Dividend ETFs

We will be looking at a few different groups or sectors of ETFs that all have the common factor of being oriented toward paying dividends. These will be benchmarked against the TLT US Treasuries 20+ year fund, the SPY S&P 500 Equities fund, and the SDY S&P 500 stocks oriented toward dividends.

When The Fed starts to cut interest rates, these instruments tend to rise. When The Fed starts to raise rates, the dividend is now in competition with Treasuries that are paying higher rates, so selling prices tend to fall. Watch for when The Fed starts to raise rates and expect to leave dividend oriented bonds and funds when that is expected / likely soon. You can’t fight The Fed and it is slim consolation to be getting a 4% dividend on a principle that is shrinking daily and with a 4% inflation rate to boot… So while these can be very good in a ‘risk off’ world, once things swap to ‘risk on’, it’s time to leave them behind. They are not buy and forget investments, they are “buy and watch The Fed” investments.

Utilities ETFs

These are some utility ETFs. They give a general idea what Utilities are doing, and some small idea what strategy might be best. It would be best to then look in detail at particular utilities if you want to optimize potential dividends. OTOH, as a simple way to get exposure to utilities with some active management, they can be a simple first decision.

Utilities ETFs vs TLT, SPY, and SDY benchmarks

Utilities ETFs vs TLT, SPY, and SDY benchmarks

XLU  - SPDR Utilities ETF (Y: 4.3% right now)
TLT  - US Treasury 20+ year ETF
SPY  - S&P 500 stock index ETF 
SDY  - S&P 500 dividend stock ETF
PUI  - PowerShares Utility ETF
RYU  - Rydex Equal Weight S&P Utilities ETF
DBU  - Wisdom Tree Global Ex-US Utilities ETF
UPW  - Leveraged 2 x LONG Utilities (SWAPS + Stock) 
SDP  - Leveraged 2 x SHORT Utilities (SWAPS)

There are some other ETFs that are often near exact duplicates of these that are not on the chart. IPU is the SPDR International Utilities and is substantially the same as the DBU fund (but with a slightly lower dividend right now). JXI is the iShares “Global” Utility fund and has a mix of international (overlapping with the “international” fund) and some US utilities. Frankly, I think it would be better to pick US or International rather than take an average, but if you want to have lower performance but a much lazier approach, it might be what you want. GRID claims to be a ‘clean’ or ‘smart grid’ oriented fund. Thinly traded and with not much of interest that I could see. FXU is an AlphaDex fund that looks to be a near duplicate of RYU, and while it trades more shares, the dividend is down at 1.7% is not very interesting as a dividend fund. VPU, the Vanguard Utilities Fund was about the same as XLU but a bit of an under-perform in comparison. (About identical line, but significantly lower dividend.)

So it is possible to find other ETFs, but finding better ones is the important thing to do… Looking inside the holdings of an ETF via Yahoo! can let you ‘race’ their holdings and pick out the more interesting ones (in some cases). For those with foreign exposure, the fund may be able to get stocks you can not buy locally.

There is a pretty good description of some of these funds (with too many ads…) here:

http://www.thestreet.com/story/11308713/1/top-10-utilities-etfs.html

Telecom And Related ETFs

Some of these are international cell phone companies, some US centric, some wire line, and some are networking companies.

Cell Phone Services

A variety of cell phone providers from around the world

A variety of cell phone providers from around the world

1 year,
6 months

PCS  - MetroPCS - prepaid plans
DCM  - NTT DoCoMo - Tokyo
S    - Sprint Nextel - making a comeback
LEAP - Leap Wireless.  Low end prepay Cricket brand
TKC  - Turkcell  - Turkey
VZ   - Verizon - US top end carrier
AMX  - America Movil - Mexico
CEL  - Cellcom Israel
T    - AT&T 
VOD  - Vodaphone - London with global exposure

There is a nice list of Telecom ETFs here:

http://etf.stock-encyclopedia.com/category/telecommunications.html

Their list includes:

