Tag Archives: dvy

The iShares Select Dividend ETF: Not Your Traditional Dividend ETF

Summary Compared with other dividend ETFs DVY is quite unique. Its portfolio is a lot different than some would expect. It is higher yielding than both VYM and SCHD. In my last article I highlighted the PowerShares S&P 500 High Dividend Low Volatility ETF (NYSEARCA: SPHD ) which I believe is a very solid dividend ETF. Of course, I also highlighted that there are also plenty of other good dividend ETFs available to investors. One other dividend fund I personally like is the iShares Select Dividend ETF (NYSEARCA: DVY ). I believe that DVY is unique in the sense that it is a more like a traditional dividend ETF, however, is not your typical one. Having said that, I believe DVY is an excellent compliment to a more traditional dividend ETF. To really highlight DVY, and why I believe it is uniquely good, I thought it would be prudent to compare it to two other high quality dividend ETFs. The two that I chose are the Vanguard High Dividend Yield ETF (NYSEARCA: VYM ) and the Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ). A couple of basics are laid out in the table below to get a quick glance at each of the funds before getting to their holdings. Fund Yield Expense Ratio Price/Earnings Beta DVY 3.32% 0.39% 17.01 0.52 SCHD 2.94% 0.07% 19.59 ~1.0 VYM 3.02% 0.10% 19.30 0.93 From the higher yield and lower P/E ratio we can see right away that DVY is different than these other two. What might stand out the most for some is DVY’s expense ratio, though. This higher expense ratio compared with the other two is an obvious downside. However, while the expense ratio seems very high compared to these two, it is actually is below the average of 0.44% for ETFs in general. A big plus for DVY would be the low beta. It is definitely a fund that experiences less volatility than some of the other dividend focused ETFs. Taking a quick look at the top 10 holdings it is easy to see how the basics above come together. Looking at the above list it doesn’t really seem like this is by any means your more traditional dividend ETF. AT&T (NYSE: T ) doesn’t even cut into the top 25 holdings. Johnson & Johnson (NYSE: JNJ ) isn’t even in the 100 name portfolio. To really exemplify what I’m getting at, below are the top 10 holdings for the other two funds. SCHD VYM Comparing the top 10 holdings is great and all, but the real comparison comes with looking at the overall holdings based on sector. This is where DVY looks immensely different than other dividend ETFs. Similar to SPHD, DVY is heavily weighted toward utilities. The difference would be that DVY is not weighted with REITs at all. It is fairly obvious why there is such a great weight dedicated to utilities seeing as they are some of the best dividend payers in the market. Having regulated and reoccurring businesses offers for the most part consistent safety for dividends. In comparison take a look at the sector weights for the other two. (SCHD left, VYM right) As can be seen, both have very few utilities in their portfolios. This is what I believe makes DVY such a good compliment to either of these solid funds. Since both SCHD and VYM are lacking in exposure to utilities, one could easily make up with this by adding DVY. DVY is clearly a lot different than traditional dividend focused ETFs in the sense that one is getting such large exposure to utilities. For those seeking income this is a good thing considering utilities are such solid dividend payers. Same as my previous article I will give a fair warning to investors as to where the funds value is. With a rate hike looming on the horizon it may be prudent to wait on the purchase of DVY. Since utilities is one of the larger sectors most affected by a rate hike, it may be prudent to wait and see if there is any further downside post-hike. In conclusion, DVY is very unique dividend ETF. Since it gives a much different exposure to investors I see it as an excellent compliment to those who own other traditional dividend ETFs. Overall, the fund is a solid pick for any dividend investor seeking attractive distributions and relatively low volatility.

