The stock markets are on an incredible run currently. All three major U.S. stock indexes are flying high on investor optimism over a potential new stimulus bill. However, as part of a defensive portfolio move, many investors are shifting some of their investments to secure stable and reliable sources of income as a hedge against a market correction that might be occur if their high expectations regarding the bill are not realized or if problems arise in the deployment of COVID-19 vaccines…
Exchange traded funds (ETFs) with an emphasis on dividends are becoming increasingly popular amid the pandemic. Dividend investing is arguably one of the best options now for investors to generate consistent income. However, investing in high-dividend-yielding stocks could be tricky because there is the potential for them to weaken in the near term should any new negative coronavirus surprises present themselves. ETFs help investors mitigate this risk in that they hold broad and diversified stock exposure at minimal operating costs.
Vanguard High Dividend Yield ETF (VYM – Get Rating), Vanguard Real Estate ETF (VNQ – Get Rating), and WisdomTree Emerging Markets High Dividend Fund (DEM – Get Rating) are three dividend-paying ETFs that not only have strong price appreciation potential but could also be a steady source of income.
VYM offers a diversified, conservative approach to high dividend yield in a low-cost wrapper. The fund seeks to track the performance of the FTSE High Dividend Yield Index, a market-cap weighted index of high-dividend-paying large-cap U.S. companies.
The ETF has an impressive record of increasing its quarterly dividends over the last 10 years. The most recent dividend declared by VYM was $0.7053 in September. In the past three years, the fund has grown its dividend at a CAGR of 8.8%. While the four-year average dividend yield for VYM is 3.18%, the ETF’s annual dividend totals $2.88, representing a 3.14% dividend yield.
VYM has $31.16 billion in AUM and an expense ratio of 0.06%. The ETF has an MSCI ESG Fund Rating of A, based on a score of 5.87 out of 10.
The fund currently holds 414 companies with weightings of 19.1% to Financials, followed by a 15.6% and 14.7% to the Consumer Staples and Healthcare sectors, respectively. The top three holdings of the fund are Johnson & Johnson (JNJ), The Procter & Gamble (PG) and JPMorgan Chase & Co (JPM), with weightings of 3.8%, 3.5% and 3.1%, respectively.
VYM has lost 2% year-to-date, to close yesterday’s trading session at $91.84. However, the ETF has witnessed net inflows of $1.29 billion in the past three months and is up 10.4% in the same period. VYM is currently trading just 3.2% below its all-time high of $94.86.
How does VYM stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
It is ranked #3of 83 ETFs in the Large Cap Value ETFs group.
VNQ offers exposure to U.S. property trusts that cover approximately two-thirds of the value of the entire U.S. real estate investment trust (REIT) market. REITs might appeal to investors seeking current income because these trusts must distribute at least 90% of their income to investors, and they offer an efficient way for investors to gain indirect exposure to the real estate class. The ETF tracks the performance of the MSCI US IMI Real Estate 25/50 Transition Index, diversified across multi-cap equity publicly traded REITs and other real estate-related investments.
VNQ pays dividends on a quarterly basis, and its last pay-out was of $0.5901 on September 30, 2020. The ETF has grown its dividend at a CAGR of…
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