The Federal Reserve has cut interest rates again, for the second time since late July 2019. The rate, which was slashed a quarter basis points (0.25 percentage points) following the two-day FOMC meeting that concluded on Sept. 18, now stands in the range of 1.75%-2%.
In order to maintain the U.S. economy’s decade-long economic expansion while protecting it against slowing global economic growth and uncertainty related to the China-U.S. trade war, the Fed has opted for the rate cut. Explaining that issue, Jerome Powell said, “we took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks”
The Federal Reserve also kept chances of another rate cut this year alive, in case the economy deteriorates further. The officials had a divided outlook about the economy. In fact, St. Louis Fed President James Bullard supported a 50 basis point rate cut. However, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George preferred the rate to remain unchanged at 2%-2.25%. Notably, seven Fed members expect another rate cut in 2019, while five members believe the rate should be in the range of 2% to 2.25% by the end of 2019.
The Fed Couldn’t Appease Trump
The Fed’s decision could not satisfy President Trump, who has been urging the central bank to lower the interest rate to zero or push it in negative territory, just like the European Central Bank. After the Fed’s announcement, he tweeted that, “Jay Powell and the Federal Reserve Fail Again. No ‘guts,’ no sense, no vision! A terrible communicator!”
Dividend ETFs to Buy
The appeal of dividend ETFs has been on the rise this year, due to investors’ drive for juicy yields. That is especially true against the backdrop of falling yields, easing monetary policy globally and market uncertainty triggered by trade gyrations, geopolitical tensions and global growth slowdown concerns. Moreover, central banks across the globe are taking steps to prop up slowing economic growth. As a result, bond yields will fall further. Against this backdrop, let’s take a look at some well-positioned dividend ETFs:
WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ:DGRW)
This fund seeks to provide exposure to large, established U.S. companies, providing high dividends by applying quality and growth screens. It has assets under management of $2.87 billion and charges a fee of 0.28 percentage points a year. The fund has high exposure to the Information Technology, Industrials and Consumer Staples sectors with 22.4%, 18.2% and 12.5% exposure, respectively.
FlexShares Quality Dividend Defensive Index Fund (NYSE:QDEF)
The fund replicates the price and yield performance, excluding fees and expenses, of the Northern Trust Quality Dividend Defensive Index. It has $440.5 million of assets under management and charges a fee of 0.37 percentage points every year. The fund has solid exposure to the Information Technology, Health Care and Consumer Discretionary sectors, with 19.6%, 12.5% and 12.1% exposure to each area.
WBI Power Factor High Dividend ETF (NYSE:WBIY)
The underlying Solactive Power Factor High Dividend Index tracks the performance of 50 large, mid and small-cap U.S.-listed stocks that exhibit high dividend yields and strong fundamentals. It has $96.4 million of assets under management and charges a fee of 0.7 percentage basis points per year. The fund has high exposure to the Consumer Discretionary, Financial Services and Technology sectors, allocating 30.1%, 20.6% and 12.9% to each of those areas, respectively (as of Jun 30).
Schwab U.S Dividend Equity ETF (NYSE:SCHD)
The underlying Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend-yielding stocks of U.S. companies with a record of consistently paying out dividends. These firms are also selected based on their fundamental strength relative to their peers, as measured by financial ratios. SCHD has assets under management of $10.27 billion and charges a fee of 0.06 percentage points a year. The fund has strong exposure to the Consumer Staples, Information Technology and Industrials sectors, with allocations of 21%, 18% and 16.6%, respectively. (as of Jun 30)
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WisdomTree U.S. Quality Dividend Growth Fund (DGRW): ETF Research Reports
FlexShares Quality Dividend Defensive Index Fund (QDEF): ETF Research Reports
WBI Power Factor High Dividend ETF (WBIY): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
