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Exchange-Traded Funds First Cut ETFs

Lower-Risk, Higher-Yielding ETFs

As potential ideas for income-seeking investors, this month’s ETF First Cut seeks funds with above-average yields and below-average levels of category risk.

by Charles Rotblut | July 2021

Charles Rotblut leads a class in AAII's new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

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To provide income-seeking investors with potential ideas, this month’s ETF First Cut seeks funds with above-average yields and below-average levels of category risk.

For exchange-traded funds, yield is calculated as income for the most recent 12 months divided by the month-end net asset value.

The category risk index compares how volatile an ETF’s total return has been over the last three years relative to its category. For example, a risk index of 0.90 for a fund indicates that it is 10% less volatile than the typical fund in its category. Values above 1.00 denote more risk than average and values below 1.00 denote less risk than the category average.

Passing ETFs are required to have at least $100 million in assets. ETFs with assets below this level are at greater risk of being closed. A minimum daily trading volume of 10,000 shares is also required to ensure the shares can be bought and sold with relative ease.

The 25 ETFs passing this First Cut screen with the highest yields are shown below.

Most of the passing ETFs are from the large value and large blend categories. This not surprising since larger companies are more likely to pay dividends. Small-cap categories—particularly small-cap value—are more represented among the passing ETFs than mutual funds. This may be due to the greater use of indexing. Some ETF providers have created small-cap versions of their large-cap indexes in an attempt to grab market share.

Lower-Risk ETFs With Above-Average Yields
(Ranked by Yield)

Fund Ticker Yield
(%)		 Category Risk Index Category Risk Grade 1-Yr Ann’lizd Ret
(%)		 3-Yr Ann’lizd Ret
(%)		 Exp Ratio
(%)		 Category
iShares Core High Dividend ETF HDV 3.6 0.93 B 21.6 9.1 0.08 Large Value
WisdomTree US High Dividend ETF DHS 3.6 0.91 B 31.6 9.0 0.38 Large Value
Invesco High Yield Eq Div Achiev ETF PEY 3.6 0.84 A 53.7 11.6 0.52 Mid-Cap Value
VictoryShares US SmCp Hi Div Vol Wtd ETF CSB 3.2 0.83 A 80.9 15.5 0.35 Small Value
FT Cboe Vest S&P 500 Dv Ast Tgt Inc ETF KNG 3.1 0.87 A 39.6 15.5 0.75 Large Value
Invesco Dow Jones Industrial Avg Div ETF DJD 3.1 0.90 B 34.8 13.6 0.07 Large Value
Legg Mason Low Volatility High Div ETF LVHD 2.9 0.83 A 32.6 11.5 0.27 Large Value
Vanguard High Dividend Yield ETF VYM 2.8 0.89 A 37.8 12.0 0.06 Large Value
Schwab US Dividend Equity ETF SCHD 2.7 0.93 B 51.4 19.9 0.06 Large Value
SPDR S&P Dividend ETF SDY 2.5 0.90 B 42.2 14.1 0.35 Large Value
iShares Morningstar Value ETF ILCV 2.4 0.93 B 36.0 11.8 0.04 Large Value
VictoryShares US EQ Inc Enh Vol Wtd ETF CDC 2.3 0.80 A 45.3 16.5 0.37 Large Value
WisdomTree US LargeCap Dividend ETF DLN 2.2 0.90 A 32.9 13.4 0.28 Large Value
WisdomTree US Total Dividend ETF DTD 2.2 0.94 B 35.6 12.5 0.28 Large Value
SPDR SSGA US Large Cap Low Volatil ETF LGLV 2.0 0.89 A 32.2 16.6 0.12 Large Blend
ProShares S&P MidCap 400 Dividend Arst REGL 2.0 0.81 A 43.2 13.4 0.41 Mid-Cap Blend
WisdomTree US SmallCap Dividend ETF DES 1.9 0.88 A 63.6 7.1 0.38 Small Value
Franklin LibertyQ US Equity ETF FLQL 1.9 0.90 B 33.7 15.4 0.15 Large Blend
WisdomTree US Quality Dividend Gr ETF DGRW 1.8 0.93 B 35.3 15.6 0.28 Large Blend
ProShares Russell 2000 Dividend Growers SMDV 1.7 0.71 A 38.0 8.3 0.41 Small Blend
iShares MSCI USA Min Vol Factor ETF USMV 1.6 0.79 A 20.0 13.6 0.15 Large Blend
SPDR MSCI USA StrategicFactors ETF QUS 1.5 0.91 B 34.6 17.1 0.15 Large Blend
Vanguard Dividend Appreciation ETF VIG 1.5 0.87 A 34.6 17.4 0.06 Large Blend
Vanguard Small-Cap Value ETF VBR 1.5 0.89 A 70.7 11.3 0.07 Small Value
Invesco S&P SmallCap Low Volatility ETF XSLV 1.5 0.90 A 43.8 2.5 0.25 Small Blend
Source: AAII/Morningstar. Data as of 5/31/21.