First Trust NASDAQ CEA Smartphone Index Fund (FONE) NEW
iShares Dow Jones U.S. Telecommunications Sector Index Fund (IYZ)
iShares Goldman Sachs Networking Index Fund (IGN)
iShares S&P Global Telecommunications Sector Index Fund (IXP)
MSCI ACWI ex US Telecommunication Services Sector Index Fund (AXTE)
Powershares Dynamic Networking Portfolio Fund (PXQ)
ProShares Ultra Telecommunications ETF (LTL) Leveraged ETF
ProShares UltraShort Telecommunications ETF (TLL)Leveraged ETF
SPDR S&P International Telecommunications Sector ETF (IST)
SPDR S&P Telecom ETF (XTL) NEW!
Telecom HOLDRS ETF (TTH)
Vanguard Telecommunication Services ETF (VOX)
Wireless HOLDRS ETF (WMH)

Selected Telecom related ETFs vs TLT, SDY, and SPY benchmarks

Selected Telecom related ETFs vs TLT, SDY, and SPY benchmarks

IYZ  - iShares US Telecom ETF (Y: 4% ) 
TLT  - US Treasury 20+ year ETF
SPY  - S&P 500 stock index ETF 
SDY  - S&P 500 dividend stock ETF
FONE - First Trust Smartphone Index ETF ( Y: <1% ) 
IGN  - North America Tech MultiMedia Network ETF ( Y: <1% )
IXP  - iShares Global Telecom ETF ( Y:  4.69% )
PXQ  - PowerShares Networking ETF ( Y: n/a )
IST  - SPDR International Telecom ETF ( Y: 7.96% )
VOX  - Vanguard Telecom ETF ( Y: 3.23$ )

One thing to notice right off is that many Telecom ETFs are not very dividend oriented, especially those in networking. Funds that are “North America” will most likely include RIMM Research In Motion that has been just plunging.

The astute observer will notice that many of the HOLDER tickers do not make it to my charts. They show in BigCharts as some other company or not at all. I have to wonder if something is going on at that company, or if they have just pruned some slow selling products. A minor “dig here”.

That ETF listing site also lists some telecom related, but less dividend oriented ETFs as well:

B2B Internet HOLDRS ETF (BHH)
Broadband HOLDRS ETF (BDH)
First Trust Dow Jones Internet Index Fund (FDN)
Internet Architecture HOLDRS ETF (IAH)
Internet HOLDRS ETF (HHH)
Internet Infrastructure HOLDRS ETF (IIH)
NASDAQ Internet Portfolio ETF (PNQI)

While not strictly a dividend oriented play, I’m going to include a chart of some of those tickers here as that makes it easy to see if the telecoms are buying those goods (raising those stock tickers) indicating a healthy telecom industry. As some of the “HOLDERS” tickers are not recognized by BigCharts (which may mean they have folded, or may mean BigCharts has some ticker confusion) I’m also going to add a couple of the more common telecoms. FWIW, I’m leaving off TKC and CEL, Turkish Telecom and Cellphone Israel. Both are in hard down trends (so much so that CEL has a dividend over 11%) but not interesting until that trend reverses. VIP Vimplecom, the Russian cell phone company is also dropping. At some point I might add a “rest of world” chart, but not today… Similarly S Sprint/Nextel is looking sort of bottomy, but just generally not winning…

Telecom Tech and Cell Phones

Telecom Tech and Cell Phones

VZ   - Verizon ( Y: 5% )
TLT  - US Treasury 20+ year ETF
SPY  - S&P 500 stock index ETF 
SDY  - S&P 500 dividend stock ETF
FDN  - Internet Index ETF
HHH  - Internet HOLDERS ETF
PNQI - NASDAQ Internet ETF
VOD  - Vodaphone ( Y: 7.04% ) 
T    - AT&T  ( Y: 5.82 % )

Having a self created fund from an equal spread of VZ, T, and VOD would give decent yield with prospects for some growth as long as folks continue using cell phones, along with some inflation protection. They IYZ fund is supposed to do that (or something like it) for you, but has a spread of other lesser names mixed in (including the S Stinker) and just isn’t cutting it, IMHO. How hard is it to pick the top half dozen cell and telco providers in the world, anyway?

