- As rising inflation takes a bite out of household purchasing power, these dividend ETFs could help mitigate the crisis.
- SPDR S&P Dividend ETF (SDY): Features a healthy portfolio of relevant big blue chips.
- ProShares S&P 500 Dividend Aristocrats ETF (NOBL): Geared toward established secular businesses, NOBL may prove resilient.
- iShares Core High Dividend ETF (HDV): Focusing on higher yields, HDV is also one of the better-performing dividend ETFs this year.
While wagering on a single high-growth stock often features the greatest reward potential, such a targeted order could easily go awry. That’s why exchange-traded funds (ETFs) offer a viable tool for risk-averse investors, allowing buyers to distribute downside threats across a wide surface area. In the same vein, people should consider adding dividend ETFs to buy for their portfolios.
Primarily, dividend ETFs are incredibly relevant under present circumstances. Heading into 2022, American consumers recovering from the impact of the coronavirus pandemic faced another outbreak: soaring inflation. Soon thereafter, Russia made the unsettling decision to invade Ukraine, sparking greater pressure on the new normal economy. Given that prices are likely to continue accelerating – particularly for energy costs – passive income funds help mitigate the devastating surge.
Secondly, dividend ETFs allow investors to enjoy greater confidence in the stability of their returns. Let me be clear that any venture connected to the capital markets is subject to some baseline risk. However, betting on any one company or asset for passive income could be incredibly treacherous, especially under present circumstances. Thus, a passive income-generating ETF would make more sense due to diversification.
Finally, these funds are structured in such a way to hopefully deliver a stated goal, such as reliability or higher payouts. Therefore, the below dividend ETFs could be useful tools during these difficult times.
|Ticker||Exchage-Traded Fund||Current Price|
|SDY||SPDR S&P 500 Dividend ETF||$126.13|
|NOBL||ProShares S&P 500 Dividend Aristocrats ETF||$93.47|
|HDV||iShares Core High Dividend ETF||$105.31|
Dividend ETFs: SPDR S&P Dividend ETF (SDY)
Featuring an eclectic mix of reputable blue chips, the SPDR S&P Dividend ETF (NYSEARCA:SDY) is well worth consideration for those seeking dividend ETFs for a solid mixture of stability and robust passive income. As an example, the SDY’s top two companies in its core holdings are Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), oil giants that have cynically benefitted from the surge in crude oil prices.
Coming in third place is IBM (NYSE:IBM), a technology firm that’s slowly transitioning from being a legacy stalwart to leading in relevant innovations, such as cloud-computing applications, artificial intelligence and enterprise-level cybersecurity. And while Big Blue isn’t the sexiest name out there, it also features a dividend yield of 4.8%, helping the cause for the SDY ETF.
While intriguing, this fund isn’t without its issues. For one thing, SDY is currently running just under parity for the year, which isn’t terrible (in context) but isn’t great either. Also, SDY features an expense ratio of 0.35%, which is slightly under the category average of 0.39%.
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
As the name suggests, the ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL) focuses on a category of publicly traded companies called dividend aristocrats – a group of elite corporations that have 25 or more years of consecutive dividend increases. Naturally, then, NOBL is one of the more reliable ideas among dividend ETFs to buy.
For one thing, companies that have attained a distinguished status that takes nearly two generations to accomplish are unlikely to give it up cheaply. Frankly, the executives presiding over such firms wouldn’t want to have their reputations tarnished by being the first to give up the title. As well, the inclusion into this elite categorization is itself a massive marketing opportunity, particularly during rough times.
Now, the one conspicuous drawback for the NOBL ETF is that it’s an underperformer. Down 3% on a year-to-date basis, NOBL is certainly a better performer than the benchmark S&P 500 index, which is down 11%. Still, other dividend ETFs provide better returns. On balance, though, if you’re in this for the long haul, NOBL’s inherent reliability makes it worthwhile for consideration.
Dividend ETFs: iShares Core High Dividend ETF (HDV)
Focusing on higher yields, iShares Core High Dividend ETF (NYSEARCA:HDV) is likely to attract attention from investors – both Wall Street veterans and newcomers – due to the threat of rising inflation. Given that macroeconomic fears are mounting, which in turn may cause the Federal Reserve to abandon its hawkish strategy, inflation could be with us for a while.
In that case, passive income-generating dividend stocks may be just what the doctor ordered. Essentially, with the purchasing power of the dollar declining, investors need some way to combat the wealth erosion. Reliable dividend ETFs provide a convenient and hopefully effective solution.
With HDV, investors enjoy a two-fold advantage. First, the ETF is diverse, covering a wide range of suddenly relevant sectors such as energy, banking, consumer staples – even some vice plays to spice things up. Second, it’s one of the better-performing dividend ETFs available, having gained nearly 6% YTD.
One last kicker: HDV also features an expense ratio of 0.08%, well below the category average of 0.39%. You can almost have your cake and eat it too.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.