing ideas].

Yield

This ETF currently boasts an annual dividend yield of around 5%, a very strong figure especially considering the targeted nature of its exposure. DVYA tends to focus in on a few market sectors, but does manage to spread its assets out nicely.

Portfolio

The portfolio is shallow, with around 30 stocks at a time, give or take a few. Not only that, but the top 10 holdings make up nearly half of the fund, giving a very low diversity of holdings. DVYA tends to focus its assets on just a few market segments, but does do a decent job of spreading its investments out to companies of market capitalizations.

Verdict

It’s hard to say if a hyper-targeted fund ike DVYA will be around forever, but its yield is certainly enticing. The decision of investing in this fund ultimately boils down to your thoughts on the Asia/Pacific region as a whole and whether or not you think the high yield is enough to overcome DVYA’s lack of diversity.

41. DEFA Fund (DWM)

DWM
12-Month Yield 3.7%
Dividend Rating A-
Expense Ratio .48%
200-Day Volatility 16.6%

This offering from Wisdom Tree is similar to DTH, as it tracks an index that is designed to measure the performance of dividend paying companies in the developed world, excluding the United States and Canada. The fund specifically focuses on stocks from the Europe, Far East Asia and Australia region.

Yield

DWM currently maintains a dividend yield of 3.78%, which is 60 basis points lower than DTH’s annual distribution yield.

Portfolio

In comparison to DTH, DWM’s portfolio holds more than twice the number of holdings. Although DWM has a much deeper basket of holdings, its portfolio composition is very similar to DTH’s. The majority of stocks are giant and large cap firms from Western European countries. Top individual country allocations include the United Kingdom, Japan, Australia and France. Sector weightings are slightly more distributed, however, with financials only making up for roughly 20% of total assets, and the remainder relatively spread out across different sectors.

Verdict

For investors looking for exposure to the EFA region, DWM is a compelling option. While its dividend yield is slightly lower than DTH’s, it does offer a broader scope on the space as well as a lower price tag with its expense ratio coming in at 0.48%, 10 basis points lower than DTH’s.

42. SPDR S&P International Dividend ETF (DWX)

DWX
12-Month Yield 6.7%
Dividend Rating A+
Expense Ratio .45%
200-Day Volatility 19.8%

This ETF targets dividend-paying stocks from developed markets outside the United States, an asset class that has the potential to make some significant distributions in the current environment. With anxiety over European stocks running high, distribution yields have jumped as investors have been hesitant to load up on this asset class.

Yield

This ETF has a dividend yield north of 6.5%, meaning that it sports a yield that approximately triples the S&P 500.

Portfolio

The DWX portfolio has a meaningful weight towards European stocks, with Spain, France and Italy all making up substantial portions of the portfolio. There are also allocations to Asian economies sprinkled in as well, giving the portfolio some geographic diversification. That hefty allocation to risky stock markets is partially responsible for the hefty yield this product offers, but it of course also contributes to higher potential volatility. If Europe encounters continued turbulence, DWX could struggle.

Verdict

For investors who think European markets are a solid value play and are also interested in generating substantial streams of current income, this ETF could be a great buy. There’s significant risk given the hefty allocation to European markets, but considerable reward as well.

43. STOXX European Select Dividend Index Fund (FDD)

FDD
12-Month Yield 5.3%
Dividend Rating A
Expense Ratio .60%
200-Day Volatility 20.2%

This ETF, as the name suggests, offers exposure to dividend-paying European stocks. Given the numerous hurdles many European economies are facing now, investors have generally moved away from this asset class and valuations have declined. That has translated into some attractive dividend yields in many cases, creating an opportunity to capture some juicy yields for those willing to take on a bit of risk.

Yield

This ETF features a yield of 5.3%, one of the higher payout percentages for non-leveraged stock ETFs out there.

Portfolio

FDD holds a relatively small portfolio of just 30 stocks selected from a universe including 18 different markets. However, there are metrics considered to eliminate any highly speculative stocks; component companies must have positive five-year dividend per share growth and a dividend-to-earnings per share ratio of less than 60%. That results in a portfolio that includes some well-known names (AstraZeneca, Banco Santander) as well as some relative unknowns.

Verdict

The yield potential in FDD is obvious; with distributions in the neighborhood of 7% annually, there is a huge opportunity in this product. The risk lies in the region; European stocks are risky right now, with plenty of downside potential. For investors willing to take on that risk, or for those with a bullish take on the outlook for the eurozone, this ETF could be quite appealing.

44. DJ Global Select Dividend Index Fund (FGD)

FGD
12-Month Yield 4.9%
Dividend Rating A
Expense Ratio .60%
200-Day Volatility 15.1%

This ETF is linked to a dividend yield weighted index consisting of 100 stocks from around the world, resulting in a broad-based security with an attractive payout yield.

Yield

FGD has an annual dividend yield of about 5%, much higher than broad-based global ETFs.

Portfolio

The FGD portfolio consists of stocks from a number of developed markets; Australia, the United States, United Kingdom and Hong Kong are the largest allocations. Most of the individual names are relative unknowns; Shimao Property Holdings and Telecom Corporation of New Zealand each represent more than 2%.

Verdict

This ETF could be an interesting alternative to broad-based developed market ETFs; the dividend yield is considerably higher than the most popular funds targeting this asset class, and volatility is relatively low as well.

45. WisdomTree Global Natural Resources Fund (GNAT)

GNAT
12-Month Yield 3.6%
Dividend Rating A-
Expense Ratio .58%
200-Day Volatility 21%

This one-of-a-kind ETF offers exposure to dividend-paying commodity producers, allowing for income-hungry investors to favorably position themselves as demand for natural resources climbs with the global recovery. GNAT steers clear of market cap-weighting and, instead, this fund weights its underlying holdings based on their dividend yields, further increasing its appeal to those in search of current income [see also Everything You Need To Know About Commodity ETFs].

Yield

GNAT currently features an annual distribution yield of around 3.58%, presenting itself as a viable investment vehicle for those looking to round out their commodity exposure while still generating current income.

Portfolio

GNAT’s underlying portfolio is both fairly deep and well-balanced; this fund is comprised of about 100 securities total and its top-ten holdings receive less than a quarter of total assets. This ETF is heavily tilted towards giant and large cap stocks, resulting in a stable risk-profile that may, however, turn away those in search of more lucrative growth potential. From a sector breakdown perspective, energy stocks dominate this portfolio, accounting for over half of total assets. The next largest chunk of exposure goes to materials companies, while consumer staples stocks receive minimal allocations. GNAT is well-diversified from a geographic perspective, with the United States, the United Kingdom, Russia, Canada and Australia accounting for the top five allocations by country.

Verdict

For investors looking to tap into the commodities space, but still wishing to maintain a focus on dividend-paying securities, GNAT is a great instrument that warrants a closer look. Although its dividend yield isn’t the “juiciest,” the commodity and yield-focused methodology employed by GNAT give it an appealing risk/return profile.

46. WisdomTree Middle East Dividend ETF (GULF)

GULF
12-Month Yield 4.4%
Dividend Rating A
Expense Ratio .88%
200-Day Volatility 15.7%

This intriguing ETF tracks a fundamentally-weighted benchmark that measures the performance of companies in the Middle East region that pay regular cash dividends on shares of common stock. GULF targets high-dividend payers that are based in the Arabian Gulf nations, including: Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar and the United Arab Emirates.

Yield

This ETF features an annual dividend yield of 4.49%, presenting itself as a viable option for income-hungry investors looking to geographically diversify their equity component.

Portfolio

GULF holds roughly 50 companies in total with over half of total assets going towards the top ten holdings alone, resulting in a top-heavy portfolio with increased company-specific risk. In terms of sector breakdown, traditional high dividend sectors dominate the list as financials and telecoms take up nearly two-thirds of the entire portfolio; exposure to indsutrials and real estate is also included. From a geographic perspective, GULF is fairly concentrated; stocks from the United Arab Emirates sand Qatar account for roughly two-thirds of total assets.

Verdict

GULF can be a valuable tool for investors who wish to generate current income while at the same time tapping into countries that receive virtually no representation in most of the other ETFs found on this page.

47. Dow Jones EPAC Select Dividend ETF (IDV)

IDV
12-Month Yield 5.2%
Dividend Rating A-
Expense Ratio .50%
200-Day Volatility 16.1%

This ETF offers exposure to dividend-paying securities in developed markets beyond the United States, presenting an option for investors looking to diversify internationally and focus on stocks that feature hefty payouts. IDV includes a significant allocation to many European countries, a feature that delivers some meaningful return opportunities along with considerable risk in certain environments.

Yield

IDV has distribution yield in excess of 5%, representing a payout that is considerably higher than cap-weighted indexes offering exposure to the same asset class (by comparison, EFA has a 12-month yield that is approximately 200 basis points lower).

Portfolio

The IDV portfolio consists of high-yielding stocks from developed markets around the world, including Australia and Western Europe. Though Australia, the United Kindgom and Hong Kong are the three largest individual allocations, there is a material weight in euro-denominated markets as well. That eurozone exposure is one reason for the significant yield opportunity, though it also translates into additional risk in certain environments. From a sector perspective there is a bit of a tilt towards financials and consumer staples, though this fund is pretty well balanced in that regard as well.

Verdict

For investors with a bullish outlook on ex-U.S. developed markets and an interest in capturing yields in excess of 5%, IDV could be worth a closer look. This fund is a bit more expensive than the cap-weighted products covering this asset class, but does offer a significant increase in yield opportunity for those extra basis points in fees.

48. S&P Global Dividend Opportunities Index ETF (LVL)

LVL
12-Month Yield 7.7%
Dividend Rating A
Expense Ratio .60%
200-Day Volatility 16.2%

This is one of the most unique products on this list, offering global exposure to high-yielding common stocks, MLPs and ADRs. LVL’s weighting methodology allows investors to capture significant cash-flows from not only the United States, but also other developed countries and emerging markets.

Yield

This ETF boasts an annual dividend yield upwards of 7.5%, just shy of SDIV’s 7.66% pay out.

Portfolio

LVL’s portfolio consists of 100 individual holdings, with the top ten securities accounting for roughly a third of the fund’s total assets. In regards to sector allocations, LVL is heavily tilted towards communication services equities, followed by significant weightings in industrials, consumer cyclicals and real estate. The fund primarily invests in European stocks, but also has meaningful exposure to American, Australian and Asian equities. Top country allocations go towards the United States, France and Australia. Investors should note that LVL has more than 6% of its assets in the debt-ridden and risky country of Spain.

Verdict

For investors looking to diversify their portfolio, but who still want to receive meaningful returns, LVL is an appealing option. The heavy tilt towards European equities however, may be risky considering the region’s current economic environment.

49. Intl Dividend Achievers (PID)

PID
12-Month Yield 3.2%
Dividend Rating B+
Expense Ratio .50%
200-Day Volatility 13.2%

This ETF seeks to provide investors with exposure to dividend-paying companies from around the globe. PID’s underlying index selects only those companies that have increased their annual dividend for five or more consecutive fiscal years, an exclusive segment that may have obvious appeal to investors looking to enhance current returns generated by the equity portion of their portfolios.

Yield

PID currently boasts an annual dividend yield of 3.16%. While it is not the highest-yielding option in the foreign large cap space, its performance over the past three years certainly warrants a closer look by investors.

Portfolio

The PID portfolio has a meaningful weight towards European stocks, with the United Kingdom, Spain and Switzerland and all making up substantial portions of the portfolio. There are also significant allocations to the United States and Canadian economies, giving the portfolio some geographic diversification. That hefty allocation to giant and large cap stocks may offer some stability, but PID’s tilt towards the risky eurozone region may be excessively risky, even though it is partly responsible for the fund’s high yield.

Verdict

For investors willing to stomach the risk of European equities, PID is an appealing value play that could bring in substantial streams of current income.

50. Global X SuperDividend ETF (SDIV)

SDIV
12-Month Yield 7.5%
Dividend Rating A+
Expense Ratio .58%
200-Day Volatility 12.3%

This Global X ETFs is one of the more unique yield-focused products out there; it is designed to offer exposure to 100 of the highest-yielding global stocks, regardless of country or sector. The result is a portfolio of global stocks consisting of smaller and generally lesser-known companies–with a hefty yield opportunity.

Yield

SDIV has a dividend yield of about 8%, making it one of the highest yielding ETFs to focus on traditional stocks (i.e., the portfolio doesn’t specifically target mortgage REITs or MLPs, as do many of the other ETFs high up on this list).

Portfolio

The SDIV portfolio is unique in that it is equally weighted; each of the component securities makes up about 1% of assets. Given the fact that some of these stocks are rather risky, that feature helps to diversify away any company-specific risk. However, SDIV is still capable of exhibiting considerable volatility; it should be noted that many of the companies that make up SDIV exhibit high dividend yields in part because of considerable risk in their operations. So this ETF will generally have a much higher volatility than ETFs targeting consistent dividend payers such as VIG. This ETF may offer an opportunity to invest in battered stocks that investors have recently shied away from–potentially consistent with a contrarian strategy. But the potential to stumble into a value trap also exists with some of the component stocks.

Verdict

SDIV is a very interesting opportunity; it features one of the most attractive dividend yields available from global equities, but can be a potentially risky play as well. For investors with a relatively bullish outlook on the global economy and an interest in generating substantial cash flows, this ETF might be a great fit in a portfolio.

Junk Bonds

51. Senior Loan Portfolio (BKLN)

BKLN
12-Month Yield 5%
Dividend Rating B+
Expense Ratio .76%
200-Day Volatility 2.3%

This ETF targets a unique corner of the fixed income market: senior loans. These loans from banks to relatively high-risk issuers have the potential to deliver some attractive returns [see Better-Than-AGG Total Bond Market Portfolio].

Yield

This fund has a distribution yield of nearly 5%, and a yield to maturity of well over 6%.

Portfolio

The BKLN portfolio consists of debts owed by some well-known companies, including Tribune, Chrysler, Del Month and Clear Channel. In total, there are about 135 securities, with no one issuer making up more than about 3% of total assets.

Verdict

Senior loans aren’t often a core holding in many portfolios, but they can be a very useful addition for those in search of attractive yields. BKLN is a bit expensive, but can offer a way to generate attractive distributions with minimal interest rate risk.

52. Emerging Markets High Yield Bond Fund (EMHY)

EMHY
12-Month Yield 5.93%
Dividend Rating B-
Expense Ratio .65%
200-Day Volatility 6.3%

This ETF offers exposure to high-yield debt from emerging markets issuers (including both corporate and sovereign debt), allowing investors to achieve some geographic diversification in their portfolios while also boosting overall yields.

