Hunting for the perfect dividend stocks for your portfolio can be a challenging aspect of diversification. An easy way to mitigate these issues is by purchasing an exchange-traded fund (ETF) that invests in high-yielding stocks that fit your strategy.
The pros of investing in a dividend ETF:
- Annual shareholder distributions
- Lower volatility
- Investment strategies that meet your goals and needs.
The cons? The average market price returns and net asset value returns are typically low as the volatility in these stocks is not as high.
Here are two ETFs primarily investing in emerging markets and small-cap financial dividend stocks:
WisdomTree Emerging Markets High Dividend Fund DEM is offering a dividend yield of 8.40% or $3.04 per share annually, through quarterly payments, with a five-year average market price return of 3.09%. WisdomTree is a fundamentally weighted index that measures the performance of the highest dividend-yielding stocks selected from the WisdomTree Emerging Markets Dividend Index.
Companies are weighted in the Index based on annual cash dividends paid, and securities ranking in the highest 30% by dividend yield are selected for inclusion.
As of June 30, the WisdomTree ETF had $1.8 billion in assets under management. Its top weighted holding is in Vale S.A. VALE at 9.37%, and its top sector is in financials, equating to roughly 27% of the securities owned.
Invesco KBW High Dividend Yield Financial ETF KBWD is offering a dividend yield of 10.63% or $1.78 per share annually, making monthly payments, with a five-year average market price return of 3.10%. The Invesco KBW High Dividend Yield Financial ETF is based on the KBW Nasdaq Financial Sector Dividend Yield Index.
The fund generally will invest at least 90% of its total assets in the securities of publicly listed financial companies with competitive dividend yields, while being rebalanced and reconstituted quarterly, in the United States and that comprise the Index.
As of June 30, 2022, the Invesco ETF had $2.3 billion in assets under management. While its top-weighted holding is in ARMOUR Residential REIT Inc ARR of 4.88%, with roughly 86% of the funds assets being held in small-cap value, as of Sept. 2, 2022.
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