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While the stock market has been hovering around a record level, exceeding all expectations, there are valid reasons to approach the current situation with caution. The continued excitement for AI, global growth slowdown and still-present inflationary pressure indicate potential bubbles.
Per the legendary investor John Hussman – famous for predicting the 2000 and 2008 crashes, the latest stock rally is ingrained in the extreme fear of missing out. FOMO (Fear of Missing Out) factors have surged in markets, and stock prices could decline 50%-70% this cycle. His firm's most reliable indicator now tops 1929 extremes, per a Business Insider article, as quoted on Yahoo Finance.
Ripe valuations, divergence among individual stock sectors, and uneven sentiment are factors to worry about, according to Hussman. Another point of caution is the growing set of stocks hitting fresh 52-week lows even as indexes themselves soar continuously.
Why Dividend ETFs Are Good Bets
Dividend ETFs can be a good investment during times of uncertainty, as they provide a steady source of income regardless of market conditions. These types of stocks and ETFs typically pay out a higher percentage of their profits as dividends than other stocks, which means that they can make up for the capital losses, if there is any.
High-dividend ETFs provide investors avenues to earn higher current income that would go a long way in protecting investors’ total returns. On the other hand, dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. These generally act as a hedge against economic uncertainty and act as a quality exposure. Additionally, aristocrats tend to skew the portfolio to less-volatile sectors and mature companies.
ETFs in Focus
ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL - Free Report) ) – Down 4% Past Week
The underlying S&P MidCap 400 Dividend Aristocrats Index targets companies that are currently members of the S&P MidCap 400 Index and have increased dividend payments each year for at least 15 years. The fund charges 40 bps in fees.
ProShares Russell U.S. Dividend Growers ETF (TMDV - Free Report) ) – Down 3.8% Past Week
The underlying Russell 3000 Dividend Elite Index targets companies that are currently members of the Russell 3000 Index, which represents approximately 98% of the investable U.S. equity market, have increased dividend payments each year for at least 35 years, and meet certain liquidity requirements. The fund charges 35 bps in fees and yields 2.49% annually.
Franklin U.S. Low Volatility High Dividend Index ETF (LVHD - Free Report) ) – Down 3.4% Past Week
The underlying QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility. The fund charges 27 bps in fees and yields 4.20% annually.
Invesco High Yield Equity Dividend Achievers ETF (PEY - Free Report) ) – Down 3.3% Past Week
The underlying NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 52 bps in fees and yields 5.11% annually.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) ) – Down 3.1% Past Week
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The fund charges 7 bps in fees and yields 4.53% annually.
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Time to Buy 5 Beaten-Down Dividend ETFs?
While the stock market has been hovering around a record level, exceeding all expectations, there are valid reasons to approach the current situation with caution. The continued excitement for AI, global growth slowdown and still-present inflationary pressure indicate potential bubbles.
Per the legendary investor John Hussman – famous for predicting the 2000 and 2008 crashes, the latest stock rally is ingrained in the extreme fear of missing out. FOMO (Fear of Missing Out) factors have surged in markets, and stock prices could decline 50%-70% this cycle. His firm's most reliable indicator now tops 1929 extremes, per a Business Insider article, as quoted on Yahoo Finance.
Ripe valuations, divergence among individual stock sectors, and uneven sentiment are factors to worry about, according to Hussman. Another point of caution is the growing set of stocks hitting fresh 52-week lows even as indexes themselves soar continuously.
Why Dividend ETFs Are Good Bets
Dividend ETFs can be a good investment during times of uncertainty, as they provide a steady source of income regardless of market conditions. These types of stocks and ETFs typically pay out a higher percentage of their profits as dividends than other stocks, which means that they can make up for the capital losses, if there is any.
High-dividend ETFs provide investors avenues to earn higher current income that would go a long way in protecting investors’ total returns. On the other hand, dividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. These generally act as a hedge against economic uncertainty and act as a quality exposure. Additionally, aristocrats tend to skew the portfolio to less-volatile sectors and mature companies.
ETFs in Focus
ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL - Free Report) ) – Down 4% Past Week
The underlying S&P MidCap 400 Dividend Aristocrats Index targets companies that are currently members of the S&P MidCap 400 Index and have increased dividend payments each year for at least 15 years. The fund charges 40 bps in fees.
ProShares Russell U.S. Dividend Growers ETF (TMDV - Free Report) ) – Down 3.8% Past Week
The underlying Russell 3000 Dividend Elite Index targets companies that are currently members of the Russell 3000 Index, which represents approximately 98% of the investable U.S. equity market, have increased dividend payments each year for at least 35 years, and meet certain liquidity requirements. The fund charges 35 bps in fees and yields 2.49% annually.
Franklin U.S. Low Volatility High Dividend Index ETF (LVHD - Free Report) ) – Down 3.4% Past Week
The underlying QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility. The fund charges 27 bps in fees and yields 4.20% annually.
Invesco High Yield Equity Dividend Achievers ETF (PEY - Free Report) ) – Down 3.3% Past Week
The underlying NASDAQ US Dividend Achievers 50 Index is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends. The fund charges 52 bps in fees and yields 5.11% annually.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD - Free Report) ) – Down 3.1% Past Week
The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The fund charges 7 bps in fees and yields 4.53% annually.