Investing in dividend stocks has become quite popular amid the pandemic-driven recession and stimulus programs adopted by the government. With near-zero interest rates, and the Fed’s repurchase of US treasury bills and mortgage backed securities, people dependent on interest income have been shifting their investments to dividend stocks. In addition, with rising unemployment and no decision regarding the next stimulus package so far, individuals have been turning to the stock market for a steady source of income.
Though the economy is getting back on its feet with the reopening of businesses across the country, the unemployment level still remains high. The Department of Labor reported 898,000 jobless claims last week. This is expected to rise amid speculation of a “second wave” during the holiday season. With a potential double-dip recession, dividend stocks are the best bet for people looking for stable and periodic payouts on their investments.
In this regard, Vanguard Dividend Appreciation ETF (VIG), SPDR S&P Dividend ETF (SDY), ProShares S&P 500 Dividend Aristocrats (NOBL), and iShares International Select Dividend ETF (IDV), which track companies having stable dividend payouts for a prolonged period are ideal dividend instruments.
Vanguard Dividend Appreciation ETF (VIG)
VIG invests in companies which have increased their dividend payouts consistently over the last 10 years. With $45.1 billion in assets under management (AUM), VIG’s major holdings include Microsoft Corporation (MSFT), Walmart, Inc. (WMT) and Procter & Gamble Co. (PG). This passively managed ETF closely tracks the NASDAQ US Dividend Achievers Select Index.
VIG has an expense ratio of 0.06% versus the category average of 0.39%. The ETF has gained 15.3% over the past six months, and 7.7% over the past three months. VIG pays an annual dividend of $2.23, which yields 1.7%. Its 4-year average dividend yield is 1.9%.
VIG has gained more than 50% since hitting its 52-week low of $87.71 in March. The ETF hit its 52-week high of 135.13 in October.
How does VIG stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
You can’t ask for better. It is also ranked #5 out of 204 ETFs in the Large Cap Blend ETFs group.
SPDR S&P Dividend ETF (SDY)
SDY invests in companies that have increased their dividend payouts for the past 20 years. It is one of the safest ETFs for investors looking for stable periodic dividend payouts. With an AUM of $17.9 billion, SDY replicates the performance of its underlying benchmark, the S&P High Yield Dividend Aristocrats Index. Its major holdings are AT&T Inc. (T), Exxon Mobil Corp (XOM), and National Retail Properties, Inc. (NNN).
SDY’s expense ratio of 0.35% is lower than its category average of 0.52%. It has gained 10.2% over the past six months, and 2.4% in the past three months. SDY pays an annual dividend of $2.83, yielding 2.9%. Its 4-year average dividend yield is 3.6%.
SDY hit its 52-week high of $108.81 earlier in February, but lost more than 60% to hit its 52-week low of $67.57 in March. The ETF has gained more than 40% since then.
It’s no surprise that SDY is rated “Buy” in our POWR Ratings system, with an “A” in Trade Grade, and a “B” in Buy & Hold Grade and Industry Rank. It is currently ranked #43 out of 85 ETFs in the Large Cap Value ETFs group.
ProShares S&P 500 Dividend Aristocrats (NOBL)
NOBL tracks companies that are a part of the S&P 500 index, and have increased their dividends for at least 25 consecutive years. NOBL has an AUM of $6.5 billion, investing in holding companies such as Target Corporation (TGT), VF Corp (VFC), and Carrier Global Corporation (CARR). NOBL closely tracks the S&P 500 Dividend Aristocrats Index.
NOBL has an expense ratio of 0.35% compared to the category average of 0.51%. It gained 17.1% over the past six months, and 5.3% over the past three months. NOBL pays an annual dividend of $1.61, which yields 2.1%. It’s 4-year average dividend yield is also 2.1%.
NOBL has gained more than 50% since hitting its 52-week low of $48.62 in March.
NOBL is rated a “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade, Buy & Hold Grade, Peer grade, and Industry Rank. It is also ranked #16 out of 204 ETFs in the Large Cap Blend ETFs group.
iShares International Select Dividend ETF (IDV)
IDV’s holdings comprise foreign companies yielding stable and high payouts. It has $3.8 billion in AUM, and it closely tracks the Dow Jones EPAC Select Dividend Index. Its major holdings are Rio Tinto PLC (RIO), British American Tobacco PLC (BTI), and Commonwealth Bank of Australia.
IDV’s expense ratio of 0.49% is slightly higher than the category average of 0.44%. The ETF returned 9.9% over the past six months. It pays an annual dividend of $1.78, yielding 7% on the prevailing price. IDV’s four-year average dividend yield is 5.6%.
IDV has gained more than 25% since hitting its 52-week low of $19.52 in March. The ETF had hit its 52-week high of $34.52 earlier this year in February before the pandemic-driven market crash.
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VIG shares were trading at $133.38 per share on Tuesday afternoon, up $1.32 (+1.00%). Year-to-date, VIG has gained 8.55%, versus a 8.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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