Market Overview

Twelve For '12: Dividend ETFs to Watch In The New Year


The year 2011 has been a lot of things to investors and a lot of those things have been bad. One silver lining has been a steady stream of increased dividends throughout the year. So strong has the dividend news been this year that dividend increases in dollar terms by S&P 500 constituents beat the 2010 the end of April.

For the first four months of the year, the net indicated dividend increases for the S&P 500 is up 148% from the 4 Month April 2010 period, with the actual payments up 13.6%, according to Standard & Poor's.

But that was April. In the first quarter, 462 companies raised their dividends and that was followed by another 444 dividend boosts in the second quarter. Overall, 2011 has been very kind to dividend investors and that's a good thing in an environment fraught with depressed Treasury yields and piddly interest rates on CDs and money markets.

The Federal Reserve has said it plans to keep interest rates low until at least 2013, so it's all but mandatory that investors be involved with dividend stocks and ETFs. With that, here's a look at 12 must-know dividend ETFs for 2012. In no particular order...

SPDR S&P Dividend ETF (NYSE: SDY): With over $7.8 billion in assets under management (AUM), the SPDR S&P Dividend ETF is one of the bigger boys on the dividend ETF block and it's 0.35% expense ratio and current 3.23% yield are fair among dividend ETFs.

SDY tracks the High Yield Dividend Aristocrats Index, so you won't find a lot of Dow components in here. However, the ETF does offer double-digit weights to six sectors – staples, financials, utilities, consumer discretionary, industrials and materials. Overall, SDY is home to enough reliable dividend payers and high yielders to make it worth a look.

iShares Dow Jones International Select Dividend ETF (NYSE: IDV): It has been noted time and again that international dividend stocks often trump their domestic counterparts in the same sector. So if you find yourself craving global dividend plays, but just can't make up your mind, IDV is one option to consider. Home to 103 stocks and an expense ratio of 0.5%, it's easy to see one red flag with this ETF: An almost 22% allocation to financials and that's a problem when Italy, France, Germany, Austria, Spain and Greece are among an ETF's top-10 country weights.

Energy, utilities, consumer services and telecom names also get double-digit representation in IDV. Current yield 5.16%.

iShares Dow Jones Select Dividend Index Fund (NYSE: DVY): Home to almost $8.9 billion in AUM, 103 stocks and fees of 0.4%, DVY is another dominant dividend ETF. DVY is diverse at the stock level as the top-10 holdings account for just 22.7% of the ETF's total weight. However, three sectors account for 70% of DVY's sector weight. Nine Dow stocks are found among DVY's holdings. Current yield: 3.54%.

WisdomTree Emerging Markets SmallCap Dividend ETF (NYSE: DGS): There was a time when the combination of dividends, emerging markets and small-caps was quite alluring. Then along came 2011. The good news is DGS has been knocked down to very reasonable levels and this is one of the few ETFs offering double-digit exposure to Thailand outside of the Thailand-specific ETF itself. Taiwan and South Africa are the other double-digit country weights.

Above $44, DGS is a buy. Above $48, it's in rally mode. The ETF's current distribution yield is a stellar 6.41%.

WisdomTree International Dividend ex-Financials Fund (NYSE: DOO): Perhaps you're interested in IDV but that 22% weight to financials is off-putting. Who could blame you for feeling that way? Then check out DOO. It's fees (0.58%) are higher than IDV's, but financials are off the table with this ETF. That has helped DOO slightly outperform IDV year-to-date. Be advised that almost 43% of DOO's country weight is devoted to Euro Zone members. Current distribution yield: 2.73%.

WisdomTree Emerging Markets Equity Income Fund (NYSE: DEM): Consider the WisdomTree Emerging Markets Equity Income Fund to be the large-cap cousin to DGS. DEM's biggest issue isn't that it's an emerging markets play. It's that it's got 26% exposure to financials. Taiwan and Brazil account for over 41% of the ETF's country weight. That's probably not a selling point either, but DEM's chart has started to improve. Buy above $52 and add in above $56. Current distribution yield: 7.2%.

Global X SuperDividend ETF (NYSE: SDIV): Following its June debut, the Global X SuperDividend ETF has proven to be one of the more impressive new ETFs of 2011, hauling in almost $29 million in AUM. The premise here is simple: 100 stocks each with weights of 1% across a variety sectors and assets classes known for their robust yields. On that note, SDIV's most recent distribution yield of 5.27% is quite impressive.

Vanguard Dividend Appreciation ETF (NYSE: VIG): The Vanguard Dividend Appreciation ETF isn't going to win any yield contests with a yield barely above 2%. That's comparable to long-dated Treasuries. However, VIG's utility comes from two directions. First, it's 0.18% expense ratio is great for long-term investors. Second, VIG is a play in dividend increase news. Look at the ETF's holdings and you'll find stocks that just keep raising their dividends every year like clockwork.

Guggenheim ABC High Dividend ETF (NYSE: ABCS): It's probably fair to say the Guggenheim ABC High Dividend ETF isn't fully appreciated. The fund has some high points though when you get past the high expense ratio of 0.65%. It offers developed meets emerging markets exposure through a devotion to only Brazil, Australia and Canada. The ETF focuses only on large-cap names and six sectors get double-digit allocations. Current yield: 7.56%, according to Finviz.

Guggenheim Multi-Asset Income ETF (NYSE: CVY): The Guggenheim Multi-Asset Income ETF gets a bit more respect than ABCS and it has a lower expense ratio at 0.6%. Home to almost 150 stocks, CVY is a great mix of common stocks, American depositary receipts and master limited partnerships. No single stock gets of a weight of even 2% and don't be put off by the large weight to financials because with CVY, that doesn't mean money center or investment banks. It's more mortgage REITs and some preferred issues. Current yield: 5.27%.

PowerShares International Dividend Achievers ETF (NYSE: PID): The PowerShares International Dividend Achievers ETF doesn't get a lot of press, but it's a worthwhile global dividend play to consider, though you won't need to own it simultaneously with the comparable ETFs we've highlighted here. Financials only account for 10.3% of PID's weight and only one Euro Zone member (Spain) is featured in this ETF. PID could be a buy above $15.50. Current yield: 3.8%.

First Trust DJ Global Select Dividend ETF (NYSE: FGD): We'll let the First Trust DJ Global Select Dividend ETF's 0.6% expense ratio slide because we like the fact that the ETF holds 101 stocks across 10 sectors. We also like 60% of the country weight going to the U.S., Australia, the U.K. and Canada. If FGD rebalances to trim its Euro Zone exposure (15%) and weight to financials (19%), the ETF could be a pleasant surprise next year. Current yield: 4.75%.

Posted-In: Long Ideas News Broad U.S. Equity ETFs Short Ideas Dividends Dividends Specialty ETFs New ETFs Best of Benzinga


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