Yield

This ETF has a distribution yield of about 4.7%, which is roughly in line with many domestic junk bond issuers. So EMHY doesn’t offer a huge upgrade from U.S. high-yield corporates, but can be worthwhile for those who think EM issuers are lower credit risks.

Portfolio

This ETF holds about 150 different bonds from a number of different countries and from several different sectors. The primary countries are not the usual EM suspects; Turkey, Venezuela and the Philippines make up the biggest allocations.

Verdict

The yield on this portfolio isn’t tremendous, but it’s nothing to laugh at either. If you think that emerging markets are not much of a credit risk, EMHY can be an easy way to boost the yield from your fixed income portfolio.

53. Global High Yield Corporate Bond Fund (GHYG)

GHYG
12-Month Yield 6.82%
Dividend Rating B
Expense Ratio .40%
200-Day Volatility 6.5%

This ETF offers exposure to high-yield corporate bond issues from companies in developed markets around the world, including the United States.

Yield

This ETF has an average coupon of about 7.5%, and an effective distribution yield of about 6.8%.

Portfolio

About 75% of the underlying portfolio is denominated in U.S. dollars; the remainder is split between euros, pounds and Canadian dollars. About 65% of the portfolio is in U.S. debt, with the remainder split mostly between European and Canadian issuers.

Verdict

If you’d like to add a little international flavor to your junk bond position, this ETF mixes in some developed market issuers with those from the United States. It should be noted, however, that it’s not truly global; you’ll need some emerging markets exposure to round out fully.

54. Market Vectors Emerging Markets High Yield Bond ETF (HYEM)

HYEM
12-Month Yield 6.9%
Dividend Rating C+
Expense Ratio .40%
200-Day Volatility 8.4%

This ETF serves as a complement to IHY, offering a way for investors to achieve exposure to high yielding bonds from emerging markets issuers.

Yield

This ETF has an average coupon of about 8.4% and a distribution yield of almost 7%–a significant upgrade from broad-based emerging markets debt funds.

Portfolio

The underlying portfolio consists of bonds from a number of different countries, including China, Russia, Brazil, Venezuela, Mexico and Indonesia. There are about 100 individual bonds in the fund, none of which represent more than about 4% of total assets.

Verdict

HYEM is one of several ETF options for investors looking to capture the solid yields that can come along with exposure to debt of emerging markets issuers; if you like this asset class, compare this fund to a few of the other options highlighted here.

55. Peritus High Yield ETF (HYLD)

HYLD
12-Month Yield 9%
Dividend Rating A+
Expense Ratio 1.35%
200-Day Volatility 3.5%

This actively-managed ETF holds junk bonds, seeking to outperform index-based products such as JNK and HYG. The underlying portfolio generally focuses on the secondary market in favor of new issues.

Yield

HYLD has an average coupon of more than 9% and a current yield that is just short of 10%, meaning it offers much greater yield potential than most index-based junk bond ETFs.

Portfolio

The underlying portfolio features a wide range of issuers from several different industries; top holdings recently included Air Canada, Rotech Healthcare and Dyncorp International.

Verdict

With an expense ratio of more than 1%, HYLD is one of the more expensive options for those interested in junk bonds. But the yield opportunity here is considerably greater than many other high-yield corporate bond ETFs as well.

56. Global ex-USD High Yield Corporate Bond ETF (HYXU)

HYXU
12-Month Yield 5.9%
Dividend Rating B-
Expense Ratio .40%
200-Day Volatility 9.9%

HYXU offers exposure to junk bonds denominated in currencies other than the U.S. dollar (primarily the euro, pound and Canadian dollar) [see our King Dollar ETFdb Portfolio].

Yield

This ETF has an annual distribution yield of about 6%, presenting a viable way for investors to beef up current income while also diversifying geographically.

Portfolio

About 85% of the portfolio consists of debt denominated in euro; the largest country allocations are to France, Luxembourg and the United Kingdom. There are about 115 bonds in total in the portfolio; no one issuer makes up more than 3% of total assets.

Verdict

The attractive yield of HYXU is thanks in part to the significant allocation to European junk bonds. If you’re bullish on Europe, this ETF is a nice way to boost the returns from your fixed income positions.

57. Market Vectors International High Yield Bond ETF (IHY)

IHY
12-Month Yield 7.5%
Dividend Rating B
Expense Ratio .40%
200-Day Volatility 9.3%

This ETF targets junk bonds from international issuers; most of the portfolio is rated BB or lower, and it includes debt from several different parts of the world.

Yield

This ETF pays out an annual dividend distribution of about 7.5%, a hefty figure that’s sure to please income-hungry investors.

Portfolio

The IHY portfolio includes debt denominated in several different currencies, including dollars, euro and pounds. Most of the debt held has less than ten years remaining to maturity, and about 20% is allocated to bonds from financial issuers.

Verdict

For investors looking to beef up on exposure to European debt–a risky proposition with a potentially significant return–IHY could be an interesting option.

58. B – Ca Rated Corporate Bond Fund (QLTC)

QLTC
12-Month Yield 7.29%
Dividend Rating B
Expense Ratio .55%
200-Day Volatility 7.5%

This ETF focuses on the very low end of the corporate bond spectrum, investing in debt with some of the lowest possible ratings. While that obviously involves considerable risk, it has the potential to deliver some attractive returns as well.

Yield

This ETF has a weighted average coupon of about 8% and a distribution yield in excess of 7%.

Portfolio

There are about 150 individual holdings in the portfolio, giving considerable diversification across issuers. Financial and utility issuers are a relatively small portion; industrial corporate bonds (which includes a number of different types of companies) represent about 80%. Some of the top issuers include Reynolds Group, First Data and Clearwire Communications.

Verdict

For investors interested in squeezing the most yield possible out of their junk bonds, QLTC offers a nice upgrade in that department over funds such as HYG and JNK. It’s important to understand, of course, that the higher yield comes with much higher default risk as well.

59. JPMorgan Alerian MLP Index ETN (AMJ)

AMJ
12-Month Yield 5%
Dividend Rating B
Expense Ratio .85%
200-Day Volatility 11.9%

This is the biggest ETP currently available on the market that covers the lucrative MLP asset class. AMJ tracks a market capitalization weighted benchmark, which offers exposure to the performance of the energy MLP sector; as an ETN, investors are also exposed to the credit risk of the issuer as well unique tax consequences. The companies included in its portfolio operate in the energy infrastructure industry, a corner of the market known for delivering consistent dividend distributions.

Yield

This ETN is linked to a benchmark that has a current annual yield of about 4.9%, making it an attractive dividend-paying instrument with relatively low volatility.

Portfolio

AMJ is linked to a traditional, market cap-weighted benchmark, which results in a rather top-heavy portfolio; the top three holdings alone account for over one-third of total assets. As such, this popular ETN bears a higher degree of company-specific risk than some of its lesser known equal-weighted competitors in the space.

Verdict

For those who prefer investing in a product with a more established track record, AMJ is an appealing instrument with over $5.2 billion in assets under management; however, its market cap-weighted approach results in a top-heavy portfolio that may turn away some investors.

60. Alerian MLP ETF (AMLP)

AMLP
12-Month Yield 6.1%
Dividend Rating A
Expense Ratio .85%
200-Day Volatility 7.6%

This ETF is one of several products that holds MLPs, an asset class that has become extremely popular in recent years thanks to its strong, steady cash payouts. While there’s certainly a lot to like about AMLP as a tool for boosting current returns without excessive risk, there’s also a need for investors to understand some nuances before diving in.

Yield

AMLP offers a pretty hefty return, paying out in the neighborhood of 6% annually to investors. And that significant payout comes with relatively low volatility, especially compared to many of the other asset classes that offer meaningful yields in the current environment.

It’s important for investors to understand the potential drawbacks (and advantages) to accessing MLPs through the ETF wrapper. Thanks to some nuances in the tax code, AMLP will accrue a deferred income tax liability in certain environments that can eat into returns relative to the underlying index. According to the fund fact sheet, this liability can equal about 4% annually–a significant chunk of change to any investor.

Portfolio

AMLP holds about 25 MLPs, including companies engaged in petroleum transport and natural gas storage. Though the largest names make up close to 9% individually, it’s a relatively well balanced portfolio.

Verdict

AMLP can be a great option for some investors interested in accessing MLPs for their portfolio. But for others, the ETF structure may be less than optimal and significantly erode returns over the long haul. If you’re considering MLPs, it’s best to do your homework and consult with a professional; some will be better served by ETNs or owning individual securities.

61. ETRACS Alerian MLP Index ETN (AMU)

AMU
12-Month Yield 5.4%
Dividend Rating N/A
Expense Ratio .80%
200-Day Volatility %

This ETN is one of two offering exposure to the Alerian MLP Index. While it’s not nearly as popular as AMJ, it might be more appealing to certain investors since it avoids the uncertainty associated with a cap on new creations.

Yield

AMU offers an annual distribution yield of more than 5%, putting it roughly in line with other MLP ETPs profiled here.

Portfolio

The index to which AMU is linked is exactly the same as AMJ; top holdings include Enterprise Products Partners (15%) and Kinder Morgan (9%).

Verdict

For investors who are interested in broad-based MLP exposure in the ETN wrapper, AMU can be a good choice. This note is probably a better choice than AMJ at this point thanks to the lack of a cap on new creations; picking this lesser-known product can help you control some unpredictable risk factors.

62. North American Energy Infrastructure Fund (EMLP)

DVYE
12-Month Yield 5%
Dividend Rating B-
Expense Ratio .49%
200-Day Volatility 17.4%

This ETF offers exposure to the North American energy industry, including MLPs, Canadian income trusts, pipeline companies and gas storage companies. EMLP is one of the few actively-managed funds on the list, which means it has a higher expense ratio–0.95%–than just about any other ETF listed here.

Yield

The yield on EMLP isn’t overwhelming, currently sitting at about 5%. That’s considerably lower than many ETPs that target MLPs exclusively.

Portfolio

EMLP is a mix of energy companies (about 60% of the portfolio) and utilities (about 40%). That design helps EMLP to avoid the potential tax complications that would be triggered if it held more than 25% of assets in MLPs; unlike the pure MLP ETFs on the market, this fund won’t accrue a tax liability when the underlying securities appreciate.

Verdict

EMLP might seem like a Frankenstein ETF that combines very different asset classes, but that is by design to avoid the adverse tax consequences that plague many of the MLP funds on this list. For those looking to make a play on the high-yielding energy and utility sectors, this fund is a very interesting option.

63. MLP ETF (MLPA)

MLPA
12-Month Yield 6.7%
Dividend Rating C
Expense Ratio .45%
200-Day Volatility 10.6%

This offering from Global X seeks to provide investors access to the lucrative world of MLP investing. While this fund is similar to other MLP ETFs on this list, it does come at the significantly lower price with its expense ratio at a mere 0.45%.

Yield

Currently, MLPA’s annual distribution yield comes in at 6.7%, making it one of the higher yielding exchange-traded product in its MLP ETFdb Category.

Portfolio

MLPA’s portfolio is comprised of 30 master limited partnerships (MLPs), the majority of which are involved in natural gas pipelines and petroleum transportation. In additon, the fund does offer small allocations to exploration and production, refining and distribution, and coal production MLPs.

Verdict

Although MLPA does not provide the highest cash flow to its investors, it is the cheapest of the funds that offer exposure to MLPs.

64. ETRACS ALerian Natural Gas MLP ETN (MLPG)

MLPG
12-Month Yield 6%
Dividend Rating A
Expense Ratio .85%
200-Day Volatility 15.7%

This ETN is one of several MLP products to make this list; it offers exposure to an asset class that offers consistent, significant payouts. MLPG is unique in that it holds a portfolio of partnerships that focus exclusively on the transfer and storage of natural gas; that may make this product appealing for those who believe that this fuel is in the beginning of a bull market and expect that transport and storage needs will jump in coming years.

It should be noted that MLPG is structured as an ETN, which can result in some unique tax consequences when accessing MLPs.

Yield

This ETN is linked to an index that has a current annual yield of 6%, making it one of the higher yielding non-leveraged ETPs out there. It’s also displayed relatively low volatility; because MLPs derive primarily fee-based revenues, these partnerships are relatively insensitive to changes in the spot price of natural gas.

Portfolio

Another unique attribute of MLPG is the nature of the underlying portfolio; this ETN is linked to an index that has equal weights in approximately 20 MLPs. That results in a portfolio that is well balanced; each name represents about 5% of total assets upon rebalancing. Moreover, there is a built in mechanism to take profits from the best performers and shift assets towards laggards–proponents of the equal weighting strategy might like this ETN as a tool for MLP exposure.

Verdict

For investors in search of yield with a bullish outlook on natural gas demand in North America and with a favorable view of equal weighting strategies, MLPG might be a great fit. There are plenty of options for MLP exposure, but there is also plenty about MLPG that makes it unique.

65. UBS E-TRACS Alerian MLP Infrastructure Index (MLPI)

MLPI
12-Month Yield 5%
Dividend Rating B-
Expense Ratio .85%
200-Day Volatility 11.7%

This ETN from UBS offers exposure to an index comprised of energy infrastructure MLPs, an asset class that has demonstrated the potential to deliver both steady and juicy yields. Because of its product structure, MLPI exposes investors to some unique tax nuances as well as the underlying credit risk of the issuer.

Yield

This ETN is linked to an index that has a current annual yield of about 4.9%, making it an attractive offering for income-hungry investors who also value the relatively low-volatility associated with these securities; these partnerships are relatively insensitive to changes in commodity spot prices.

Portfolio

Like many of the offerings in this space, MLPI is linked to a market capitalization weighted benchmark; its underlying portfolio consists of 25 MLPs, and the top five holdings alone account for close to half of total assets. The index that MLPI tracks is a midstream-focused subset of the Alerian MLP Index, a popular benchmark the well-known AMJ ETN links to [see our Energy Bull ETFdb Portfolio].

Verdict

MLPI is a solid instrument that can deliver an attractive, steady source of current income to all styles of investors. For those looking to steer clear of the pitfalls associated with market cap-weighted products, however, alternatives like MLPN and MLPG are worth a closer look.

66. ETRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN (MLPL)

MLPL
12-Month Yield 10.6%
Dividend Rating N/A
Expense Ratio .85%
200-Day Volatility 23.1%

This ETN from UBS is similar to the aforementioned BDCL; it amplifies exposure to an asset class known for providing hefty yields, resulting in one of the highest potential cash flow profiles available to investors. Of course the explicit leverage, which resets on a monthly basis, adds some additional risk to the equation. MLPL is vulnerable to big swings if MLPs fluctuate significantly, but the underlying asset class should be relatively stable.

