There are some certainties that come with exploration of dedicated dividend exchange-traded funds.
First, there are a lot of dividend ETFs. To be precise, there are 102 dividend ETFs currently trading in the U.S. That is a healthy percentage of the approximately 1,700 exchange-traded products found on U.S. exchanges.
Second, as can be said of dividend stocks, the long-term performance of dividend ETFs is stout. For example, the Vanguard Dividend Appreciation ETF (VIG), the largest dividend ETF, has gained around 150% since March 10, 2009, the start of the current bull market. By comparison, the Vanguard S&P 500 ETF (VOO) is up “just” 90% over that period.
Seasoned income investors know the advantages of dividend stocks and dividend ETFs. They also know the advantages of dividend stocks that consistently raise their payouts. What often goes overlooked is the advantage of increased frequency of payouts or monthly dividends.
Relative to the number of traditional dividend stocks, the amount of monthly dividend stocks trading in the U.S. is small. Same goes for dividend ETFs. There are far more dividend ETFs that deliver payouts quarterly than there are monthly dividend ETFs.
The advantages of monthly dividend stocks and ETFs are obvious. For investors needing current income, monthly dividend stocks increase frequency of payout. For younger, long-term investors, monthly dividend stocks and ETFs boost the power of compounding when those investors opt to reinvest dividends.
Here are some examples of dividend ETFs that deliver monthly dividends.
Monthly Dividend Stocks: WisdomTree LargeCap Dividend Fund (DLN)
Dividend Yield: 2.69%
WisdomTree LargeCap Dividend Fund (DLN), the fifth-largest U.S. issuer of ETFs, is frequently associated with currency-hedged ETFs, but make no mistake: The company is a force to be reckoned with when it comes to dividend ETFs, too.
After all, dividend ETFs are an area in which WisdomTree has dwelled for close to a decade and the WisdomTree LargeCap Dividend Fund is one the company’s most well-known dividend funds.
The $1.7 billion DLN holds an array of familiar dividend stocks, including Exxon Mobil (XOM) and Johnson & Johnson (JNJ), as well as newer dividend stocks, including Apple (AAPL) and Microsoft (MSFT). Though few if any of DLN’s nearly 300 holdings are monthly dividend stocks, this dividend ETF is a monthly dividend ETF.
As we noted earlier, monthly dividend stocks can enjoy significant return advantages of their quarterly paying rivals. That is the case with DLN, too. This dividend ETF has surged nearly 200% since the start of the current bull market, easily topping comparable dividend ETF rivals as well as broad market funds.
DLN charges 0.28% a year, or $28 per $10,000 invested.
Monthly Dividend Stocks: PowerShares S&P 500 Low Volatility Portfolio (SPLV)
Dividend Yield: 2.09%
Alright, so the PowerShares S&P 500 Low Volatility Portfolio (SPLV), arguably the ETF that started the low volatility craze among ETF investors, is not a dedicated dividend ETF. Nor is SPLV littered with monthly dividend stocks. However, those factors do not prevent the $5 billion SPLV from being a monthly dividend ETF.
It should not surprise investors that SPLV is a credible dividend ETF even though it is not positioned as such. The low volatility factor often encompasses scores of dividend stocks. Think about what sectors are considered “low volatility.” As one example, consumer staples comes to mind and that is a sector loaded with a slew of consistent dividend payers and raisers.
Consumer staples is SPLV’s second-largest sector weight at 22%. Perhaps the real surprise with SPLV is its low weight to utilities stocks, a favored destination of income investors.
For a long time following SPLV’s 2011 debut, critics labeled it a utilities fund in disguise. That is not the case any more as utilities account for just 4.5% of this fund. Though SPLV is not a dividend ETF, it is well-positioned to withstand an interest rate hike because of its light utilities exposure and its almost 35% weight to financial services stocks.
Monthly Dividend Stocks: Global X SuperDividend U.S. ETF (DIV)
Dividend Yield: 7.45%
“Super dividend” might appear to be no more than marketing jargon, but the Global X SuperDividend U.S. ETF (DIV) does pack a significant yield punch. The Global X SuperDividend U.S. ETF has a trailing 12-month dividend yield of nearly 7.8% and a distribution yield of almost 8.6%, according to Global X data.
Obviously, DIV is a dedicated dividend ETF, but by virtue of its emphasis on some low volatility sectors and dividend stocks (utilities and staples combine for over 35% of the ETF’s weight), this is a dividend ETF with the look of a low volatility fund. A standard deviation of just 9.7% confirms as much.
Beyond its big weights to utilities and consumer staples, DIV accesses non-traditional dividend stocks through master limited partnerships and real estate investment trusts. Those asset classes are home to more monthly dividend stocks than traditional, common dividend stocks.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.