The latest job report has rekindled interest in high dividend ETFs and stocks. This reflects the highest number of job addition by the economy in February since July 2016 with a slowdown in wage growth, easing fears of rising inflation.
The news has dismissed chances of faster-than-expected rate hikes, which would sharply increase borrowing costs for consumers. The Fed is now expected to move toward gradual normalization of the monetary policy, providing some relief to high dividend products, which were battered by the recent aggressive stance adopted by the Fed. As a result, these products are positioned to be the biggest potential movers in the weeks ahead.
Additionally, Trump’s tariff plan is weighing heavily on investor sentiments as it could lead to a trade war. Further, geopolitical tension, instability in Washington, mid-term election and stretched valuations are adding to the woes.
Amid this backdrop, dividend paying securities are the major sources of consistent income for investors, creating wealth when returns from the equity market are at risk. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Given this, we have highlighted four ETFs and stocks that yield more than 5% in dividends and could be interesting plays for the coming months.
Using our database, we have selected ETFs that offer broad exposure to a number of sectors and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with a decent AUM of above $50 million.
High-Dividend ETFs and Stocks Yielding 5% or More: SPDR Portfolio Total Stock Market ETF (SPTM)
Annual Yield: 7.12%
The SPDR Portfolio Total Stock Market ETF (NYSEARCA:SPTM) offers exposure to the broad market by tracking the SSGA Total Stock Market Index, holding 2,791 stocks in its basket.
SPTM is a low-cost choice charging just 3 bps in annual fees and trades in average daily volume of 121,000 shares. The product has AUM of $1.5 billion and has a Zacks Rank #3.
High-Dividend ETFs and Stocks Yielding 5% or More: SPDR S&P 500 Value ETF (SPYV)
Annual Yield: 6.96%
The SPDR S&P 500 Value ETF (NYSEARCA:SPYV) offers exposure to the large-cap value segment of the U.S. equity market by tracking the S&P 500 Pure Value Index.
Holding 392 securities in its basket, SPYV has amassed $1.4 billion in its asset base and trades in a solid average daily volume of 399,000 shares. It charges 4 bps in annual fees and has a Zacks Rank #3.
High-Dividend ETFs and Stocks Yielding 5% or More: Global X SuperDividend U.S. ETF (DIV)
Annual Yield: 6.12%
The Global X SuperDividend U.S. ETF (NYSEARCA:DIV) provides exposure to 50 of the highest dividend yielding U.S. securities by tracking the INDXX SuperDividend U.S. Low Volatility Index.
The product has amassed $399.3 million in its asset base while trading in moderate volume of about 78,000 shares. It charges 45 bps in fees per year from investors and has a Zacks ETF Rank #3.
High-Dividend ETFs and Stocks Yielding 5% or More: SPDR Portfolio Large Cap ETF (SPLG)
Annual Yield: 5.28%
The SPDR Portfolio Large Cap ETF (NYSEARCA:SPLG) fund follows the SSGA Large Cap Index and offers exposure to the US large cap market segment.
The product has $1.1 billion in AUM and charges an annual fee of 3 bps. Volume is light at around 21,000 shares a day on an average. The product holds 772 stocks in its basket and has a Zacks ETF Rank #3.
High-Dividend ETFs and Stocks Yielding 5% or More: AllianceBernstein Holding LP (AB)
We have chosen four top picks using the Zacks Screener that fits our criteria: a Zacks Rank #1 or 2, a Value Style Score of A or B and a market capitalization of more than $1 billion. Our chosen stocks are:
Annual Yield: 12.33%
New York-based AllianceBernstein Holding LP (NYSE:AB) provides diversified investment management services, primarily to pension funds, endowments, foreign financial institutions, and to individual investors.
AB has a five-year historical dividend growth rate of 4.1% and a payout ratio of 146.1%. AllianceBernstein has a Zacks Rank #2 and a market capitalization of $2.33 billion.
High-Dividend ETFs and Stocks Yielding 5% or More: Ladder Capital Corp (LADR)
Annual Yield: 8.27%
New York-based Ladder Capital Corp (NYSE:LADR) is a commercial real estate finance company. With a market capitalization of $1.5 billion, the company has a five-year historical dividend growth rate of 7.2% and a payout ratio of 81.3%. The stock has a Zacks Rank #2.
High-Dividend ETFs and Stocks Yielding 5% or More: AT&T Inc. (T)
Annual Yield: 5.40%
California-based AT&T Inc. (NYSE:T) provides communication, entertainment and Internet services to consumers and businesses around the world. It is the largest pay-TV provider in the United States and owns the second largest wireless network.
It has raised its dividend every year over the past five years at an annualized rate of 2.1%, with a current payout ratio of 65.6%. The company has a Zacks Rank #2 and a market capitalization of $231.7 billion.
High-Dividend ETFs and Stocks Yielding 5% or More: Macy’s Inc (M)
Annual Yield: 5.23%
Ohio-based Macy’s Inc. (NYSE:M) is one of the nation’s prime retailers offering a range of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods.
M has a market capitalization of more than $7.55 billion. The company has been increasing its dividend once every year over the past five years at an annualized rate of 14.5%. The payout ratio stands at 40.1%. The stock has a Zacks Rank #1.
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