Yield

The index to which MLPL is linked has an annual yield in the neighborhood of 5%. With the leverage strategy used by MLPL, that jumps to more than 10%, making MLPL one of the few products that has the potential to pay out a double-digit yield.

Portfolio

As an ETN, MLPL doesn’t actually have a portfolio; it is a debt instrument linked to an index consisting of Master Limited Partnerships.

Verdict

For investors looking to establish exposure to cash flow-generating MLPs and who willing to take on some risk, MLPL features an extremely attractive yield profile.

67. Credit Suisse 30 MLP Index ETN (MLPN)

MLPN
12-Month Yield 5.5%
Dividend Rating A-
Expense Ratio .85%
200-Day Volatility 16.7%

This MLP ETN from Credit Suisse offers the opportunity for investors to generate consistent, significant payouts. MLPN separates itself from the pack by employing an equally-weighted methodology along with a proprietary valuation method to rank securities for inclusion in its underlying index. It should be noted that because MLPN is structured as an ETN, investors are exposed to some unique tax consequences when accessing MLPs as well as the credit risk of the issuer.

Yield

This ETN is linked to an index that has a current annual yield of about 5.4%, making it one of the highest yielding non-leveraged MLPS ETPs out there. Furthermore, because MLPs derive primarily fee-based revenues, these partnerships are relatively insensitive to changes in the spot price of natural gas.

Portfolio

In addition to being equal-weighted, MLPNs underlying benchmark uses a formulaic ranking system that emphasizes the importance of cash flow and cash distribution metrics rather than market capitalization. Another unique feature of MLPNs portfolio is that it only tracks midstream MLPs, and does not hold any upstream or downstream MLPs, which may be more sensitive to the movements in fuel prices.

Verdict

MLPN offers a compelling strategy for those looking to access the MLP asset class but who are wary of following the traditional market cap-weighted, index approach.

68. UBS E-TRACS Wells Fargo MLP Index (MLPW)

MLPW
12-Month Yield 5%
Dividend Rating B+
Expense Ratio .85%
200-Day Volatility 16.4%

This ETN offers exposure to an asset class covered by several seemingly identical products; MLPW separates itself from the pack by featuring the deepest portfolio of holdings. It should also be noted that because of its product structure, this instrument exposes investors to some unique tax consequences in addition to the underlying credit risk of the issuer.

Yield

This ETN is linked to a benchmark that has a current annual yield of about 4.9%; because MLPs derive primarily fee-based revenues, these partnerships can deliver steady distributions to shareholders regardless of swings in energy spot prices.

Portfolio

MLPW follows a traditional market capitalization strategy to construct its portfolio. This ETN, however, separates itself from other competitors who also rely on this cap-weighted index approach by holding the deepest portfolio; MLPW is comprised of 71 individual securities.

Verdict

For investors who prefer to access the MLP asset class using a market cap-weighted approach, this ETN presents itself as a viable instrument for the job. However, those looking for a juicier yield or an equal-weighted portfolio should consider other offerings in this space.

69. Cushing MLP High Income Index ETN (MLPY)

MLPY
12-Month Yield 7.6%
Dividend Rating A+
Expense Ratio .85%
200-Day Volatility 13.6%

This offering from Morgan Stanley seeks to provide investors access to the lucrative world of MLP investing. Master Limited Partnerships (MLPs) are primarily companies that engage in certain businesses, including the transport of energy commodities such as crude oil and natural gas. And similar to BDCs, these entities are required to make quarterly distributions to partners, providing a steady stream of income.

Yield

MLPY’s quarterly distributions roughly amount to an annual yield of 7.6%, making it one of the higher yielding exchange-traded product in its MLP ETFdb Category.

Portfolio

As an ETN, MLPL doesn’t physically hold a portfolio, but the index that is tracks is designed to measure the performance of 30 publicly-traded energy and shipping MLPs.

Verdict

Although MLPY is not the cheapest of the funds that offer exposure to MLPs, it does provide a relatively higher cash flow to its investors.

70. Exchange Traded Concepts Yorkville High Income MLP ETF (YMLP)

YMLP
12-Month Yield 9.1%
Dividend Rating C+
Expense Ratio .82%
200-Day Volatility 12.3%

This offering tracks an index comprised of MLPs spanning a wide variety of industries in addition to energy, which is the corner of the market that most other ETPs in this space focus on. As an ETF, this fund may appeal to investors who are eager to access this lucrative asset class but are wary of the inherent credit risk and tax nuances associated with ETNs [Download 101 ETF Lessons Every Financial Advisor Should Learn].

Yield

This ETN is linked to an index that has a current annual yield of about 9%, making it quite the irresistible offering for income-hungry investors.

Portfolio

The most noteworthy feature of YMLP’s underlying portfolio is its diversity; this ETF is made up of 26 securities and, in addition to covering the energy space, this fund also includes companies involved in the production and marketing of natural resources like timber, fertilizers, coal and other minerals. One drawback, however, is the fund’s top-heavy portfolio; the top-ten holdings alone account for half of total assets.

Verdict

For investors looking to round out their MLP exposure beyond the energy sector, YMLP is an attractive ETF that offers great diversity from an industry breakdown perspective.

Preferred Stock

71. Canada Preferred ETF (CNPF)

CNPF
12-Month Yield 3.6%
Dividend Rating B+
Expense Ratio .58%
200-Day Volatility 10.4%

This one-of-a-kind ETF allows investors to gain exposure to preferred stocks from Canadian issues that trade on the Toronto Stock Exchange. Preferred shares are selected based on a specific criteria relating to size, liquidity, issuer rating, maturity and other requirements. Investments in preferred shares are generally considered to be less risky than traditional equities and can provide more meaningful yields.

Yield

This ETF boasts an annual dividend yield of 3.60%, making it a nice option for investors looking to gain access to the Canadian market, but want to avoid traditional equities.

Portfolio

CNPF’s underlying portfolio consists of roughly 50 preferred stocks from Canadian issuers that trade on the Toronto Stock Exchange. The lion’s share of preferred stocks come from financial companies, but meaningful allocations are given to energy and telecommunications companies.

Verdict

CNPF is an attractive option for those seeking to boost yields in a portfolio, but who want less risky forms of equity exposure. In addition, the fund’s focus on Canadian firms makes it a great diversifying agent.

72. iShares S&P International Preferred Stock Index Fund (IPFF)

IPFF
12-Month Yield 3.8%
Dividend Rating C+
Expense Ratio .55%
200-Day Volatility 8%

This ETF taps into the universe of preferred securities, an asset class capable of delivering capital appreciation and current income without incurring handfuls of volatility. IPFF is the international counterpart to the more well-known PFF and, as such, can offer valuable geographic diversification benefits.

Yield

This ETF currently maintains an annual dividend yield of 3.8%, offering an attractive option for investors looking to diversify into preferred stocks beyond the domestic market.

Portfolio

IPFF hold approximately 70 individual securities and is fairly well-balanced; this ETF allocates just under one-third of total assets to the top ten holdings, giving it greater balance than the majority of broad-based offerings covering this space. However, IPFF also features the same pitfall as most other preferred ETPs; it has very heavy exposure to the financials sector, dedicating over three-quarters of total assets to securities from this corner of the market alone. From a country perspective, IPFF entirely excludes U.S. exposure; instead, it makes a significant allocation to Canadian securities. Minimal exposure to the United Kingdom, New Zealand and Sweden is also included.

Verdict

Although IPFF features a definitive tilt towards Canadian financials, this ETF makes for a compelling tool for anyone looking to diversify into the preferred asset class outside of the United States.

73. iShares S&P US Preferred Stock Fund (PFF)

PFF
12-Month Yield 5.8%
Dividend Rating A-
Expense Ratio .48%
200-Day Volatility 3.7%

This ETF offers exposure to a selected group of preferred securities from U.S. issuers. This particular segment of the market is known for delivering more meaningful yields along with lower expected volatility than traditional equities.

Yield

This ETF currently boasts an annual dividend yield of 5.75%, offering a creative way for investors to beef up their current income stream without taking on significant risk.

Portfolio

PFF is comprised of about 250 individual securities; the top ten holdings account for less than a fifth of total assets, giving this portfolio a well-balanced composition profile. From a sector breakdown perspective, PFF is extremely concentrated in the financials space. This ETF allocates over three-quarters of total assets to preferred securities from issuers in the financials sector, which potentially increases the sector-specific risk associated with this product. From a credit quality perspective, the majority of the underlying holdings are rated BBB or higher.

Verdict

This ETF makes it easy to tap into the domestic universe of preferred securities, offering a generous yield without handfuls of volatility. Although its underlying portfolio is deep and well balanced, investors should note PFF’s heavy bias towards the financials sector.

74. Van Eck Market Vectors Preferred Securities ex Financials ETF (PFXF)

PFXF
12-Month Yield 5.5%
Dividend Rating N/A
Expense Ratio .40%
200-Day Volatility %

This fund looks to provide exposure to the preferred stock asset class with a twist; PFXF is the only offering in this space that entirely avoids securities from the financials sector [see our Financials Free ETFdb Portfolio].

Yield

This ETF recently featured an annual dividend yield of 5.5%, offering a juicy source of income while at the same time avoiding exposure to the infamous financials sector.

Portfolio

This ETF holds approximately 70 individual non-convertible preferred securities listed on U.S. exchanges. With no financials holdings, PFXF rounds out exposure to other high-yielding sectors; top allocations by sector include REITs and electric utilities. This ETF also includes substantial exposure to auto manufacturers, telecommunications and insurance companies. From a credit quality perspective, more than half of the securities are rates BB or higher.

Verdict

This ETF is an excellent choice for investors looking to tap into the preferred stock asset class but who are wary of a bias towards the financials sector, which plagues other offerings in this space.

75. PowerShares Financial Preferred Portfolio (PGF)

PGF
12-Month Yield 6.5%
Dividend Rating A+
Expense Ratio .60%
200-Day Volatility 3.9%

This ETF is one of several on this list that offers exposure to preferred stock, a hybrid asset class that exhibits characteristics of both stock and bonds. Another feature of preferred stock is a generally attractive yield profile; the steady, meaningful distribution payments have made preferred stock a preferred source of returns for all types of investors.

Yield

PGF has a yield in the neighborhood of 6.5%, a payout that is more attractive than many junk bonds. Yet the PGF portfolio consists of larger, generally more stable issuers–making it an attractive option for many investors.

Portfolio

As the name suggests, the PGF portfolio consists entirely of preferred stock from financial issuers. That isn’t all that dissimilar from other preferred stock ETFs, which tend to feature a heavy helping of financial companies in the portfolio (those looking to avoid financials may like PFXF). Many of the top allocations are household names; the PGF portfolio includes stock of companies like HSBC, Credit Suisse and Bank of America.

Verdict

PGF offers a way to capture hefty yields through a portfolio of preferred stock; though there is some risk of big losses in extreme environments, this fund should generally be pretty stable. That makes it an attractive option for those looking to avoid traditional equity exposure while also steering clear of junk bonds.

76. Preferred Portfolio (PGX)

PGX
12-Month Yield 6.4%
Dividend Rating A
Expense Ratio .50%
200-Day Volatility 3.8%

This ETF belongs to the same family as PGF; it offers exposure to preferred stock, but goes beyond the financial sector to achieve this objective. It’s worth noting, however, that there is some pretty substantial overlap; the PGX portfolio features a heavy tilt towards banks and insurance companies.

Yield

The yield profile of PGX aligns very closely with that of PGF; these two funds feature a bit of overlap, and generally similar risk and return opportunities. With an effective yield of about 6.5%, the distributions from PGX are both substantial and relatively stable.

Portfolio

Though PGX is technically not limited to financials its portfolio includes a healthy allocation to this sector. Financial preferred stocks make up more than 90% of the portfolio; there is only a smattering of weightings afforded to utilities and telecoms. So while this option offers a bit of diversification on that front, the financial bias is significant nevertheless.

Verdict

PGX is one of several preferred stock ETFs available to investors; when selecting one that’s right for you, factors to consider include yield, expenses and allocation to the financial sector.

77. SPDR Wells Fargo Preferred Stock ETF (PSK)

PSK
12-Month Yield 6.3%
Dividend Rating A
Expense Ratio .45%
200-Day Volatility 3.8%

PSK is another, newer preferred stock ETF that represents an opportunity to access a reasonably attractive payout with limited risk. While PSK has a lot in common with many of the competing products, there is quite a bit to like about this one, including a low expense ratio, deep portfolio and even a bit of sector diversification.

Yield

This ETF features a current yield of about 6.5%, putting it in close proximity to similar funds such as PGX.

Portfolio

The PSK portfolio consists of about 140 individual securities, making it quite a bit deeper than PGX. Moreover, no one security accounts for more than about 2.3% of assets, delivering a balanced portfolio that some other preferred stock ETFs can’t match.

From a sector perspective, PSK maintains a heavy tilt towards financials at about 80% of the portfolio (the remainder is spread across utilities, telecoms and some consumer companies). That’s a big tilt, but far less of an allocation to banks than some other preferred stock ETFs.

Verdict

For investors interested in preferred stock, PSK might be one of the best ETF options out there; it’s relatively cost efficient, offers a balanced portfolio and features a very attractive yield profile with limited risk.

78. SuperIncome Preferred ETF (SPFF)

SPFF
12-Month Yield 9.4%
Dividend Rating C
Expense Ratio .58%
200-Day Volatility %

This ETF offers exposure to the highest-yielding preferred securities in the United States and Canada. SPFF’s underlying holdings must meet certain criteria for inclusion relating to their size, liquidity, issuer concentration and credit rating.

Yield

SPFF’s annual distribution yield comes in upwards of 9%, a meaningful return that can certainly tame your portfolio’s overall volatility.

Portfolio

SPFF invests in roughly 47 securities, all of which are currently U.S.-listed preferred shares. The fund features a heavy allocation to the financials sector; SPFF holds nearly three-quarters of total assets in financial preferred securities, with insurance and real estate holdings making up the next two largest allocations.

Verdict

SPFF is one of several preferred stock ETFs available to investors; when selecting one that’s right for you, factors to consider include yield, expenses and allocation to the financial sector.

