Dividend ETF #1: PowerShares KBW High Dividend Yield Financial ETF (KBWD)
Dividend Yield: 7.7%
PowerShares KBW High Dividend Yield Financial ETF (KBWD) is one of the highest-yielding dividend ETFs available, and it’s powered primarily by dividend stocks dealing in financial services.
I like KBWD because it bundles higher-risk dividend stocks from multiple sectors, thereby giving you diversification. It has companies like Capstead Mortgage (CMO), which invests in mortgage securities and is structured as a REIT. These mREITs are subject to interest-rate fluctuations, as they make their money off the spreads between what they borrow and what their securities yield. KBWD also contains Business Development Companies like PennantPark Investment Corp (PNNT) and Ares Capital (ARCC).
Also attractive is the fact that KBWD’s top 10 holdings represent roughly 37% of its total assets, which isn’t overly concentrated.
Naturally, the big draw is its whopping 7.7% dividend yield, though that certainly comes at a price — KBWD charges 1.48% in expenses, or $148 annually per every $10,000. Still, even if you take fees out of the annual dividend, you’re yielding more than 6%.
I also like that KBWD’s beta (risk compared to overall market) is 0.75, or 25% less risky than the market but delivers an alpha of 4.6, or 4.6% over a comparable market index.