Dividend Oriented Stocks ETFs

We will be looking at a set of Dividend Oriented ETFs. I’ve semi-randomly picked these based on a modestly eclectic mix of: things I’m familiar with, things that have an interesting name (that suggests something I’m interested in or know about or would like to know about – such as the Dogs Of The Dow strategy), or those that looked interesting on the chart.

I did edit some from my quick look. ENY, a Canadian Energy ETF, had a chart that looked more like a bottom than a rising line AND had a lower dividend that I like in a dividend oriented ETF. Similarly, GULF is an ETF oriented toward things near the Persian Gulf – so holds things like the Bank of Qatar, Bank of Kuwait, Maroc Telecom. Probably all “good stuff”, but not when Iran is threatening Nuclear War and closing of the Gulf and when the USA is leaving and when Egypt is having a revolution ‘do over’… So it, too, might be a great ‘bottom fishing’ opportunity right now (the chart looks ‘bottomy” but the yield listed as n/a in Bigchart, though 5.7% at Yahoo!, and I just don’t see that as ‘worth the risk’ unless one has some special insight or exposure to the area and holdings. Similarly, FDD a European Dividend fund, was left off as the Euro drop vs the dollar has taken it down. Why take a 2.4% Dividend in a falling ticker?

There are two relevant benchmarks on this chart. SPY, the equities benchmark S&P 500. TLT, the US Treasuries 20+ year bonds.

Selected Dividend Oriented ETFs vs SPY and TLT benchmarks

Selected Dividend Oriented ETFs vs SPY and TLT benchmarks

TLT  -  US Treasuries 20+ year ETF  Y: 3.37%
SPY  -  S & P 500 stock index ETF - basic benchmark
AMLP -  Alerian Master Limited Partnership ETF  Y: 6.25%
MLPN -  Midstream Energy Infrastructure ETN Y: 5.42%
DOD  -  Dogs of the Dow ETN  Y: 0%
FGD  -  Dow Jones Global Select Dividend ETF  Y: 4.81%
PID  -  PowerShares International Achievers ETF  Y: 3.9%
SDY  -  S&P Dividend ETF.  Y: 3.74% (Bigcharts) 3.21$ TTM Yahoo!
DWX  -  SPDR International Div. ETF.  Y: 4.04% (B.C.)  7.03$ TTM Yahoo!
KBWD -  PowerShares High Div Financials ETF  Y: 5.93%  N/A TTM Yahoo!

The yield percent given will change over time as the ticker price changes. The numbers noted here are for illustration only (i.e. check the present yield before you buy anything – it’s up to YOU to do YOUR homework for YOUR decisions.)

For many of these, the yield is substantially the same listed on BigCharts or on Yahoo! Finance. For some they diverge greatly. Why? Well, there can be different reporting methods or basis. Yahoo! has a TTM Trailing Twelve Months while Bigcharts declines to state if it’s TTM, more recent dividend annualized, or estimated. (I could likely dig it out, but find it easier to just hit Yahoo! and compare). When they diverge a lot, like where DWX has a nearly 2:1 ratio, “something is up” and you need to look into it. To me, it looks like the international funds are being a bit more spotty perhaps in part as international folks often pay a dividend one time only in December, so a quarterly dividend report would not catch the annual dividend due Real Soon Now.

Also, a reminder, ETN is exchange traded NOTE. It holds things like options and futures contracts, not the underlying asset, so can have a variety of odd ‘wastage’ behaviours as the “time value of options” decays. Not always, but watch out for it. When an ETN starts to drop, you can NOT just hold and wait for the underlaying asset to recover. There isn’t any…

For funds that hold MLP (Master Limited Partnerships), this may be a way to keep the odd tax impact of MLP “unrelated income” out of impacting an IRA or 401K account. I don’t know for sure, but suspect that, since IT is a fund and not an MLP, the MLP odd tax treatment in the USA will be sterilized at the fund.