REITs

79. iShares FTSE NAREIT Industrial/Office Capped Index Fund (FNIO)

FNIO
12-Month Yield 3.1%
Dividend Rating B+
Expense Ratio .48%
200-Day Volatility 15.3%

This ETF provides exposure to U.S. publicly-traded real estate investment trusts with a twist; unlike most of the offerings in this space, which are broad-based, FNIO specifically targets REITs operating in the industrial and office sectors of the U.S. real estate market.

Yield

This ETF currently maintains an annual yield of 3.01%, serving up an attractive dividend source for those looking to target a specific segment of the U.S. REIT asset class.

Portfolio

Similar to its close relative REZ, this ETF also features a top-heavy portfolio comprised of about 30 stocks. From a market capitalization perspective, mid- and small-cap size firms outnumber their large cap counterparts, although the portfolio is certainly well-balanced overall. When it comes to sector breakdown, this fund allocates close to two-thirds of total assets to office REITs, with industrial ones accounting for the next biggest chunk of exposure.

Verdict

While it doesn’t boast the “juiciest” yield in its category, FNIO does offer a compelling strategy for those looking to focus in on the industrial and office real estate sectors of the U.S. equity market.

80. S&P REITs Index Fund (FRI)

FRI
12-Month Yield 2.4%
Dividend Rating C+
Expense Ratio .50%
200-Day Volatility 10.3%

This ETF offers exposure to the investable U.S. real estate investment trust market, an asset class that has historically been embraced because of its ability to deliver excess returns during bull markets and low correlation with traditional stock and bond investments. Given its focus, FRI has the potential to generate considerable cash flows while also exposing investors to wide range of different types of REITs.

Yield

With a 12-month yield of only 2.36%, FRI is one of the lowest-yielding real estate options out there.

Portfolio

REM’s portfolio is headlined by Simon Property Group, which makes up about 11% of assets. In total, there are about 120 different holdings, though the top ten represent almost half of total assets.

Verdict

While this ETF has one of the deepest portfolios in the real estate space, its relatively low dividend yield may deter some investors. But because of its higher level of diversification, FRI exhibits significantly lower volatility than other ETFs in its category, making it a more appealing option for less risk-tolerant investors.

81. iShares FTSE NAREIT Real Estate 50 Index Fund (FTY)

FTY
12-Month Yield 3.7%
Dividend Rating B+
Expense Ratio .48%
200-Day Volatility 10.3%

This ETF tracks the performance of the real estate sector in the U.S. equity market, placing an emphasis on large cap companies. Because REITs are required to pay out a substantial portion of their taxable income as dividends, this asset class has the potential to make some big distributions along with lucrative capital gains.

Yield

This ETF boasts an annual dividend yield of 3.58%, making it an appealing dividend-paying instrument for conservative investors looking to investing in domestic, large cap REITs.

Portfolio

FTY’s portfolio is made up of roughly 50 individual holdings, with nearly one-half of total assets going to the ten holdings alone. While the majority of the underlying holdings are large cap securities, this ETF also makes a significant allocation to mid cap stocks, giving FTY a fairly balanced risk/return profile. Geographically, this ETF is focused only on the United States, however, its industry breakdown sheds light on just how well-diversified its portfolio really is; FTY makes allocations to all sorts of REITs, including those focused on apartments, healthcare facilities, regional malls and offices.

Verdict

While FTY does not boast quite as high of a dividend yield as other REIT offerings, it does feature a well-diversified portfolio focusing on some of the largest, and most stable, REITs in the United States. For those looking to establish indirect exposure to the real estate market while beefing up their current income, FTY is a compelling option.

82. iShares Cohen & Steers Realty Major (ICF)

ICF
12-Month Yield 3%
Dividend Rating B-
Expense Ratio .35%
200-Day Volatility 10.4%

This ETF targets real estate investment trusts, an asset class that is capable of delivering impressive yields yet is often overlooked as a result of the recent housing market collapse. ICF is linked to the Cohen & Steers Realty Majors Index, which bears a very close resemblance to competing broad-based ETFs targeting this corner of the market.

Yield

This ETF currently maintains an annual dividend yield of 2.97%, offering an attractive distribution for those seeking broad-based REIT exposure.

Portfolio

ICF ‘s underlying portfolio is generally the same as other market cap-weighted ETFs covering this space; this fund is rather shallow and top-heavy, seeing as the top-ten of its 30 total holdings account for over half of the entire portfolio. Investors will spot a number of well-known REIT juggernauts in ICF that are seen across other portfolios from this category, including Simon Property Group, Public Storage and HCP. This fund is entirely made up of U.S. securities with a definitive tilt towards large cap size REITs.

Verdict

ICF can serve as a broad-based instrument for accessing the domestic REIT space, however, a number of competitors in the real estate category offer virtually identical exposure for a fraction of the cost.

83. iShares FTSE EPRA/NAREIT North America Index Fund (IFNA)

IFNA
12-Month Yield 3%
Dividend Rating B-
Expense Ratio .48%
200-Day Volatility 15%

This iShares ETF offers exposure to an asset class known for delivering attractive yields and stellar returns during times of economic prosperity; IFNA tracks the performance of companies engaged in the ownership and development of the North American real estate market.

Yield

This ETF features an annual yield of 2.95%, offering a dividend distribution that falls in line with other broad-based funds covering the real estate space.

Portfolio

IFNA offer better diversity from a portfolio composition perspective than many competitors in this category; this ETF is made up of over 130 securities and allocates less than half of total assets to the top ten holdings. This ETF’s market-cap-weighted approach, however, results in a portfolio that bears a very close resemblance to other broad-based real estate offerings; top holdings in IFNA include Simon Property Group, HCP, Ventas and Public Storage. Digging deeper into the sector breakdown, we see that industrial/office and retail REITs combined make up half of the portfolio, while specialty, residential and hotel REITs receive smaller allocations.

Verdict

IFNA is a viable instrument for those in search of broad-based REIT exposure; however, this ETF faces some stiff competition from generally similar offerings in the space that boast more attractive yields and cheaper price tags.

84. iShares Dow Jones U.S. Real Estate Index Fund (IYR)

IYR
12-Month Yield 3.5%
Dividend Rating B+
Expense Ratio .48%
200-Day Volatility 9.7%

This iShares ETF is the second most popular option when it comes to accessing the real estate market, trailing only Vanguard’s VNQ when it comes to total assets under management. IYR looks to track the performance of the U.S. real estate industry through a basket of well-known REITs.

Yield

This ETF boasts an annual dividend yield of 3.5%, making it a solid choice for those looking to generate extra income from the real estate sector, although it is certainly not the most attractive one.

Portfolio

IYR’s underlying portfolio tracks approximately 90 individual securities in total, allocating less than half of its total assets to the top ten holdings; as such, this ETF features a similar, slightly top-heavy portfolio composition to the other offerings, which cover the real estate space. Investors should also note that this ETF is split fairly equally between large and mid cap size companies. In terms of sub-industry diversification, industrial and office REITs account for the greatest percentage of total assets, while retail and specialty REITs account for the next largest chunks.

Verdict

As the second-biggest real estate ETF on the market, IYR offers a compelling strategy for those looking to beef up current income through REIT exposure. On the other hand, VNQ offers generally similar exposure for a fraction of the cost without sacrificing any liquidity.

85. KBW Premium Yield Equity REIT Portfolio (KBWY)

KBWY
12-Month Yield 5.1%
Dividend Rating A
Expense Ratio .35%
200-Day Volatility 10.6%

This ETF is one of several that offers exposure to real estate, an asset class that has historically been known as a source of significant distributions. Because REITs are eligible for certain tax advantages if they pay out a substantial portion of earnings to shareholders, companies that invest in real estate are likely to offer high yields. KBWY is unique in that it is linked to an index that is yield-weighted, meaning it gives the largest allocations to the individual REITs with the highest dividend yields. That results in a relatively targeted portfolio of high-yielding real estate stocks that may feature considerable risk but can also deliver attractive returns.

Yield

This ETF has a distribution yield in the neighborhood of 5%, which represents a significantly greater return than many ETFs that hold REITs. Compare this ETF to the popular VNQ , which has a dividend yield of only about 3.4% (and KBY has recently been exhibiting even lower volatility).

Portfolio

As mentioned above, the unique aspect of KBWY is the association with a dividend-yield-weighted index, which results in higher weightings for the REITs with the highest yield. It’s also worth noting that KBWY is somewhat narrow; it holds only a few dozen REITs at any time.

Moreover, the portfolio consists primarily of small cap companies; that feature is a big reason behind the impressive yield, but may also increase the volatility of this fund in certain environments.

Verdict

For investors with a bullish view on the real estate market and an interest in optimizing their current yield, there is a lot to like about KBWY. This ETF offers a yield that is materially greater than many REIT ETFs, though with a narrow portfolio that is focused on smaller stocks (which will generally translate to higher risk in both directions).

86. Market Vectors Mortgage REIT Income ETF (MORT)

MORT
12-Month Yield 10.1%
Dividend Rating A+
Expense Ratio .40%
200-Day Volatility 15%

This Market Vectors ETF offers exposure that is somewhat similar to the aforementioned REM; it targets REITs that generate earnings and cash flows by issuing mortgages or acquiring loans. Because REITs are required to pay out a substantial portion of their taxable income as dividends, this asset class has the potential to make some big distributions. Throw in the ability to use some leverage in raising capital, and the result is a yield that pushes double digits.

Yield

MORT has a distribution yield of about 10%, making it one of the highest-yielding non-leveraged ETFs out there.

Portfolio

Similar to REM, this ETF has a big portion of its assets tied up in two names: Annaly Capital Management and American Capital Agency combine to make up about a third of the total portfolio. What’s interesting about mortgage REITs–at least in the current environment–is the relatively low volatility they exhibit. One might expect a tremendous amount of risk given the huge yields, but MORT has actually been remarkably stable recently. Of course, there is considerable interest rate risk in these securities; if rates begin to rise, volatility could jump.

Verdict

If you’re in the market for a mortgage REIT ETF, we like MORT in part because of its lower expense ratio (0.40%) compared to the other option on the table (REM charges 0.48%). Again, it probably doesn’t makes sense to have a huge portion of your portfolio dedicated to MORT, but given the huge yield and relatively low volatility, a small strategic allocation can enhance your overall yield profile.

87. PowerShares Active U.S. Real Estate Fund (PSR)

PSR
12-Month Yield 1.5%
Dividend Rating C+
Expense Ratio .80%
200-Day Volatility 12.6%

This ETF looks to offer exposure to the real estate sector with a twist; instead of relying on a traditional, passive, market capitalization-weighted strategy, PSR undertakes an active management approach to accessing this corner of the market [sign up for a free trial to Dividend.com Premium for more dividend investing ideas].

Yield

This ETF boasts an annual dividend yield of 1.48%, making it less than ideal for those looking to seriously beef up their portfolio’s current income.

Portfolio

Because PSR is structured as an actively-managed ETF, its underlying portfolio is not linked to a benchmark like other competitors in the space. The fund’s investment objective is high total return through growth of capital and current income; PSR looks to accomplish this by selecting and holding a portfolio of approximately 50 U.S. REITs. Like other ETFs in this space, PSR’s portfolio is a bit top-heavy as the top ten individual holdings account for half of the entire portfolio. From a market capitalization perspective, this ETF is well-balanced among large and mid cap REITs.

Verdict

For investors looking to steer clear of market cap-weighted products, this ETF can be a useful instrument. However, for those who value dividends and expenses more, PSR is quite lacking as it charges a high price tag for a fairly insignificant distribution yield.

88. FTSE NAREIT Mortgage REITs Index Fund (REM)

REM
12-Month Yield 12.1%
Dividend Rating A
Expense Ratio .48%
200-Day Volatility 15.2%

This ETF is one of two products currently available to U.S. investors that holds mortgage REITs, companies that make their money through investing in and issuing mortgage-backed securities. Given this objective, REM has the potential to generate considerable cash flows while also exposing investors to a bit of risk.

Yield

With a 12-month yield of more than 10%, this ETF is one of the highest-yielding options out there. While REM certainly brings a bit of risk, the return potential is difficult to find elsewhere. Perhaps somewhat surprisingly, this ETF isn’t very volatile; the beta is well below 1.0, and the realized 200-day volatility is far lower than that of SPY.

Portfolio

REM’s portfolio is headlined by Annaly Capital Management, which makes up about 20% of assets. In total, there are about 30 different holdings, though the top ten represent three-quarters of total assets.

Verdict

This ETF is riskier than many plain vanilla holdings, but the volatility exhibited historically isn’t off the charts. For investors looking to generate substantial cash flows, REM’s yield is tough to beat.

89. iShares FTSE NAREIT Residential Index Fund (REZ)

REZ
12-Month Yield 3.1%
Dividend Rating B
Expense Ratio .48%
200-Day Volatility 10.5%

This ETF provides exposure to U.S. publicly-traded real estate investment trusts, an asset class known for offering attractive yields. REZ separates itself from broad-based real estate funds by targeting a particular corner of the U.S. market; this ETF focuses on companies operating in the residential real estate, healthcare and self storage sectors.

Yield

This ETF boasts an annual dividend yield of 3.09%, offering an attractive source of income for those looking to specifically target the residential REIT sector.

Portfolio

REZ holds approximately 30 securities and allocates nearly two-thirds of its total assets to the top ten holdings alone, resulting in a top-heavy portfolio. The underlying portfolio is fairly equally split between large and mid cap size securities, offering up a well-balanced risk-return profile. Digging deeper, we see that from an industry perspective REZ features a heavy tilt towards apartment and healthcare REITs, while firms operating self storage units receive a much smaller allocation.

Verdict

While its yield is not as high as some of its competitors’ rates in its category, REZ offers a compelling strategy for those looking to focus in on the residential corner of the U.S. REIT market.

90. IQ US Real Estate Small Cap ETF (ROOF)

ROOF
12-Month Yield 5.1%
Dividend Rating A
Expense Ratio .69%
200-Day Volatility 12.1%

This ETF is one of many funds that offers exposure to real estate, an asset class that has been considered one of the most cringe-worthy investments since the financial crash of 2008. Despite its rather abysmal history, investments in this sector, particularly in small cap companies, can provide lucrative growth opportunities as well as potentially high yields.

Yield

This ETF has a distribution yield in the neighborhood of 5.04%, one of the highest payouts among real estate ETFs.

Portfolio

Considering ROOF’s rather narrow focus, it is perhaps not surprising to see that the fund holds a portfolio of only about 40 individual securities, with about 40% of the assets allocated to the top ten holdings. All of the real estate companies included in ROOF’s underlying index are U.S.-based, and the majority are small cap firms, but a significant allocation is given towards micro-cap stocks.