3 Best ETFs To Consider When Looking For Passive Income

Summary Investors who pursue income should consider income ETFs. ETFs have the advantage of buying a portfolio of one’s favorite stocks in a single buy. Here is the list of my top three income ETFs. The week after Labor Day continued to be highly volatile. The high volatility was seen both in intra-day trading as well as the day-to-day change in sentiment. This is how the trading board ended up on Tuesday: And this is how it looked at the end of the following trading day: While traders and short-term investors are waiting to see where the markets are going to trend in the coming future, the long-term investors should look for opportunities to achieve their long-term goals. By taking advantage of the recent fear and stocks selloff, long-term investors’ goals can be achieved even earlier than the original plan. One way to do it is to put buy orders of your favorite stocks and buy those each separately. An alternative way is to buy an ETF. The advantage of an ETF is that it can give the investor an exposure to a bunch of stocks, sectors or indexes without the commotion (and the commissions) of individual stock picking. There are investors who are seeking to generate passive income by holding U.S. large cap blue chip stocks. The ETF market possess several opportunities for this type of investor. To find the best list of top income ETFs, I started with the full list of large cap value equity ETFs using etfdb.com, and from that initial list carved out the income ETFs. The list of the 29 income ETFs can be found here . In order to narrow down the list, I filtered out high management expense ratios, leaving in only ETFs that charge less than 0.4% per year. This filter allowed to narrow down the list to 16 ETFs. Since I was looking for high-income ETFs, the next step was to filter out the ETFs with the lowest dividend rate. My benchmark was the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) which is a good representative of the S&P 500 index. SPY’s current dividend yield is at 2.06%, hence I used that as my dividend rate cutoff. Following this filter, I was left with a list of 11 ETFs: iShares Core Dividend Growth ETF (NYSEARCA: DGRO ) WisdomTree Equity Income ETF (NYSEARCA: DHS ) WisdomTree LargeCap Dividend ETF (NYSEARCA: DLN ) WisdomTree Total Dividend ETF (NYSEARCA: DTD ) WisdomTree Dividend ex-Financials ETF (NYSEARCA: DTN ) iShares Select Dividend ETF (NYSEARCA: DVY ) iShares Core High Dividend ETF (NYSEARCA: HDV ) ALPS Sector Dividend Dogs ETF (NYSEARCA: SDOG ) PowerShares S&P 500 High Dividend Portfolio ETF (NYSEARCA: SPHD ) Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ) Vanguard High Dividend Yield ETF (NYSEARCA: VYM ) The profile of this list can be found in this table: The next step was to assess the dividend growth history. DGRO paid dividends only since September 2014, hence due to its short history it was taken off the list. The next two tables summarize the ETFs’ yearly dividend since 2010 and the year-over-year dividend change percentage: Most of the ETFs were found to have high swings in the year-over-year paid dividend. Though most of the years the dividends have risen, there are years of dividend reduction. An income investor will pursue a growing dividend ETF and only three managed to increase their dividends since 2010: DVY, HDV and VYM. (click to enlarge) If I had to choose the single best ETF, it would have to be HDV . HDV delivers the highest annual dividend yield (3.94%) and carries a low expense ratio (0.12%). Its top holdings include an impressive list of blue chip cash machines like Exxon Mobil (NYSE: XOM ), Verizon (NYSE: VZ ), Pfizer (NYSE: PFE ), Johnson & Johnson (NYSE: JNJ ), General Electric (NYSE: GE ), Philip Morris International (NYSE: PM ), Procter & Gamble (NYSE: PG ), AT&T (NYSE: T ), Chevron (NYSE: CVX ) and The Coca-Cola Company (NYSE: KO ). In total, the ETF has 76 different holdings. The top 10 holdings account for 58% of the HDV’s investment allocation. DVY and VYM hold similar top 10 holdings in their lists and have higher diversification and a larger number of total holdings in their portfolio. Conclusions: An investor looking for an income stream based on U.S. best of breed blue chip companies, but would like to avoid accumulating these stocks separately, should consider one of these three ETFs: DVY, HDV or VYM. Based on this study, my favorite is HDV but each should do his own due diligence. 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.