There are currently more than a handful Exchange Traded Funds that are paying more than an 8% dividend yield. And yes, you are reading that correctly, more than an 8% dividend yield. There are at least four ETF’s currently paying dividend yields above 8%, while a few others are paying yields even higher.
Furthermore, these ETF’s are investing what is surprisingly a wide range of different investments, meaning even if you’re not a fan of REITS or MLP’s, there is still may be an ETF, that’s paying a healthy yield, out there waiting for you. So, let’s take a look at a few of the different options.
First, we have what most would expect out of a high dividend-yielding ETF, an MLP ETF. The VanEck Vectors High Income MLP ETF (YMLP) is currently yielding 8.18% and has an expense ratio of just 0.82%. The fund has 18 holdings, all of which are MLP’s structured as C-corporations. Also, the weighted average market cap is only $1.36 billion, and the funds top nine holdings all fall in line at 7% to just over 8% fund weighting. Year to date the fund is up 18%, but only 2% over the last month and 3.85% over the previous year.
Another typical high dividend-paying investment is a REIT or Real-Estate-Investment-Trust. And you can imagine when one ETF owns 27 different REIT’s, the dividend gets a little juiced. One such ETF is the VanEck Vectors Mortgage REIT Income ETF (MORT) which has a yield of 7.4% but has an expense ratio of just 0.41%. MORT has 27 holdings with a weighted average market cap of $5.13 billion and has a year-to-date performance of 10.93% while being up just 1.55% over the last month and 11.61% over the last 12 months. MORT invests in mortgage REIT’s which are REIT’s that own mortgages or mortgage back securities. The risk with these investments is that we see outsized mortgage loan default rates, such as what we saw during the last recession.
The next few options are a little less straight forward as they invest in several different high yield investments. For example, the Global X SuperDividend ETF (SDIV) has its portfolio broken down as follows; Financials 62.88%, Consumer Cyclicals 9.24%, Energy 6.79%, Industrials 6.02%, Telecommunications Services 5.12%, Basic Materials 4.09%, Utilities 3.39%, Consumer Non-Cyclicals 0.76%. SDIV pays a yield of 8.85% and has an expense ratio of 0.58%. The fund has 105 holdings with a weighted average market cap of $5.64 billion. SDIV is also a global fund, meaning it will pull investments from anywhere around the world. SDIV is off by more than 2% over the last month, while being up 7.5% over the last three months and being down 4.4% over the last year.
The Global X SuperDividend US ETF (DIV) is very similar to the SDIV, but it only invests in US-based companies. Furthermore, it only has roughly 50 holdings and currently pays a dividend of 6.78% while charging investors 0.45%. It has a weighted average market cap of $30.26 billion, and none of its holdings represents more than 2.3% of assets. DIV is up 8% over the last three months but down almost 1% over the last month while being up 6.5% over the previous 12 months.
The last high dividend ETF I would like to highlight is the Invesco KBW High Dividend Yield Financial ETF (KBWD). KBWD focus on high-dividend stocks but tilts its portfolio away from the broad financial market. It also shies away from the large industry giants and focuses more on the smaller companies, has a weighted average market cap of just $3.24 billion, which offer a larger yield. It currently has 41 holdings and pays a dividend of 8.1%, but has an expense ratio on the way high end at 2.42%. The fund is off 1% over the last month while being up 11.2% over the last three months and just slightly more over the last year. KBWD also invests 100% in US-based companies.
It should be noted that all of the ETF’s mentioned above took a massive hit at the end of 2018 and have since rebounded. This fall and subsequent rebound have distorted the fund's performances over the last few months. Large double-digit returns should not be expected moving forward unless the market returns to high volatility. Furthermore, remember these return rates don’t include the dividends that are being paid out.
Finally, not all investors are suited for dividend investing at this level due to its higher risk factor. High paying dividend companies have their own set of risks that investors need to understand before making a purchase entirely.
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.