Verdict

For investors who are bullish on the real estate market and have a relatively high level of risk tolerance, this ETF is an intriguing option. Its small cap twist allows for potential growth opportunities, while at the same time maintaining a meaningful dividend yield.

91. FTSE NAREIT Retail Index Fund (RTL)

RTL
12-Month Yield 2.1%
Dividend Rating C
Expense Ratio .48%
200-Day Volatility 10.9%

Similar to REM, this ETF offers exposure to the U.S. real estate market, but does so with a focus on the retail segment. The fund primarily invests in companies that own and operate shopping malls and other retail centers in the United States.

Yield

RTL currently maintains an annual distribution yield around 2.04%. While this yield may be lower than other ETFs in the space, it is important to remember that the retail real estate sector was hit hardest in the crash of 2008. The segment has picked up steam as of late, however, as RTL has gained nearly 33% over the last year.

Portfolio

RTL’s portfolio consists of roughly 32 stocks of companies that either own or operate shopping malls or retail centers in the United States. About half of the individual securities are mid cap firms, while large caps account for a third of total assets.

Verdict

For investors looking to invest in retail real estate, RTL is the only fund available on the market that specifically targets this niche segment. Although its yield is significantly lower than other real estate ETFs, it does have potential to make a turn around once the retail segment picks up steam.

92. State Street SPDR DJ Wilshire REIT ETF (RWR)

RWR
12-Month Yield 3.1%
Dividend Rating B
Expense Ratio .25%
200-Day Volatility 10.3

This ETF offers broad-based exposure to the U.S. REIT market, an asset class that has been overlooked by many following the recent housing market collapse. RWR taps into a corner of the market that is known for delivering attractive dividend yields and, as such, warrants a closer look from any income-oriented investor.

Yield

This ETF currently maintains an annual dividend yield of 3.07%, presenting itself as a viable income-generating tool within the real estate space.

Portfolio

RWR is made up of approximately 80 stocks with roughly half of total assets going to the top ten holdings. Given its market-cap-weighted approach, RWR makes major allocations to well-known REITs like Simon Property Group, Public Storage and HCP. This ETF is focused entirely on U.S. holdings and features a well-balanced portfolio from a sector breakdown perspective; RWR includes fairly equal allocations to REITs managing apartments, regional malls, offices and healthcare facilities, while smaller allocations are allotted to strip centers, industrial properties and hotels.

Verdict

This ETF can make for a viable instrument for anyone seeking out broad-based exposure to the domestic REIT market, however, several alternatives from the real estate category offer “juicier” yields, while others boast a cheaper price tag.

93. U.S. REITs ETF (SCHH)

SCHH
12-Month Yield 1.9%
Dividend Rating C
Expense Ratio .07%
200-Day Volatility 10.3%

Yet another REIT ETF, this offering from Charles Schwab stands apart from its competition by holding the title of cheapest ETF in its category. With its expense ratio at a mere 0.07%, SCHH is perhaps the most economical option for those looking to add commercial real estate exposure to their portfolios.

Yield

SCHH currently maintains an annual dividend yield of only 1.89%, which unfortunately puts the fund in second-to-last place in its category in terms of dividend yields.

Portfolio

SCHH’s portfolio is most similar to FRI’s, with Simon Property Group also accounting for a little over 11% of total assets. SCHH does not, however, offer the same depth of holdings as FRI does; SCHH portfolio is comprised of 84 individual holdings, compared to FRI’s 120.

Verdict

For those cost-conscious investors, SCHH is an appealing option as it currently boasts the cheapest expense ratio in its category. Its relatively lower dividend yield, however, may turn some investors away.

94. Vanguard REIT ETF (VNQ)

VNQ
12-Month Yield 3.4%
Dividend Rating A-
Expense Ratio .10%
200-Day Volatility 10.1%

This behemoth of a fund is the largest ETF covering the real estate space, boasting nearly $15 billion in assets under management. VNQ tracks a benchmark of U.S. property trusts that covers about two-thirds of the value of the entire U.S. REIT market.

Yield

This ETF boasts an annual dividend yield of 3.35%, making it a viable tool for those looking to enhance their current income through broad-based REIT exposure.

Portfolio

VNQ tracks about 120 securities in total, allocating slightly less than half of total assets to the top ten holdings alone. When it comes to popularity, this ETF takes home the cake; as the biggest real estate fund, VNQ attracts investors and traders alike thanks to its superb liquidity and cost-efficiency. From a market capitalization perspective, this fund is split fairly equally between large and mid size companies. In terms of sub-industry diversification, VNQ tilts exposure towards specialized and retail REITs, while industrial ones account for the smallest percentage of total assets.

Verdict

Those who prefer to invest in products with a proven track record will have a hard time passing up VNQ as this is the oldest and most popular ETF targeting the real estate sector. However, those in search of juicier yields within this corner of the market may wish to look to mortgage REIT-focused alternatives like MORT and REM.

95. Guggenheim Wilshire REIT ETF (WREI)

WREI
12-Month Yield 3.1%
Dividend Rating A-
Expense Ratio .32%
200-Day Volatility 13.3%

This fund offers broad-based exposure to U.S. publicly-traded real estate investment trusts, an asset class known for delivering attractive yields. This corner of the market has demonstrated the potential to deliver excess returns during periods of economic prosperity, while also offering a stream of dividends to fall back on when times get tough.

Yield

This ETF boasts an annual dividend yield of 3.03%, making it one of the “safer” REIT offerings compared to higher-yielding alternatives like MORT.

Portfolio

WREI is made up of approximately 100 stocks, with nearly half of total assets going to the top ten holdings alone. Digging deeper into its portfolio, investors will notice that WREI is well-balanced among companies of all sizes; this ETF is split fairly equally between small, mid and large cap stocks. Top holdings include well-known domestic REITs like Simon Property Group, Public Storage and Vornado Realty Trust.

Verdict

WREI can serve as an appealing option for those looking to target the U.S. REIT sector, however, there may be more attractive alternatives for those seeking out better diversity or a juicier dividend yield; for example, MORT focuses on mortgage REITs and costs a bit more than WREI, although its steep dividend yield is well worth the few extra basis points.

Multi-Asset

96. SPDR Income Allocation ETF (INKM)

INKM
12-Month Yield 4.6%
Dividend Rating B
Expense Ratio .70%
200-Day Volatility 6.6%

This multi-asset ETF offers exposure to a number of high-yielding asset classes, representing a way for yield-hungry investors to cast a wide net. This approach can also help to smooth out volatility thanks to lower correlations across these asset classes.

Yield

This ETF has a 30-day SEC yield of about 4.7%, considerably higher than most fixed income of dividend paying stocks offer.

Portfolio

This ETF includes dividend-paying stocks (both domestic and international), long-term corporate bonds, junk bonds, preferred stock, REITs, Build America Bonds and telecom stocks (among others; see the complete holdings).

Verdict

For a broad-based approach to high-yielding asset classes, INKM is a pretty good option. With a yield close to 5% and relatively low volatility, this ETF can be a nice core of portfolios for yield-hungry investors.

97. Morningstar Multi-Asset Income Index Fund (IYLD)

IYLD
12-Month Yield 4.7%
Dividend Rating B-
Expense Ratio .60%
200-Day Volatility 3.9%

IYLD is another multi-asset ETF that targets a range of high-yielding securities. For investors looking to gain access to a core strategy, this could be a useful option.

Yield

This ETF boasts an annual distribution yield of 4.7%, presenting itself as a diversified vehicle capable of generating meaningful income.

Portfolio

This ETF holds a variety of other ETFs, including funds targeting high-yield corporates, REITs, emerging market debt, preferred stock, infrastructure stocks and long-term Treasuries.

Verdict

This ETF includes exposure to more than a dozen different asset classes and hundreds of individual securities, combining to form a significant dividend yield.

98. ETRACS 2x Leveraged Long Business Development Company ETN (BDCL)

BDCL
12-Month Yield 13.7%
Dividend Rating N/A
Expense Ratio .85%
200-Day Volatility 29.4%

This exchange-traded note (ETN) offers exposure to Business Development Companies (BDCs), which hold positions in various securities of private corporations. BDCs generally pay out elevated distribution yields on their own, and the leverage employed by BDCL further enhances the distribution stream (while, of course, increasing the risk as well).

Yield

This ETN has the highest yield potential of any exchange-traded product, paying out close to 14% annually. Part of this hefty yield comes from the nature of the underlying asset class, while a substantial portion is due to the leverage employed. That obviously adds significant risk to BDCL, though it should be noted that the leverage resets on a monthly basis as opposed to daily.

Portfolio

The BDCL portfolio consists of about 28 different BDCs, with a trio of companies making up about 10% each.

Verdict

This ETN has plenty of return potential, but investors must be careful not to overlook the risk inherent in any leveraged product. BDCL has been one of the best performers over the past year, rewarding investors who sought out the huge yield opportunity.

99. Wells Fargo Business Development ETN (BDCS)

BDCS
12-Month Yield 7.2%
Dividend Rating A
Expense Ratio .85%
200-Day Volatility 15.9%

This ETN provides investors with broad exposure to a number of U.S.-listed business development companies. This particular segment of the market is known for paying out significantly higher yields, since BDCs have unique tax treatments that require them to pay out a hefty chunk of profits and capital gains as taxable dividends.

Yield

BDCS boasts one of the highest yield potentials of any exchange-traded product, ranking second in the Financials Equities ETFdb Category with its annual dividend yield at over 7%.

Portfolio

The BDCS portfolio consists of about 28 different BDCs, with the top three companies accounting for roughly one-third of the fund’s total assets.

Verdict

This ETN is essentially the non-leveraged version of BDCL (highlighted above), making it a potentially safer and less volatile play on the already risky BDC space. And although BDCS is a relatively new product, it has already rewarded investors handsomely over the past year.

Convertible Bonds

100. PowerShares Convertible Securities Portfolio (CVRT)

CVRT
12-Month Yield 3%
Dividend Rating B
Expense Ratio .36%
200-Day Volatility 19.2%

This offering from PowerShares targets a corner of the preferred equity market that exhibits great similarities with fixed income securities. CVRT provides exposure to a portfolio of convertible bonds, which offer the potential to generate capital gains similar to stock investments, although the yield offered is certainly not the “juiciest” distribution that’s available.

Yield

This ETF currently offers an annual dividend yield of 2.97%, serving as a viable income tool for those wary of undertaking significant risks.

Portfolio

CVRT is comprised of approximately 60 convertible U.S. dollar-denominated bonds, featuring exposure to both investment grade and non-investment grade securities. The underlying index constituents are market-cap weighted and the portfolio is rebalanced daily. From a credit quality perspective, nearly half of CVRT’s holdings are rated investment grade. In terms of maturity, close to two-thirds of the entire portfolio matures in five years or less.

Verdict

This ETF provides exposure to a unique breed of securities that offer characteristics of both stocks and bonds and, as such, can make for an appealing instrument for those looking to minimize risk while still generating income.

101. State Street SPDR Barclays Capital Convertible Bond ETF (CWB)

CWB
12-Month Yield 4.6%
Dividend Rating B-
Expense Ratio .40%
200-Day Volatility 7.1%

This unique fund offers exposure to an asset class that is often overlooked by income investors: convertible bonds. This breed of fixed income securities may be appealing to certain investors as they can be exchanged, at the option of the holder, for a specific number of shares of the issuer’s preferred stock or common stock.

Yield

This ETF currently boasts an annual dividend yield of 4.60%, offering an alternative source of income that may appeal to investors looking to diversify beyond traditional stock and fixed income holdings.

Portfolio

CWB holds roughly 100 U.S. convertible bonds with outstanding issue sizes greater than $500 million. These securities allow investors to “convert” their bond notes for equity in the underlying company; investors can potentially stand to benefit from broad increases in stock prices. From a sector breakdown perspective, this ETF features a well-balanced portfolio of holdings. CWB makes top allocations to the technology and consumer non-cyclical sectors, while financials and industrials also account for a major portion of total assets.

Verdict

Given its niche focus, the exposure offered through this ETF is likely too granular for most. However, for investors looking to diversify their bond holdings while at the same time leaving them open to potential equity appreciation, this fund could be an attractive instrument.

Disclosure: No positions at time of writing.

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By Prajakta Dhopade on July 17, 2020

Investing 101: Dividends explained

By Prajakta Dhopade on July 17, 2020

These tiny payments can really transform your portfolio

M A K I N G B A N K

Do you know what a dividend is? If you’re not already pretty entrenched in investing you may not have a clue—And that’s okay. These things weren’t part of the curriculum, were they? (Now, the Pythagorean theorem, on the other hand, is forever engraved into my brain and let me tell you, it’s not going to make me any money.)

So, let’s get into it.

What are dividends, and why should you care about them? Dividend stocks are stocks that you buy that pay you for being invested in them. Well, it’s not the stock that pays you, it’s the company whose stocks you’ve bought that’s giving you a little gift for being a shareholder.

That money—the dividend—is technically part of the company’s profit that’s being given back to the shareholders. Sometimes these payments are worth mere pennies per share. That may sound insignificant, but they can really add up.

Consider this. Let’s say you own 1,000 shares trading at $10 per share. Now let’s assume that company pays a quarterly 1% dividend. On a per share basis, you’d get 10-cents, but on 1,000 shares your dividend would be worth $100 on those shares. Not bad deal for simply owning a stock.

That percentage figure is commonly referred to the dividend yield, which is simply a ratio that compares how much a company will pay out in dividends in a year, compared to that company’s share price. As you start to look around you’ll discover some stocks have high yields (say 5% or more) while others might be smaller. Before I go on, a word of caution: while high dividend yields are enticing they can also be a sign of a company in trouble—but more on that in a moment.

First, lets consider a real-life example. TD Bank, for instance, has a share price of $65.83 and a dividend yield of 3.68%, meaning over the course of the year you can expect to get $2.42 per share back in dividends. It might not sound impressive, but trust me it is. Since dividends are often paid out every quarter, you’d get 60.5-cents per share, per quarter. If you’d owned 100 TD shares then you’d get back $60.56 in dividends. At the end of the year you’d have collected about $242 in dividends.

Remember, since the yield is based on the share price it will fluctuate over the course of a year, but barring some calamity, the amount you’ll collect in dividends should remain constant. Confused? Look at it this way. Let’s say TD’s shares shoots up to $100 per share. The dividend yield now would be 2.42%, and as you can probably guess the annual dividend would still be $2.42 per share.

Your entire portfolio shouldn’t be full of stocks, but it’s not a bad idea to make sure the ones you do own have good dividends so you’re making even more money. What’s more, those dividends can be reinvested, giving you new shares in the company, which allows you to collect even more dividends.

