Dividend investing is in vogue this year amid huge volatility and uncertainty. This is especially true as these are major sources of consistent income for investors in any type of market though they do not offer dramatic price appreciation. These stocks tend to outperform in volatile markets and can reduce the volatility of a portfolio.
As such, dividend-focused ETFs have been garnering huge investor interest, led by Schwab U.S. Dividend Equity ETF (SCHD - Free Report) , which pulled in $8.9 billion in capital. This was followed by inflows of $6.4 billion for Vanguard High Dividend Yield ETF (VYM - Free Report) , $4.9 billion for iShares Core High Dividend ETF (HDV - Free Report) , $2.9 billion for iShares Core Dividend Growth ETF (DGRO - Free Report) and $2.2 billion for iShares Select Dividend ETF (DVY - Free Report) .
The dividend-focused products offer safety through payouts and stability in the form of mature companies that are less volatile amid large swings in stock prices. This is because the companies that pay out dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Additionally, dividend-paying stocks are gaining appeal in a rising rate environment, which is quite negative for bonds. The Fed hiked interest rates for the fourth consecutive time this year, taking the benchmark rate in the range of 2.25% and 2.5% to fight inflation. Lingering Russia-Ukraine tensions, China slowdown and recession fears added to the chaos, thereby making dividend investing an excellent choice (read: Inflation Cools But Food Prices Up Since 1979: ETFs in Focus).
Let’s delve deeper into the above-mentioned ETFs:
Schwab U.S. Dividend Equity ETF (SCHD - Free Report)
Schwab U.S. Dividend Equity ETF offers exposure to 104 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. Schwab U.S. Dividend Equity ETF is well spread across components, with none holding more than 4.4% of the assets. It charges 6 bps in annual fees and trades in a solid volume of about 3 million shares a day.
Schwab U.S. Dividend Equity ETF has AUM of $39 billion and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Vanguard High Dividend Yield ETF (VYM - Free Report)
Vanguard High Dividend Yield ETF provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 443 securities, the product is pretty well spread out across components as each holds no more than 3.3% of the assets (read: 5 ETFs Set to Bloom as Economy Recovers All Jobs).
Vanguard High Dividend Yield ETF has amassed $48.3 billion in its asset base while trading in volumes of 2 million shares a day on average. The expense ratio is 0.06%. VYM has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Core High Dividend ETF (HDV - Free Report)
iShares Core High Dividend ETF offers exposure to 75 high-quality and high-dividend stocks by tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms, with each making up no more than a 7.2% share.
iShares Core High Dividend ETF has AUM of $12.6 billion and trades in a solid volume of around 1.3 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Core Dividend Growth ETF (DGRO - Free Report)
iShares Core Dividend Growth ETF provides exposure to companies having a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. It holds 414 stocks in its basket, with each accounting for less than a 3.3% share (read: Growth ETFs Shining to Start Second Half: Here's Why?).
iShares Core Dividend Growth ETF has AUM of $24.7 billion and trades in solid volumes of about 1.6 million shares. It charges 8 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Select Dividend ETF (DVY - Free Report)
iShares Select Dividend ETF provides exposure to the high dividend-paying U.S. equities with a five-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 99 securities in its basket, with each accounting for less than 2.2% of assets.
iShares Select Dividend ETF has AUM of $22.7 billion and an average daily volume of around 897,000 shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.