Lower-Risk, Higher-Yielding ETFs Video

We think you’d like this related webinar! Individual Investor Show: Deep-Value Screen, High-Yield Equity Funds, Using PRISM to Select Funds


 

Discussion

ROBERT A from NC posted over 5 years ago:

I wish you would stop with this silly equating of "risk" with volatility. Volatility is just that -- volatility. It has nothing to do with risk to a long-term investor. If you're going to mention risk, then please define that term. (Risk of what!?) The only risk I'm concerned with is permanent loss of value, and volatility tells me nothing about that. Only if you are forced to sell (e.g. by a margin call) in the near future would you be concerned with how much a security might decline in the short run. If you're investing for the long term, all the ups and downs in between now and the "end" are irrelevant. But don't trust me -- read Warren Buffett on volatility!


ROBERT A from NC posted over 5 years ago:

I'm also wondering why DGRO (iShares Core Dividend Growth ETF) didn't make the cut. It yields around 2.1% with an expense ratio of .08%. I don't know what its "beta" is, but its volatility seems to be pretty low.


CHRISTOPHER F from GA posted over 5 years ago:

how would you rate QYLD? It has a very high and consistent dividend and has a Morningstar rating of 5 stars Chris F, Atlanta


Sneha J from IND posted over 5 years ago:

Hi! Out of the above listed 25 ETFs I humbly suggest to choose only the following 8 ETFs (ensured at least 1 in each category) which have shown a better performance. If we consider a period from 31st July 2015 till 30th June 2021 {6 years period - month to month basis.} then this combination in equal weightage shows that $ 10000/- invested in the beginning has grown pre-tax to $ 21,097/- . If one is able to make a 'basket' of these 8 ETFs it will be better. QUS SPDR MSCI USA StrategicFactors ETF> Large Blend, VIG Vanguard Dividend Appreciation ETF> Large Blend, SCHD Schwab US Dividend Equity ETF> Large Value, CDC VictoryShares US EQ Inc Enh Vol Wtd ETF> Large Value, REGL ProShares S&P MidCap 400 Dividend Arst > Midcap Blend, PEY Invesco High Yield Eq Div Achiev ETF> Midcap Value, SMDV ProShares Russell 2000 Dividend Growers > Small Blend, CSB VictoryShares US SmCp Hi Div Vol Wtd ETF > Small Value. And then, if you want least number of ETFs from this 25 ETF list just consider only the following 2 ETFs ..... VIG Vanguard Dividend Appreciation ETF & CDC VictoryShares US EQ Inc Enh Vol Wtd ETF My Best Wishes. Thanks & Regards! Prakash P. Joshi Mumbai, INDIA. [On behalf of my daughter who is a member of AAII]


Sneha J from IND posted over 5 years ago:

Hi! I have humbly tried to dig the entire list of "U S EQUITY" ETFs (Total 650 ETFs) made available on AAII site as on 31st May, 2021. Then decided to choose only selected few ETFs across all the categories on the basis of (i) Better amongst comparable peer category (ii) Consistency of better 'returns' over different time frames. When the exercise concluded, I could found out only 12 (Twelve) ETFs out of 650 displayed, that fits as per the my methodology. They are [Ticker Symbols] below:---- QQQ,SFYF,COWZ,ARKK,IPO,HAIL,XMMO,SYLD,SMDV,RZV,XSVM & RWJ. I made their 'basket' with equal weight and optimized it. The end result is >>>>> $ 10000/- invested in the 'basket' on 31st May, 2019 grown to tune of $ 20254/- as on 30th June, 2021 {span of 25 months} @ pre-tax CAGR 40.36%. Looks impressive? Experts please correct me if I am wrong. Shortly I will make similar exercise of two more categories viz. > Sector Equity ETFs and International Equity ETFs with reference to the relevant displayed list as on 31st May, 2021. Thanks & Regards! Prakash P. Joshi Mumbai, INDIA (On behalf of my daughter who is a AAII member)


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