But before you go out on an investing adventure and buy every stock with a high dividend yield, watch out.

A high dividend yield isn’t always a good thing. That’s important to remember. You really don’t want to get fooled by a 10% dividend yield. Don’t let double-digit numbers deceive you. A high yield percentage could just mean that the value of the stock has fallen, and that the company is going to soon cut the dividend. Now that you know the basics, here’s what you need to know about buying a quality dividend stock:

Be sure to check back for regular updates as Prajakta leads us on a journey as she learns what it takes to invest her own money.

Sure Dividend

High-Quality Dividend Stocks, Long-Term Plan

200+ High Dividend Stocks List (+The 10 Best High Yield Stocks Now)

Updated on April 7th, 2020 by Bob Ciura

Spreadsheet data updated daily

When a person retires, they no longer receive a paycheck from working. While traditional sources of retirement income such as Social Security help investors make up the gap, many could still face an income shortfall in retirement.

This is where high-yield dividend stocks can be of assistance. We have compiled a full downloadable list of stocks yielding above 5%.

You can download your full list of all 200+ securities with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:

This article examines securities in the Sure Analysis Research Database with:

Note: We update this article at the beginning of each month so be sure to bookmark this page for next month.

With yields between 5% and 10%, these securities all offer high dividends (or distributions). And with Dividend Risk Scores of C or better, they don’t suffer from the usual excessive riskiness of truly high yielding securities.

In other words, these are relatively safe, high yield income stocks for you to consider adding to your retirement or pre-retirement portfolio.

Table Of Contents

All stocks in this list have dividend yields above 5%, making them highly appealing in an environment of falling interest rates. Stocks were further screened based on a qualitative assessment of business model strength, competitive advantages, and debt levels. Lastly, stocks were filtered to ensure that no individual market sector can account for more than three selections on the list for diversification.

The 10 highest-yielding securities with Dividend Risk scores of C or better are listed in order by dividend yield, from lowest to highest.

10. Principal Financial Group (PFG)

  • Dividend Yield: 8.0%

Principal Financial Group is a financial corporation that operates several businesses including insurance, primarily life insurance, and investment management, retirement solutions and asset management. Principal Financial Group was founded in 1879.

Principal Financial Group reported its fourth-quarter earnings results on January 28. The company recorded revenues of $514 million for its retirement and income solutions fee business, which was 36% more than the fee revenues that were generated by the segment during the previous year’s period. Principal Financial Group saw its assets under management grow to $735 billion, which was a new record. This was possible thanks to positive net flows which totaled $6.9 billion during the fourth quarter.

A total of 87% of the company’s assets under management held a 4 or 5 star rating by Morningstar at the end of the fourth quarter, which shows the company’s high expertise in managing wealth for its clients. This was also reflected in the fact that 79% of assets outperformed their peer group over the last 5 years.

Principal Financial Group generated earnings-per-share of $1.41 during the fourth quarter, which slightly beat the consensus estimate. Earnings-per-share were up 27% compared to the earnings-per-share that were created during the previous year’s quarter. For all of 2020, Principal Financial Group managed to grow its earnings-per-share by 1%.

Principal has a modest growth trajectory in the years ahead. A rising number of new customers and strong market performance helps drive AUM. Separately, in its insurance business, Principal Financial Group has been able to grow its premiums and fees in the past as well, and a growing float that can be invested should result in rising investment income.

Principal Financial Group has also boosted its earnings-per-share growth by repurchasing shares in the past, and plans to do the same going forward. In February, the company authorized a new $900 million share repurchase program. Through these measures, the company should achieve mid-single-digit growth over the next five years.

The high dividend yield of 8% is backed by the company’s underlying earnings. With a projected dividend payout ratio below 40% for 2020, we view the dividend as secure barring a deep and prolonged recession.

9. Office Properties Income Trust (OPI)

  • Dividend Yield: 8.7%

Office Properties Income Trust is a REIT that currently owns 189 buildings, which are primarily leased to single tenants with high credit quality. The REIT’s portfolio currently has a 92.4% occupancy rate and an average building age of 17 years. It has a market capitalization of $1.2 billion.

On 12/31/2020, the predecessor company – Government Properties Income Trust – merged with Select Income REIT (SIR) and the combined company was renamed Office Properties Income Trust. The aggregate transaction value was $2.4 billion, including the assumption of $1.7 billion of debt from SIR. The combined company has enhanced geographic diversification and one of the highest percentages of rent paid by investment-grade rated tenants in the REIT universe.

The U.S. Government is the largest tenant of OPI, as it represents 39% of the annual rental income of the REIT. After acquiring First Potomac Realty Trust (FPO) in 2020 and merging with SIR, OPI is now in the process of selling assets to reduce its leverage to a healthy level. In 2020, it sold or agreed to sell nearly $1.0 billion of assets.

In mid-February, OPI reported (2/20/2020) financial results for the fourth quarter of fiscal 2020. During the quarter, the REIT completed 779,000 square feet of leasing at weighted average rents that were 4.2% above prior rents for the same space and posted funds from operations of $1.38 per unit, which exceeded analysts’ consensus by $0.03. For the year, occupancy rate improved from 91.0% to 92.4%.

Nevertheless, due to the extensive asset divestment program, we expect normalized funds from operations (FFO) per unit to decrease from $6.01 in 2020 to approximately $5.50 for 2020. Still, this is expected to sufficiently cover the annualized dividend payout of $2.20 per share, for a 2020 payout ratio of 40%.

OPI generates 63% of its annual rental income from investment-grade tenants. This is one of the highest percentages of rent paid by investment-grade tenants in the REIT sector. Moreover, U.S. Government tenants generate about 39% of total rental income and no other tenant accounts for more than 3% of annual income. This exceptional credit profile constitutes a meaningful competitive advantage.

On April 2nd, the company issued a press release maintaining its quarterly dividend rate, adding that it does not believe its financial results will be significantly impaired by the coronavirus outbreak. The company reiterated that it does not have significant debt maturities until 2022, and that it expects to maintain a dividend payout ratio of

75% for 2020, based on cash available for distributions.

8. Altria Group Inc. (MO)

  • Dividend Yield: 8.8%

Altria Group is a tobacco products giant. Its core tobacco business holds the flagship Marlboro cigarette brand. Altria also has non-smokable brands Skoal and Copenhagen chewing tobacco, Ste. Michelle wine, and owns a 10% investment stake in global beer giant Anheuser Busch Inbev (BUD).

Altria is a legendary dividend stock, because of its impressive history of steady increases. Altria has raised its dividend for 50 consecutive years, placing it on the very exclusive list of Dividend Kings.

In late January, Altria reported strong fourth-quarter earnings. Revenue (net of excise taxes) increased 0.3% for the fourth quarter, and 0.9% for 2020 as price increases more than offset volume declines. Adjusted earnings-per-share increased 7.4% for the fourth quarter.

For 2020, adjusted earnings-per-share increased 5.8% to $4.22, due to cost controls and share repurchases. Altria exceeded its target of $575 million in cost reductions. Separately, Altria took a non-cash impairment charge of $4.1 billion related to its investment in Juul, bringing total Juul-related charges to $8.6 billion for 2020.

Altria’s key challenge going forward will be to generate growth in an era of falling smoking rates. Consumers are increasingly giving up traditional cigarettes, which on the surface poses an existential threat to tobacco manufacturers. Altria expects cigarette volumes will continue to decline at a 4% to 6% annual rate through 2023.

For this reason, Altria has made significant investments in new categories, highlighted by the $13 billion purchase of a 35% stake in e-vapor giant JUUL. This acquisition gives Altria exposure to a high-growth category that is actively contributing to the decline in traditional cigarettes.

Altria also recently announced a $1.8 billion investment in Canadian marijuana producer Cronos Group. Altria purchased a 45% equity stake in the company, as well as a warrant to acquire an additional 10% ownership interest in Cronos Group at a price of C$19.00 per share, exercisable over four years from the closing date.

Altria reaffirmed its guidance for 2020 full-year adjusted diluted EPS to be in a range of $4.39 to $4.51, which would be 4% to 7% growth from 2020. The company also expects 4% to 7% annual adjusted EPS growth from 2020-2022.

Altria enjoys significant competitive advantages. It operates in a highly regulated industry, which significantly reduces the threat of new competitors entering the market. And, Altria’s products enjoy tremendous brand loyalty, as Marlboro controls more than 40% of U.S. retail market share.

Altria is also highly resistant to recessions. Cigarette and alcohol sales fare very well during recessions, which keeps Altria’s strong profitability and dividend growth intact. With a target dividend payout of 80%, Altria’s dividend is secure.

7. Prudential Financial (PRU)

  • Dividend Yield: 9.1%

Prudential Financial operates in the United States, Asia, Europe and Latin America, with more than $1.5 trillion in assets under management. The company provides financial products – including life insurance, annuities, retirement-related services, mutual funds and investment management. Prudential operates in four divisions: PGIM (formerly Prudential Investment Management), U.S. Workplace Solutions, U.S. Individual Solutions, and International Insurance.

On February 4th, 2020 Prudential released Q4 and full year 2020 results for the period ending December 31st, 2020. For the quarter Prudential reported net income of $1.128 billion ($2.76 per share) compared to $842 million ($1.99 per share) in Q4 2020. After-tax Adjusted Operating Income totaled $950 million ($2.33 per share) compared to $1.035 billion ($2.44 per share) in the year ago period.

For the year Prudential reported net income of $4.186 billion ($10.11 per share) compared to $4.074 billion ($9.50 per share) in 2020. After-tax Adjusted Operating Income equaled $4.845 billion ($11.69 per share) compared to $5.019 billion ($11.69 per share) in 2020. Adjusted book value per share totaled $101.04, against $96.06 in the year-ago quarter. At quarter-end Prudential held $1.551 trillion in assets under management compared to $1.377 trillion in Q4 2020.

In addition, Prudential declared a $1.10 quarterly dividend representing a 10.0% year-over-year increase. Due to the recent sell-off caused by coronavirus fears, Prudential’s yield now exceeds 9%. The dividend appears sustainable, with an expected dividend payout ratio of 35% for 2020.

While Prudential is highly profitable, it would be exposed to a severe global recession. During the last recession, Prudential generated earnings-per-share of $7.31 in 2007 followed by $2.69, $5.58 and $6.27 in 2008 through 2020. It wasn’t until 2020 that earnings finally eclipsed their pre-recession peak. Similarly, the dividend was slashed from $1.15 in 2007 down to $0.58 in 2008 and did not recover until 2020.

Still, the company has a reasonable payout ratio and financial position, but investors should note its performance during the last recession. If the U.S. enters a similarly devastating economic downturn, Prudential’s dividend payout could be at risk.

6. Marathon Petroleum Corp. (MPC)

  • Dividend Yield: 10.1%

Marathon Petroleum Corp. was spun off from Marathon Oil Corp. (MRO) in 2020. After the acquisition of Andeavor Logistics in October of 2020, MPC has become the largest U.S. refiner, with 16 refineries and a refining capacity of 3.1 million barrels per day.

It also has a marketing system that includes

6,800 branded locations,

3,900 convenience stores (

2740 are Speedway), and

1,000 direct dealer locations. In addition, MPC owns a midstream MLP, (MPLX), which has gathering and processing assets as well as pipelines for crude oil and light products.

In late January, Marathon Petroleum reported (1/29/20) financial results for the fourth quarter of fiscal 2020. Adjusted earnings-per-share fell -35% over last year’s quarter, primarily due to lower fuel margins in the retail segment. That was a notable change over previous quarters.

For the year, the retail segment grew its operating income by 54%, mostly thanks to the addition of the Andeavor retail network. In the year, MPC achieved $1.1 billion of synergies from the takeover of Andeavor and thus it exceeded its goal of $600 million by a wide margin. It also continues to aim for $1.4 billion of synergies by the end of 2021.

More importantly, activist investors, including Elliot Management, exerted pressure on MPC for structural changes in an attempt to unlock shareholder value. As a result, MPC will change its CEO and will spin off its Speedway gas station business, probably in the fourth quarter of this year. It will also form a special committee, which will examine ways to unlock value from the midstream business.

MPC greatly benefits from the inland location of some of the refineries of Andeavor. Thanks to the oil supply glut, these refineries buy their crude oil at a deep discount to WTI, so they enjoy high margins. Furthermore, U.S. refiners will greatly benefit from the new international marine rules, which have come into effect since January 1st, 2020.

Per these rules, vessels that sail in international waters are forced to burn diesel instead of heavy fuel oil. As the former is much more expensive than the latter, it should boost refiner earnings. MPC is properly positioned to benefit from the new marine rules. Thanks to a series of past investments, the refiner can upgrade about 600,000 barrels per day of low-value residue to diesel.

With an expected dividend payout ratio below 40% for 2020, MPC’s dividend appears to be secure. The stock has a high yield above 10%, making it an attractive choice for income investors.

5. Magellan Midstream Partners (MMP)

  • Dividend Yield: 11.3%

Magellan Midstream Partners has the longest pipeline system of refined products in the U.S., which is linked to nearly half of the total U.S. refining capacity. Its network of assets includes 9,700 miles of pipeline, 53 storage terminals, and 45 million barrels of storage capacity.

Refined products generate approximately 59% of its total operating income while crude oil and marine storage represents the remaining 41%. Magellan has a market capitalization above $6.6 billion.

In late January, MMP reported (1/30/20) financial results for the fourth quarter of fiscal 2020. Adjusted earnings-per-share and distributable cash flow increased 16% and 18%, respectively, primarily thanks to higher shipments of refined products and a higher average transportation rate. It was a record fourth quarter and full year for the earnings and distributable cash flow of MMP. Management provided guidance for 3% distribution growth in 2020 and distribution coverage of 1.25x.

Magellan’s extensive and diversified network of pipeline and storage assets is a significant competitive advantage. Another competitive advantage is its fee-based model in which the company generates fees based on volumes transported and stored and not on the underlying commodity price. This helps insulate Magellan from sharp declines in commodity prices. Only

10% of its operating income depends on commodity prices.

Magellan has promising growth prospects in the years ahead, as it has several growth projects under way. During the last decade, the company invested $5.4 billion in growth projects and acquisitions and has exhibited much better performance than the vast majority of MLPs.

The company will invest $400 million in these projects in 2020. It also has more than $500 million of potential growth projects under consideration and continues to evaluate their prospects in order to identify the most promising ones. It also announced it will sell 3 marine terminals to Buckeye Partners (BPL) for $250 million.