So, it looks to me like there are some decent charts here to choose among. Better yields than treasuries, with rising rather than the now flattened TLT graph, and with potentials for longer term growth in some of them. In future WSW postings I will, from time to time, highlight some of these funds. Right now that AMLP looks pretty good. While the DOD has no present yield, it is on a nice trajectory and the DOD method has been shown to outperform the Dow. SDY is outperforming the SPY, and has a nice yield. Even that KBWD financials has a chart that looks “bottomed” and with a high yield. The KBWD Holdings look like a modestly well diversified set of financials, but you would need to investigate each of them to know if they have any ‘stinkers’ or not. If you think that the US Financial Armageddon is past, well, the chart does look bottomy…

All in all, I think a present focus on dividend ETFs and stocks likely has some merit. This is a first cut at this infrastructure posting, and I’ll be adding to it over time.

Source List of ETFs

I didn’t chart ALL dividend oriented ETFs as that would take a bit longer than I’m willing to put into it (everyone must budget their time and life to some degree); so there may well be some “gems” hiding in the bulk lists. I picked up my basic list from one place. There are other places that one could also explore for other lists to search ( in particular, the home sites of each of the major ETF fund creator financial companies, such as iShares, PowerShares, Wisdom Tree, etc.) Again, a lot more “Dig Here!” is available than I have shovel. Besides, it looks like these folks are dedicated to doing that particular bit of homework for me, so I suspect some large part would just be a QA process on their work product.

If anyone else would like to ‘race’ some of the other ETFs and report back on any interesting ones found, just enter the ‘ticker symbols’ into an ‘advanced’ chart at Bigcharts.com and compare it to the others, or to the SPY benchmark S&P 500 ETF. Don’t forget to look at the dividend rate shown, too, as it can be the whole reason to hold an otherwise ‘flat’ ETF. (But NOT a reason to hold one that is below the Simple Moving Average stack and falling!)

The place I picked up a list:

http://etf.stock-encyclopedia.com/category/high-dividend-etfs.html

At that link, each ETF has a live link to a description page that tells you more about it, so if you see something interesting here, you can easily see more about it there. Alternatively, I’ll put a ticker symbol into the Yahoo! finance page (in the “get quote” box in the upper left of their page) and then click on ‘profile’ and / or ‘holdings’ on the left side to see what they really own… For example, here is a link to the holdings of the ENY “Canadian Energy” ETF.

http://finance.yahoo.com/q/hl?s=ENY+Holdings

Not doing too well right now, so not graphed above. While one place called it “Sustainable Energy ETF”, the holdings look like oil sands to me. IFF it were doing well in the carts or had more than a 4% dividend, I’d dig more; but for a paltry 3.3% dividend and something that looks more “ring down at a bottom” than moving up in growth, well, just not interesting enough right now.

Their whole list, as of today (and it WILL change over time, so check the link in future weeks/months/years). The Ticker is in parenthesis at the end of the name listing:

Alerian MLP ETF (AMLP)
Credit Suisse Cushing 30 MLP Index ETF (MLPN)
ELEMENTS Dogs of the Dow ETN (DOD)
First Trust DJ STOXX Select Dividend 30 Index Fund (FDD)
First Trust Dow Jones Global Select Dividend Index Fund (FGD)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
First Trust Value Line Dividend Index Fund (FVD)
Guggenheim/BBD High Income Index ETF (LVL)
Guggenheim/SWM Canadian Energy Income Index ETF (ENY)
Guggenheim/Zacks International Multi-Asset Income Index ETF (HGI)
Guggenheim/Zacks Multi-Asset Income Index ETF (CVY)
iShares Dow Jones International Select Dividend Index Fund (IDV)
iShares Dow Jones Select Dividend Index Fund (DVY)
JPMorgan Alerian MLP Index ETN (AMJ)
KBW High Dividend Yield Financial Portfolio ETF (KBWD) NEW!
Middle East Dividend Fund (GULF)
Powershares Dividend Achievers Portfolio Fund (PFM)
Powershares High Yield Equity Dividend Achievers Portfolio Fund (PEY)
Powershares International Dividend Achievers Portfolio Fund (PID)
SPDR S&P Dividend ETF (SDY)
SPDR S&P International Dividend ETF (DWX)
UBS E-TRACS Alerian MLP Infrastructure ETN (MLPI)
UBS E-TRACS Alerian Natural Gas MLP ETN (MLPG)
Leveraged ETF UBS E-TRACS Leveraged Long Alerian MLP Infrastructure ETN (MLPL)
Short/Bearish ETF UBS E-TRACS Short Alerian MLP Infrastructure ETN (MLPS)
UBS E-TRACS Wells Fargo MLP ETN (MLPW)
Vanguard Dividend Appreciation ETF (VIG)
Vanguard High Dividend Yield ETF (VYM)
WisdomTree DEFA High-Yielding Equity Fund (DTH)
WisdomTree Dividend Top 100 Fund (DTN)
WisdomTree Emerging Markets High-Yielding Equity Fund (DEM)
WisdomTree Emerging Markets Small Cap Dividend Fund (DGS)
WisdomTree Europe High-Yielding Equity Fund (DEW)
WisdomTree Europe Small Cap Dividend Fund (DFE)
WisdomTree High-Yielding Equity Fund (DHS)
WisdomTree International Dividend Top 100 Fund (DOO)
WisdomTree International Large Cap Dividend Fund (DOL)
WisdomTree International MidCap Dividend Fund (DIM)
WisdomTree International Small Cap Dividend Fund (DLS)
WisdomTree Japan High-Yielding Equity Fund (DNL)
WisdomTree Japan Small Cap Dividend Fund (DFJ)
WisdomTree Japan Total Dividend Fund (DXJ)
WisdomTree Large Cap Dividend Fund (DLN)
WisdomTree MidCap Dividend Fund (DON)
WisdomTree Pacific ex-Japan High-Yielding Equity Fund (DNH)
WisdomTree Pacific ex-Japan Total Dividend Fund (DND)
WisdomTree Small Cap Dividend Fund (DES)
WisdomTree Total Dividend Fund (DTD)
Claymore CDN Dividend & Income Achievers ETF (CDZ-TSX)listed on the Canadian TSX stock exchange
Claymore Global Monthly Advantaged Dividend ETF (CYH-TSX)listed on the Canadian TSX stock exchange
Horizons AlphaPro Dividend ETF (HAL-TSX)listed on the Canadian TSX stock exchange
Horizons AlphaPro Global Dividend ETF (HAZ-TSX)listed on the Canadian TSX stock exchange
iShares CDN Diversified Monthly Income Fund (XTR-TSX)listed on the Canadian TSX stock exchange
iShares CDN Dividend Index Fund (XDV-TSX)listed on the Canadian TSX stock exchange
iShares DJ Euro STOXX Select Dividend Fund (IDVY-LSE)listed on the British London Stock Exchange
iShares FTSE UK Dividend Plus Fund (IUKD-LSE)listed on the British London Stock Exchange

You will note that the list includes, near the bottom, ETFs that trade only on the Canadian or UK exchanges. I tend to ignore them as I don’t have an account that lets me trade there easily, but if folks would like, I can do charts from some of those markets as well. (Though the tool I use would be in $US, so you would get a combined ETF / USD effect…)

Preferred Stock ETFs

Preferred Stocks are an odd sort of ‘half a loaf’ vehicle. They get a first claim on dividends (that ‘preferred’ claim) but only up to a point, then they get no more. So long term they tend to act somewhat like bonds, except in times when a business is in distress when they are junior to the bond holders… but in a MILD down turn, they are preferred over the common stock (but with limited participation in any upside growth). For most folks a preferred stock doesn’t have much benefit. You give up the ‘first claim’ position of the bond holder AND the upside participation of the common stock holder. Yet they can have a nice dividend with a bit more protection than for the common stock. So while I rarely own any preferred shares, and have never owned a preferred share ETF, they can give a nice yield. If you have a preferred in a major company (like, say, General Electric) the odds of a complete bankruptcy can be fairly low, while rapid growth is also unlikely. In that context, giving up the first position of a bond and the tepid growth of the common can be a decent deal.

