Dividends

I ‘SPYD’ With My Little Eye This Dividend ETF

Dividends are usually seen as good for investors.

Stocks that offer dividends effectively pay an extra little bonus to investors every quarter or month, as an incentive to keep people coming back for more. You would think this same incentive would carry over to exchange-traded funds (ETFs) that specialize in dividends; but as of late, this has not been the case.

The market darlings this year have been top tech stocks, causing the largest dividend ETFs, such as SPDR Portfolio S&P 500 High Dividend ETF (SPYD), to be left behind and, as a consequence, underperform. However, it may not be all doom and gloom.

Dividend ETFs are often flight-to-safety plays, as nothing offers more comfort to investors in rough market weather than the shelter provided by exposure to companies that have a history of offering dividend payouts. With a recession in 2024 a real possibility, dividend ETFs have a good chance of rebounding on the potential market storm.

With that said, I am starting a series of articles to introduce you to some dividend ETFs I believe have the potential to be very promising. I am starting with an ETF I “SPYD” out on the market horizon.

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) is a fund that tracks an index of the 80 highest-yielding dividend stocks selected from the S&P 500. Dividend payout is measured by taking the latest dividend and multiplying it by the frequency of the payment. That annualized payout is then divided by the company’s share price at the date of each rebalancing.

Unlike similar ETFs, SPYD does not include any dividend sustainability or quality screens. It also equally weighs its portfolio, instead of weighing it by yield like some income-focused funds. This provides what the fund manager describes as a fundamentally sound measuring stick to identify large-cap U.S. stocks with the strongest payout ratios to shareholders.

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At present, SPYD has a market value of $6.25 billion in assets under management, and an expense ratio of 0.07%. Its current top holdings include Seagate Technology Holdings PLC (NASDAQ: STX), NRG Energy, Inc. (NYSE: NRG), International Business Machines Corporation (NYSE: IBM), Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T).

Courtesy of www.stockcharts.com

As of Nov. 20, the fund is up 6.31% in the past month, but is down 1.30% in the past three months and 6.16% year to date, due to the current overall low performance of dividend ETFs.

Before setting your sights on SPYD, it’s important to remember that not every investment risk pays off. Remember to always consider your personal financial situation and goals before making any investment. Investors are always encouraged to do their due diligence before adding any stock or exchange-traded fund (ETF) to their portfolios.

I am always happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.