After the sale, the company intends to buy back up to $750 million of its own stock. This buyback could help boost future per-unit earnings and FFO growth.

Magellan has an excellent track record of steadily growing its distribution, and strong distribution safety. Magellan has increased its distribution 71 times since its initial public offering in 2001, including a recent 3% year-over-year increase. The company expects to maintain a distribution coverage ratio of at least 1.2x over the next several years, which will be sufficient to raise the payout each year. Magellan also has a strong debt profile, with a high credit rating of BBB+ from Standard & Poor’s.

Therefore, Magellan earns a high ranking on this list for its combination of a very high 11.3% yield, but also its strong credit rating and long history of distribution increases.

4. Enterprise Products Partners (EPD)

  • Dividend Yield: 11.7%

Enterprise Products Partners was founded in 1968. It operates as an oil and gas storage and transportation company. Enterprise Products has a tremendous asset base which consists of nearly 50,000 miles of natural gas, natural gas liquids, crude oil, and refined products pipelines. It also has storage capacity of more than 250 million barrels. These assets collect fees based on materials transported and stored.

In late January (1/30/20), Enterprise Products reported fourth-quarter and full-year 2020 financial results. Adjusted EBITDA increased 8.1% for the fourth quarter, and 12.4% for 2020 ($3.69 on a per-unit basis.) Distributable cash flow increased 1% for the fourth quarter, and 10.6% for the full year. Growth was fueled by volume increases and new assets placed in service.

In the fourth quarter, gross operating profits increased 17% in the NGL Pipelines & Services segment, and increased marginally in Crude Oil Pipelines & Services excluding non-cash items. Growth was somewhat offset by a 9.5% decline in Natural Gas Pipelines & Services, and an 8.2% decline in Petrochemical & Refined Products Services.

Enterprise has positive growth potential moving forward, thanks to new projects and exports.

For example, Enterprise Products has started construction of the Mentone cryogenic natural gas processing plant in Texas, which will have the capacity to process 300 million cubic feet per day of natural gas and extract more than 40,000 barrels per day of natural gas liquids. The facility is expected to begin service in the first quarter of 2020.

Enterprise Products is also developing the Shin Oak NGL Pipeline, which is scheduled to be placed into service next year. The Shin Oak NGL Pipeline is expected to have total capacity of 600,000 barrels per day. Exports are also a key growth catalyst. Demand for liquefied petroleum gas and liquefied natural gas, or LPG and LNG respectively, is growing at a high rate across the world, particularly in Asia.

In terms of safety, Enterprise Products Partners is one of the strongest midstream MLPs. It has credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s, which are higher ratings than most MLPs. It also had a high distribution coverage ratio of 1.7x for 2020, meaning the company generated approximately 70% more distributable cash flow than it needed for distributions last year.

Another attractive aspect of Enterprise Products is that it is a recession-resistant company. Enterprise Products’ high-quality assets generate strong cash flow, even in recessions. As a result, Enterprise Products has been able to raise its distribution to unitholders for 62 quarters in a row.

Like Magellan, Enterprise Products has a high credit rating of BBB+. In addition, it has world-class assets and a very long history of regular distribution increases. Combined with a high yield of 11.7%, Enterprise Products is built to outlast even a deep recession.

3. Invesco Ltd. (IVZ)

  • Dividend Yield: 14.1%

Invesco is a global investment management firm. It has more than 7,000 employees and serves customers in more than 150 countries. Invesco currently trades with a market capitalization of $4.0 billion and has over $1.1 trillion of assets under management (AUM).

In the 2020 fourth quarter, Invesco generated revenues of $1.27 billion, up 38.2% compared to the prior year’s quarter. Invesco’s revenue increase was primarily based on an increase in the company’s assets under management, to more than $1.2 trillion, with the majority of that AUM growth stemming from the Oppenheimer Funds acquisition.

Invesco saw long-term net outflows of $14 billion during the quarter, which offset some of the growth from the Oppenheimer Funds takeover. Earnings-per-share of $0.64 for the fourth quarter rose 45% year-over-year, again mainly from Oppenheimer.

For the year, adjusted net revenue increased 15.6% to $4.4 billion, while adjusted EPS increased 4.9% to $2.55.

Invesco’s future growth will depend largely on its recent acquisitions. Invesco acquired Oppenheimer Funds for

$5.7 billion. Acquiring Oppenheimer Funds grew Invesco into becoming the 6th-largest U.S. retail investment management company.

Separately, Invesco also acquired the ETF business from Guggenheim Investments for $1.2 billion. Invesco also made a significant investment in financial technology with its acquisition of Intelliflo, a leading technology platform for financial advisors that supports approximately 30% of all financial advisors in the U.K.

Share buybacks will also help boost earnings-per-share growth. During 2020, the company purchased $670 million of its common shares. Since it announced its $1.2 billion stock repurchase plan in October 2020, the company has repurchased $973 million of its common shares. It expects to utilize the remaining

$227 million by the first quarter of 2021.

Invesco ranks well in terms of dividend safety with an expected payout ratio of 48% for 2020. This should allow the company to maintain its dividend payout. Invesco also has a strong balance sheet, with a credit rating of BBB+ from Standard & Poor’s.

2. Kontoor Brands (KTB)

  • Dividend Yield: 14.8%

Kontoor Brands is an apparel company that focuses on what it calls “lifestyle apparel”. The company, which was spun off from V.F. Corporation (VFC) in 2020, owns some of the world’s most iconic denim brands, including Wrangler, Lee, and Rock & Republic. Kontoor Brands is a US-focused company; just 27% of its revenues are generated outside of the United States.

Kontoor Brands reported its fourth quarter financial results on March 5. The company reported that its revenue declined by 10.1% compared to the previous year’s quarter, to $653 million. Revenues came in $31 million lower than what the analyst community had forecasted. Kontoor Brands’ revenues were negatively impacted by its decision to close down non-profitable business lines, mainly in India, while currency rate movements also were a headwind.

Kontoor Brands’ earnings-per-share totaled $0.97 during the fourth quarter, beating the analyst consensus estimate by $0.05. Kontoor Brands’ lower revenue generation was partially offset by a higher average gross margin during the quarter. Kontoor Brands did have to deal with one-time expenses related to the closing of some businesses.

Beyond 2020, Kontoor Brands is likely to grow very slowly, due to the fact that its brands and products are inherently slow-growth, while the company also does not retain a large amount of earnings that could be spent on growth initiatives.

Management had previously forecasted revenue growth in the low-single-digits for 2020 and 2021, before reducing the guidance towards no growth more recently, based on the impact that the coronavirus will have on its operations. The further spread of the virus in the US and Europe since early March is why we believe that sales will actually be down this year, and earnings will, we believe, take a hit as well.

The company recently updated investors that it has drawn $475 million on its credit line to shore up its near-term financial position. Kontoor Brands stock has a very high dividend yield of nearly 15%. With a projected dividend payout ratio of 76%, the dividend payout could be at risk if earnings decline significantly, which is a likely scenario if a recession occurs. Therefore, investors should closely monitor the company’s financial results in the coming quarters.

1. Energy Transfer LP (ET)

  • Dividend Yield: 21.8%

Energy Transfer is a midstream oil and gas Master Limited Partnership, or MLP. Energy Transfer’s business model is storage and transportation of oil and gas. Its assets have total gathering capacity of nearly 13 million Btu/day of gas, and a transportation capacity of 22 million Btu/day of natural gas and over 4 million barrels per day of oil.

Energy Transfer’s diversified and fee-based assets provide the company with steady cash flow, even when oil and gas prices decline. As a midstream operator, Energy Transfer’s cash flow relies heavily upon volumes, and less so on commodity prices.

Energy Transfer reported solid fourth-quarter results in February. Adjusted EBITDA continued its streak of strong growth on the back of another record operating performance in the Partnership’s NGL and refined products segment, increasing 5% year-over-year to $2.81 billion. Distributable cash flow increased by 2% to $1.55 billion, reflecting improving cash flow generation efficiencies.

This led to $725 million in retained cash flow and a 1.88x distribution coverage ratio for the fourth quarter, which indicates the distribution is secure. The company has also effectively managed its balance sheet, with a credit agreement leverage ratio of 3.96x at the end of 2020.

The company is also making strong progress on several growth projects which should be adding to cash flows in the coming quarters and years. For example, in February Energy Transfer completed its seventh natural gas liquids (NGL) fractionation facility at Mont Belvieu, Texas. This brought total fractionation capacity at Mont Belvieu to over 900,000 barrels per day. The company is also progressing with plans on a Bakken pipeline optimization project, which is expected to start up in 2020.

Separately, the $5 billion acquisition of SemGroup Corp. will also fuel Energy Transfer’s growth. This will expand its natural gas liquids and crude oil capabilities with the addition of 18.2 million barrels of storage capacity. The gathering assets are in the DJ Basin in Colorado and the Anadarko Basin in Oklahoma and Kansas, as well as oil and NGL pipelines connecting the DJ and Anadarko basins with crude oil terminals in Oklahoma.

The company’s new projects will help secure its attractive distribution, which currently yields nearly 10%. Energy Transfer anticipates a distribution coverage ratio of

1.9x for 2020, which is better than average for an MLP. We believe Energy Transfer is capable of delivering distributable cash flow per share of around $2.20 for 2020. Energy Transfer has a very high yield and a secure payout, which makes it an attractive stock for income investors.

Energy Transfer trades for a price-to-cash flow ratio in the low single-digits, making it much cheaper than many other MLPs. In addition, it has an extremely high yield of 22%, which may signal a risk of a distribution cut. While the distribution appears secure at the present time, conditions are evolving rapidly in the energy sector and investors will need to have a high tolerance for risk to invest in this stock.

Final Thoughts

Interest rates are on the decline once again. After two years of the Federal Reserve raising rates, the central bank announced a recent interest rate reduction. Investors might scramble to search for suitable income in a low-rate environment, but these high-yield stocks are still presenting strong income generations ability.

The 10 stocks on this list have high yields above 5%. And importantly, these securities generally have better risk profiles than the average high-yield security. That said, a dividend is never guaranteed, and high-yield stocks are potentially at risk of dividend reductions or suspensions if a recession occurs in the near future. Investors should continue to monitor each stock to make sure their fundamentals and growth remain on track, particularly among stocks with 10%+ dividend yields.

Dividend Growth Investing 101

October 6, 2020 By M. Alden 42 Comments

Dividend Growth Investing is about purchasing dividend stocks that grow their dividends over time, and then holding onto those investments for quite a while as you receive continually increasing passive income from those companies.

Why this strategy? Because it gives you passive income that grows exponentially each year, and simultaneously builds your net worth over the long-term. Wealth is not simply about having a lot of assets, it’s about generating a significant amount of passive income that grows over time. Dividend Growth Investing works to build both your passive income and your net worth, can be more reliable than other investing methods, requires less time, and can be performed by anyone with sufficient discipline and basic math skills.

Dividend Growth Investing is not just about investing in stocks with a high dividend; it’s also about investing in companies that grow their dividends year after year. A passive income stream is typically unimpressive if it doesn’t grow. By investing in dividend growth companies, you’ll be building passive streams of income that grow over time. Each year with this investment strategy, assuming your companies stay healthy and profitable, your dividend passive income will increase. Better yet, unless you’re planning on living off of your dividends right now, you can reinvest your dividends to buy more dividend paying stocks to further increase your passive income. The growth is exponential, and the strategy works over a long period of time to build your wealth.

Companies that Pay Dividends

When a company makes a profit, they have several options for what they can use that money for. They can reinvest it to grow their business, save it for a rainy day or pay off debt, or send it to shareholders as dividends or share repurchases. Many companies use it for a combination of those things. Of the various public companies in existence, a significant subset of them pay regular cash dividends to shareholders. Regular dividends are cash payments that shareholders receive by simply holding the stock. Shareholders can then spend these dividends any way that they could spend any other form of cash income. It can be used as current income or it can be used to reinvest and buy more shares. The share can be held indefinitely, receiving income year after year.

Dividend Terms to Know

Dividend Yield

A share represents a portion of a company, and a dividend represents that shareholder’s portion of distributed earnings from that company. The dividend yield is equal to the annual dividends paid per share divided by the share price. For example, if I buy a share of a company for $50, and that share pays me a $2 cash dividend this year, then my dividend yield is 4%. Using the same math, if I spend $5,000 to buy 100 of those $50 shares, and those shares offer a dividend yield of 4%, then my annual dividends (passive cash income), will be $200.

Dividend Growth Rate

Dividend Growth Investing is not merely concerned with how much passive income your shares give you, but also how quickly that passive income grows. Many companies increase their dividend payments each year, meaning that each year’s passive income is larger than the year before it. Several companies have records of paying increasing dividends for 10, 25, or 50 consecutive years in a row and are still continuing with this trend. Some people look at a dividend yield and mistakenly assume this will be their total rate of return, but that is not the case. Dividend growth must be factored in as well. If a company pays $1 in dividends per share this year, $1.1 in dividends per share next year, $1.21 in dividends next year, then it is currently growing its dividend at a rate of 10% per year on average. If this continues for 30 years, then the company will be paying over $17 per year in dividends per share at that time! Exponential growth is enormously powerful.

Dividend Payout Ratio

The dividend payout ratio is the percentage of per-share earnings that are paid out as dividends each year. So if a company has earnings-per-share (EPS) of $3, and pays out $1 in dividends per share this year, then the payout ratio is approximately 33%. The company is paying out a third of its profit to shareholders as dividends, and keeping the other two-thirds of its profit for other purposes such as growing the business, making acquisitions, reducing debt levels, or repurchasing shares. It’s important to know the payout ratio because it gives you an idea of the growth prospects of the company, and lets you know whether the dividend is safe. If the company doesn’t have enough earnings to keep up with its dividend payments, it will have to reduce its dividend, and we certainly don’t want that.

The Math Behind Dividend Growth Investing

I’ll use a fictional company called Monk Mart Inc. as my example throughout this section. Monk Mart stock currently trades for $30 per share and has a price-to-earnings ratio (P/E) of 12. So, EPS this year is $2.50. Monk Mart currently has a payout ratio of 40%, so the company is paying out $1.00 in dividends to each shareholder this year. Using these numbers, it is calculated that Monk Mart’s dividend yield is 3.33%. Furthermore, Monk Mart currently has plans to increase the dividend by 8% annually by growing its business.

