Harry Domash's Winning Investing



High-Dividend ETFs

Dividend Paying Exchange-Traded-Funds

In term of interest rates, banks are still paying next to nothing.

So, you’ll have to look elsewhere if you want to earn a decent return on your money.

So, today, I’m featuring four Exchange-Traded-Funds (ETFs) that pay monthly dividends ranging from 4.9% to 8.2% annual yields.

Given that many folks, including me, consider the current stock market to be overheated, I’ll focus on relatively low-risk ETFs.

Low Beta Equals Low Risk

I’ll use “beta,” a volatility gauge, to measure risk. For beta, the higher the number, the higher the risk. Most analysts consider stocks or funds with beta below 1.0 to be low-risk, so I’ll confine my list to ETFs with betas below that number.

So, in a minute, I’ll describe four relatively low-risk ETFs that pay monthly dividends equating to 4.9% to 8.2% dividend yields. But first, some things you need to know.

About ETF Dividend Yields

Unlike most dividend paying mutual funds and common stocks, ETFs typically don’t pay fixed monthly dividends. Instead their payouts vary from month to month. So, we have to calculate ETF dividend yields by comparing an ETF’s last 12-month’s total dividend payouts to its recent share price. For example, the yield would be 10% for a fund that paid dividends totaling $1.00 per share over the past year and recently traded at $10.00 per share.

Evaluating Return Numbers

As is the case for all dividend paying securities, returns include dividends received plus share price appreciation over the covered period. You will notice that the ETF 12-month return figures listed for the ETFs are abnormally high. That’s because last year the market bottomed in mid-March and was still near that low in mid-April. In fact, as of April 20, the S&P’s 12-month return was 48%. So, pay more attention to the three year average annual return numbers.

With that in mind, here are the ETFs.

Four Low-Beta ETFs

•  Amplify CWP Enhanced Dividend Income (DIVO): Actively managed, the fund holds mostly large-cap stocks with strong dividend growth track records. The fund pays a 4.9% dividend yield and has returned 41% over the past 12-months, and averaged 15% annually over the past three years. Beta is 0.8.

•  Xtrackers J.P. Morgan ESG USD High Yield Corporate Bond (ESHY): Tracks an index of high-yield (junk-rated) corporate bonds issued by firms not deriving revenues from coal, tobacco, or weapons. It pays a 5.8% dividend yield and returned 20% over the past 12-months and averaged 4% annually over three-years. Beta is 0.1.

•  Saba Closed-End Funds (CEFS): Actively managed, the fund holds closed-end funds trading at discounts to their net asset values. It actively trades the portfolio to maximize discounts to net asset values. It pays an 8.2% dividend yield and returned 41% over 12-months and averaged 10% annually over three years. Beta is 0.4.

•  Strategy Shares NASDAQ 7HANDL (HNDL): Portfolio holds a balanced portfolio of U.S. equities, bonds and alternative investments, and employs leverage (23%) to enhance returns. Pays a 6.9% dividend yield and has returned 19% over 12-months and averaged 9% annually over three years. Beta is 0.7.  

Those are my ideas based. As you’ve heard, past performance doesn’t predict the future. Due your own due diligence. The more you know about your investments, the better your results.

published 4/27/21

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