OK, the chart:

Selected Preferred Stock ETFs vs SPY, TLT, and SDY as benchmarks

Selected Preferred Stock ETFs vs SPY, TLT, and SDY as benchmarks

TLT    - US Treasury 20+ year ETF
SPY    - S&P 500 stock index ETF 
SDY    - S&P 500 dividend stock ETF
TO:CPD - Toronto Stock Exchange: Canadian Preferred ETF
IPFF   - International Preferred ETF
CNPF   - Canadian Preferred ETF
PGF    - PowerShares Financial Preferred ETF
PFF    - iShares US Preferred Stock Index ETF
PGX    - PowerShares Preferred Portfolio ETF
PSK    - Wells Fargo Preferred Stock ETF

There are a couple of other Toronto traded funds, but one is a “North American” and the other is a Canadian with some US fund, but both hedged to Canadian Dollars. Rather specialized…

iShares S&P U.S. Preferred Stock Index Fund (PFF)
Powershares Financial Preferred Portfolio Fund (PGF)
PowerShares Preferred Portfolio Fund (PGX)
SPDR Wells Fargo Preferred Stock ETF (PSK)
Claymore S&P/TSX CDN Preferred Share ETF (CPD-TSX)listed on the Canadian TSX stock exchange
Horizons AlphaPro Preferred Share ETF (HPR-TSX)listed on the Canadian TSX stock exchange
iShares S&P/TSX North American Preferred Stock Index Fund (XPF-TSX)listed on the Canadian TSX stock exchange

Overall, these are up significantly off their spike down, and yields are in the 5% to 11% range ( PGF is 11.5% as I type). So there is yield available, but with some risk in exposure to financials. IFF you think the Euro will not bring down the USA or Canadian financial system, these yields can be nice. Not exactly my cup of tea, but for some folks it can be useful.

Note that IPFF and CNPF are relatively new funds, so have shorter lines that pick up part way across the chart.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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12 Responses to Dividend ETFs

  1. adolfogiurfa says:

    Economy at the ER´s screen! :-)

  2. E.M.Smith says:

    @Adolfo:

    Well, yes ;-)

    I’ve added a chart of preferred stock ETFs. You can see how they spike down on any financial panic, then rise back to rolling flat at their full value on the fear leaving.

    In general, a run to ‘safety and dividends’ happens during “risk off” times. When that run fades, it is time to exit and move toward ‘risk on’ stocks.

    Right now it’s still a place where dividend hunters are hunting…

    I’m going to add Utility ETFs a bit later.

  3. E.M.Smith says:

    OK, I’ve now added some telco / telecom related ETFs and stock tickers as well. One could put water and trash hauling in here as well, but those are, IMHO, best handled as a list of individual stocks.

    There are limits to how useful ETFs can be, and when an industry has only a few interesting players, it can be better to look at them directly rather than take a semi-random basket… For example, a mix of VZ, T, and VOD is reasonably well diversified while dodging most of the losers in the field and has a better dividend than the IYZ fund. The fund can’t just buy those three and justify their existence, so you end up with a dilution from “bright ideas” that were not so bright.

    Also note that the Yield % noted ( Y: xx% ) in the charts will change with changes in the tickers. At a future point I will be removing those from the posting as they will have changed. For now it’s just an example so you can see how much things vary. In future WSW postings I’ll refer to this page and for selected issues note the then current yield in the WSW posting.

    With that, one comment about “now” in this posting: It does look like the individual selected telecoms and some of the dividend ETFs have nice looking charts, off a bottom, and with decent yield. A very decent alternative to treasuries now that they have stopped rising.

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  5. E.M.Smith says:

    @R. de Haan:

    That article pretty much sums up why I’m so vocal about stopping the spending in DC…

    But this thread is more about what to buy… SO “Avoid Greek debt” and buy more non-EU non-US debt…

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