Monk Mart is a stock that increases its dividend approximately in line with its EPS. If the dividend grows by 8% each year, and the payout ratio remains 40% and the P/E remains 12, that means that the stock price will also increase by 8% each year. Of course, in reality, the stock price won’t increase at exactly the same pace as the dividend payments, because the payout ratio or P/E may fluctuate in times of bull markets and bear markets. To keep the calculations for reinvested dividends manageable, I’m going to assume that Monk Mart stock continually has a P/E of 12 and a payout ratio of 40%, along with 8% dividend growth.

In this scenario, I’m going to purchase 100 shares of Monk Mart stock for $30 each, for a total of $3,000. This means that I’ll receive $100 in dividend payments this year. My plan is to reinvest all of my dividends into buying more Monk Mart stock. I have the stock in a non-taxed retirement account, and my broker allows me to reinvest dividends to buy more shares (including fractions of shares) without charge. Let’s see how much much value my Monk Mart stock returns to me.

During year 1, I collect my $100 in dividend payments. I use them to purchase more shares, so at $30 per share I can purchase an additional 3.33 shares and now have a total of 103.33 shares of Monk Mart. My investment is now worth $3100.

During year 2, Monk Mart indeed raises its dividend by 8% from $1.00 per share to $1.08 per share, and because the P/E and payout ratio remained static, the stock price is now $32.40 per share. Since I receive $1.08 per share in dividends this year and have 103.33 shares, my total dividend income this year is $111.60, and I’ll use that money to buy more shares at $32.40 per share. So, I use my $111.60 to purchase 3.44 shares and now have 106.77 shares of Monk Mart. My investment is now worth $3459.35.

During year 3, Monk Mart again raises its dividend by 8% from $1.08 to $1.17 per share, and because the P/E and payout ratio remained static, the stock price is now $34.99 per share. Since I receive $1.17 per share in dividends this year and have 106.77 shares, my total dividend income this year is $124.92, and I’ll use that money to buy more shares at $34.99 per share. So I use my $124.92 to purchase 3.57 shares and now have 110.34 shares of Monk Mart. My investment is now worth $3860.80.

And so on. It may sound like a lot of work, but many brokers allow you to automatically reinvest your dividends leaving very little maintenance for the investor.

After 10 years, the investor owns 134 shares, the total investment is worth over $8,300, and the dividend income is more than $268/year.

After 20 years, the investor owns 186 shares, the total investment is worth over $22,300, and the dividend income is more than $804/year.

After 30 years, the investor owns 258 shares, the total investment is worth over $74,700, and the dividend income is more than $2,400/year.

After 40 years, the investor owns 359 shares, the total investment is worth over $224,000, and the dividend income is more than $7,200/year.

In this scenario, a mere $3,000 turned into more than $224,000 40 years later, and a mere $100 in annual dividend income turned into more than $7000. Both the investment worth and the passive dividend income grew at a rate of return of more than 11%. There will of course be inflation, so the money in the future will have less purchasing power than it does today, but it’s still a whole lot more money than there was to begin with. In addition, stocks are fairly inflation-resistant because a good company can pass the costs of inflation onto its customers. And, this large growth of money only represents a single investment. If the same investment of a few thousand dollars was made each year, then the investment worth would be worth millions by the end.

Notice again that the total rate of return of investment worth in this example was a little over 11% per year. If you add the dividend yield (3.33%) to the dividend growth rate (8%), you’ll get 11.33%, which is the approximate rate of return of this investment. It’s a good rule of thumb that all else being equal, the long-term dividend yield plus the long-term dividend growth rate is what you can expect in terms of total return. In reality, the P/E won’t stay static, and other factors will fluctuate. If you let this work against you, the return may be somewhat less than the yield plus the growth, but if you work it in your favor, the return may be somewhat more than the yield plus the growth.

A huge portion of the returns of this stock were due to dividends. If dividends were not reinvested, then instead of owning 371 shares at the end, the investor would still only own 100. Since each share was worth approximately $600 by the end, the investor would only have had an investment worth of approximately $60,000 rather than $224,000.

Passive Income Growth and Re-Investing

As previously mentioned, the goal of this investment approach is to simultaneously build passive income and a high net worth. A company has control over how much it pays in dividends, but the masses of the market are the ones that determine the stock price at any given time, so the company growth and the dividends they pay are the primary points of focus for dividend growth investors. Stock prices fluctuate all the time, going up and down, but a disciplined company can grow its dividend year after year without missing a beat for decades. It’s important to have a disciplined mindset, because in the real world even if a dividend-paying company provides long-term returns similar to those in my Monk Mart example, the growth will never be that smooth and the market will sometimes reduce the value of your investment. A dividend investor’s job is to pick good companies to invest in at reasonable stock valuations, with both money they put into their portfolio and money they receive as dividends.

To maximize investment returns, the investor should use the dividends they receive to purchase more shares, like with the earlier Monk Mart example. Consider the following chart, which displays a comparison between reinvesting and not reinvesting dividends in a given company. In the chart, two investors start out with $50,000 and keep the money invested for 40 years. The company that they invest in pays out a 3.33% dividend yield and grows its dividend at an 8% rate annually. One of the investors spends his dividends while the other investor reinvests her dividends to buy more shares.

Over time, the investor that reinvested dividends accumulated more shares of the company, so her investment worth increased at a higher rate. She ended up with over $3 million while the investor that did not reinvest dividends only ended up with $1 million.

Eventually, a person can live off of their dividends as current income rather than reinvesting them. If enough value is accumulated, the passive income will be high enough so that no shares ever have to be sold, and so the investor can live off of his or her accumulated wealth indefinitely while continuing to grow, rather than shrink, their net worth.

Characteristics of a Good Dividend Investment

Obviously, the dividend growth strategy takes time and discipline. We need to identify companies that will provide good returns over decades. No single investment must last for the entire span of the investor’s life, because the investor ideally has a diversified portfolio of several dividend-paying companies, but the better the investments perform over the long-term, the lower the turn-over rate of the portfolio needs to be. Some good selections might last throughout the entire span of the investor’s life.

There is no set formula for finding a good dividend growth stock for your portfolio. I leave formulas for the technical speculators. There are, however, general principles that are worth looking for in investments.

-A good dividend growth company has a product or service that you can foresee existing and being relevant for many decades to come. Time is very important to allow passive income to increase, so it’s wise to find a company that is built to last forever.

-The company should have unique aspects that separate it from competitors.

-A strong balance sheet is the hallmark of a good dividend investment, because it increases the chances of your company being able to survive and grow.

-Keep in mind the general estimation that the total rate of return will be equal to the dividend yield plus the sustained dividend growth rate. Some investors like high-yielding stocks with lower dividend growth while others like lower-yielding stocks with higher dividend growth, and some prefer a mix of both, but keep this basic guideline in mind.

-The company’s stock should be reasonably priced. A good company can make a bad stock if it is over-priced relative to its fundamental value. If you buy stock in an overvalued company, your returns are likely to be less than the sum of dividend yield and dividend growth. If, instead, you buy quality undervalued companies, your returns may be greater than the sum of dividend yield and dividend growth.

-You should be able to understand the company. My view of investing is about individuals taking control of their finances, so if they don’t really understand their stocks, they aren’t really taking control of their finances.

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Reader Interactions

Comments

Good post, especially the graphs about reinvested dividends and the importance of growing dividends.

I wrote a post about reinvested dividends a couple of days ago but your graphs are much clearer. Here we can visually see the difference between the alternatives.

Is it ok if I quote two sections from this post into my article? I will of course mention your name.

Dividend growth investing is one of the best strategies for investing. About half my portfolio contains stocks like this. Even better, if you took advantage of the cheap prices recently. You could have bought excellent companies like Conoco Phillips and got a yield of over 5% plus this company has a solid history of raising their dividend…in fact they did so just recently. If compound interest is the 8th wonder of the world, then dividend growth investing is the 9th, I’m a solid believer in it. Great post Dividend Monk!

You may or may not know, I follow your site, but do not leave many comments. I do however, feel compelled today to leave one after reading this post. AMAZING work!

Cheers,
My Own Advisor

Thanks for the positive feedback. I spent a good deal of time on this post and have had it sitting in my drafts section for weeks now, and I intend to put it on the “start here” section as a core article for the site. I plan to update it and improve it as necessary.

defensiven,
Yes, please feel free to quote whatever you wish to.

I stopped by after following the comment you left on my site, and I agree, this is amazing work. A dividend-based approach to investing can definitely be a core component of an infinite portfolio. I love the graphs as well; you did them with Google Spreadsheet? They are really nice; much better than what you get with Excel or OpenOffice.

As some food for thought, have you compared and contrasted dividend investing as opposed to capital growth? Why would selling shares be a bad thing if you were selling an amount in dollar terms equivalent to the amount of dividends that you would be collecting? If the overall rate of return were the same, wouldn’t not reinvesting dividends be the same thing as selling shares in a stock or index that reinvests this cash internally? Have you written about this? I’d be interested in reading more.

Invest it Wisely,

Yes, I did the graphs with Google spreadsheet. They’re really handy, but the ability to customize them is significantly less than Excel. I’ve never used Open Office so I can’t compare there.

Over the long-term, dividend-paying stocks have been shown to outperform non-dividend paying stocks on average. Of course there are exceptions, so a diversified portfolio is necessary. This is because most companies can only invest so much money into growth until more money won’t help much that year, so it ends up being wasted on poor projects. Selling stocks of a dividend-paying company isn’t helpful unless you no longer consider that investment to be worthwhile, because as you hold onto the stocks, capital appreciation should occur as long as things are going well. The more portfolio turnover there is, the more that is lost to taxes.

It’s true that, for example, if a dividend-paying company has 8% growth and a 3% yield while another company has 11% growth over the same period, the returns of the companies will be comparable. But, often this is not the case, and a dividend paying company ends up growing just as well as the one that wastes its money on other things. Its dividend, then, ends up being crucial to its out-performance.

Hate to be such a “Dividend Monk Fanboy,” Matt, but this was quite possibly the best post I’ve ever come across on the subject. It’s written very clearly and is laid out in a simple, easy-to-understand way.

Again, keep up the good work!

Thanks Pey, I appreciate your continued readership.

This is also my first time visiting your blog, and like the other readers, I’m very impressed.

I do have one thought about reinvested dividends vs money being allocated internally. If a company has proven that it can average a high return on total capital within the majority of its business operations(averaging, say, 15%+ per year for many years) then the company can reinvest what would be dividends, and thus save the shareholder tax. I’ve read two very interesting books on this: Jeremy Siegel’s book, The Future for Investors, where his philosophy is in line with yours. And then I read a book by Brian McNiven, called A Great Company at a Fair Price.
Siegel, as great as his book is, ignores taxable consequences of dividends. And as Buffett has said, dividends are taxed twice: once at the corporate level and again at the personal level. Even when reinvested (if it’s a taxable account) the taxable liability still takes a hefty chunk.
McNiven’s philosophy opposes Sielgel’s. He suggests that if the company is purchased at a fair price (and not a dumb price) then the company with the higher rate of return on capital can utilize that money much more effectively, and as such, the company’s share price will grow faster than it will with the higher dividend paying business. And that share price grows capital gains free until sold.
Buffett himself leans more towards non dividend payers–but there’s a twist.
We know that Warren Buffett’s Berkshire Hathaway hasn’t paid a dividend in more than 30 years because Buffett feels that the return on capital that he generates by retaining those earnings will create eventual share price appreciation value for the shareholder that will exceed the share price/dividend capital appreciation that his shareholders would receive. In his view, paying out a dividend and then reinvesting it back into the business (reinvesting the dividend) does virtually the same thing, but the shareholder holds on to the tax bill in the process.
The other thing Buffett mentions, however, is probably the key that separates a Warren Buffett from a guy like me. First of all, now that Berkshire is so huge, he has to buy many large companies that pay dividends. But he prefers smaller businesses that effectively retain their earnings. But he just can’t buy those anymore. They don’t move Berkshire’s needle.
A guy like Buffett can look at the return on total capital and determine whether all of the money is reinvested in parts of the business with high returns. Investors like me would just see the average return on capital, suggest that it’s high, and figure that the business is more efficient as a non dividend (or low dividend) payer. Meanwhile, the business could be wasting money, as you alluded to in your comment to Kevin. In Buffett’s 1983 letter to shareholder’s he said, “Shareholders are better off only if earnings are retained to expand the high-return business…Managers of high return businesses who consistently emply much of the cash thrown off by those businesses in other ventures with low returns should be held to account for those allocation decisions” That was a nice way of say, “they should be fired”

Kevin, if I’m reading you correctly, you’re curious about whether the investment should be sold—in pieces equivalent to what the investor would receive from dividends. Doing so might negate the power of those compounding dividends, throwing off more dividends as new shares are purchased. But I don’t really have an answer.

Great post – lots of good analysis and data in there. New income investors are often drawn to high yields like moths to the flame without considering why those trailing yields are showing so high. It’s generally better (and safer) to target dividend growth over current yield.

That’s quite a comment!

I agree that in a rare case where a business truly can utilize all of its cash effectively, a dividend is not necessary. Buffett certainly meets that criteria. The thing with Berkshire, though, is that it’s a conglomerate that can buy pretty much whatever it wants. It has an effectively unlimited number of places to allocate capital, and with Buffett at the top, that’s a fantastic combination.

Most businesses are confined to a certain niche, with finite opportunities. Most businesses don’t do well by “empire building”, that is, growing simply for the sake of growing without a focus on total shareholder returns. The majority of companies out there would do well to pay a dividend.

Tax consequences are important, but it’s also true that many holdings are held in tax-free accounts amassed in retirement accounts in various countries.

Lastly, by not paying dividends, shareholder returns are entirely due to stock market price, which is continually set by the whim of the market. Dividends allow shareholders to make a decision, with their own personal circumstances in mind, about how they want to allocate this part of their capital. They can reinvest them, spend them, invest them in another company, put them into a different type of asset, etc. It’s an additional tool to deal with a variety of market conditions. Personally, I let my dividends pool together and then decide where I’m going to allocate them, along with fresh capital to my portfolio.

Thanks for stopping by. I agree with what you’ve said. Although I enjoy finding attractive high-yield investments from time to time, I find that attractive moderate-yield investments tend to come along more often.

Great explanation and graphs of dividend reinvesting. Using your example of Monk Mart, the dividends are steady and growing year to year. However the share price (and therefore dividend yield) may fluctuate depending on investor psychology. Reinvesting the dividend in each company will be a from of dollar cost averaging which is an advantageous tactic. However, what if the dividends were collected among all the investments in a portfolio and reinvested in those companies whose share price is transiently lower to maximize the total return?

That’s how I do it, personally. I collect all of my dividends in a pool and invest them where I find good deals.

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