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Summary The volatility in the markets continues . With anxiety arrives opportunities. Here is one ETF with relatively low volatility and high dividend yield. The stock markets continue to move aggressively up and down. The uncertainty regarding the FED’s action next week drives the investors to levels of high anxiety where every small publication or clue regarding the coming interest rate hike leads to high volatility. History showed us that volatility phases are not short by nature and the best example to use is the 2011 summer selloff that took place due to the European debt concerns, and moreover, due to the U.S. credit rating downgrade. The length of high volatility phase back than was about three months, from early August till mid October. As the markets continue to be highly volatile opportunities for the long term, patient, investor are piling up. The first group of candidates to explore are the group of Aristocrats. Dividend Aristocrats are companies that have increased their dividend payouts to shareholders every year for the last 25 years. Among the more familiar names in this group are The Coca-Cola Company (NYSE: KO ), Chevron (NYSE: CVX ), AT&T (NYSE: T ) and Johnson & Johnson (NYSE: JNJ ). Overall there are about fifty members in this prestigious list of dividend stocks that are included in the Dividend Aristocrats index. Since pursuing fifty stocks in not really achievable the next best thing is to pursue an holding in an ETF that follows this index. SPDR Dividend ETF (NYSEARCA: SDY ) is a passive ETF that seeks to replicate S&P High Yield Dividend Aristocrats Index. I have written about SDY back in April when concerns regarding a correction that was coming about arose. Based on etfdb.com SDY has total of 101 holdings. That means that beyond tracking the Dividend Aristocrats Index the ETF is following the “Index of Champions” which, based on David Fish’s latest article , includes 106 companies. In order to assess the attractiveness of SPY compared to other ETFs I used the list of my best Big Cap ETFs that were published back in July : Vanguard Value ETF (NYSEARCA: VTV ), Vanguard Russell 1000 Value ETF (NASDAQ: VONV ), Vanguard S&P 500 Value ETF (NYSEARCA: VOOV ) and SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). The behavior back in 2011: (click to enlarge) When looking at the graph which compares the performance of the five ETFs, going from January to October 2011, we can see that SDY delivered the best return compared to all benchmarks. During that time period between January to October it delivered a positive 1.8% while the other ETF delivered negative returns up to -3.9% . When zooming in to the crisis period, between June to October 2011 it was again SDY that delivered the best performance, dropping by only 2.2% while the other benchmark ETFs went down by up to 7.8% . When comparing the volatility of these ETFs using a Coefficient of Variation metric (Standard deviation divided by Average price) SDY also comes out with the lowest volatility score. Back to 2015: (click to enlarge) When comparing the same list of ETFs during a similar timeframe in 2015, going from January to September, SDY is still one of the better ETF performers delivering a -8.8% which is only second to SPY which delivered -6.3% during that timeframe. When zooming in to the crisis period, June to September 2015, SDY delivered the best return at -8.9% while the other ETFs delivered lower performance all the way down to -10.7% . While delivering the highest performance DY also demonstrated the lowest volatility during that timeframe of high volatility. Based on Morningstar.com SDY’s current dividend yield is at 2.46%. In 2014 the ETF delivered more that $3 to its shareholders and therefore I believe that the dividend return at these levels is higher that 3%. Conclusions: With high volatility arrive opportunities. SDY is an ETF that follows one of the most prestigious indexes. With lower volatility compared to its benchmarks I find it very attractive and waiting for it at $65. Happy investing Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The opinions of the author are not recommendations to either buy or sell any security. Please do your own research prior to making any investment decision. Scalper1 News
Scalper1 News