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Wall Street has been experiencing wild swings in September. After registering the biggest weekly losses of the year, the U.S. stock market bounced back at the start of this week on expectations of Fed rate cuts. However, economic slowdown concerns continued to weigh on the stocks (read: Top and Flop ETFs of Last Week).
Amid the current market volatility and the upcoming rate cuts, investors are in search of high-yield dividend ETFs and stocks. High-yield dividend ETFs and stocks play a defensive role in a portfolio and can reduce volatility in turbulent times. These products provide greater stability in the form of mature companies that are less volatile to the large swings in stock prices while ensuring safety in the form of outsized payouts or solid yields regularly, thanks to their strong cash flow streams.
We present three ETFs, Global X SuperDividend ETF (SDIV - Free Report) , First Trust NASDAQ Rising Dividend Achievers ETF (RDVY - Free Report) and Global X SuperDividend U.S. ETF (DIV - Free Report) , and three stocks, Barings BDC (BBDC - Free Report) , Delek Logistics Partners L.P. (DKL - Free Report) and British American Tobacco (BTI - Free Report) , which yield more than 5% in dividends and could be interesting plays should the same trends prevail.
The ETFs are not confined to a particular industry but offer broad exposure to a number of sectors. The stocks either have a Zacks Rank #1 (Strong Buy) or #2 (Buy), and a Growth Score of B or better.
Rate Cuts Loom
The Fed is expected to lower interest rates by 25 bps at each of the three remaining policy meetings this year. With inflation approaching the Fed's 2% target and signs of an economic slowdown, policymakers have made it clear that "the time has come" to start reducing the federal funds rate, which has been in the 5.25%-5.50% range since July 2023.
The latest CME FedWatch tool shows that the markets are currently pricing in a 66% chance of the Fed cutting rates by 25 bps and a 34% chance of a 50-bps cut when the Fed delivers its decision on Sept. 18.
Slowdown Concerns
The bouts of data show that the economy is slowing. The United States created 142,000 jobs in August, lower than 160,000 anticipated by economists. Prior month job growth was also revised lower, indicating signs of continued cooling in the labor market. The recent Job Openings and Labor Turnover Survey showed that job openings dropped to the lowest level since January 2021 in July. Last week’s ISM manufacturing survey also came weaker (read: Tap Dividend ETFs as Wall Street Wobbless).
Additionally, the decline in the mega-cap tech stocks took a toll on the stock market. Concerns that big technology companies’ shares, particularly those investing heavily in artificial intelligence (AI), have been overvalued continued to weigh.
Volatility Ahead
Volatility is expected to continue in the weeks ahead, given geopolitical tensions and the looming November elections. If we go by history, September is a weak month for the stock market. The seasonal phenomenon took a toll on the stocks as investors are more prone to selling than buying when they return from their summer vacations. Also, trading volume after Labor Day is mostly bearish, many mutual funds have fiscal years ending Sept. 30, window-dressing is rampant, and investors generally sell stocks to pay tuition bills for their kids’ private schools and colleges (read: 5 ETF Strategies to Survive a Historically Weak September).
ETFs in Focus
Global X SuperDividend ETF (SDIV - Free Report) – Annual Yield: 10.8%
Global X SuperDividend ETF provides exposure to 104 highest-dividend-paying equities around the world by tracking the Solactive Global SuperDividend Index. It has key holdings in financials, energy, real estate and materials.
Global X SuperDividend ETF has amassed $789.2 million in its asset base and sees a good trading volume of about 200,000 shares a day on average. It charges 58 bps in annual fees and carries a Zacks ETF Rank #3 (Hold) with a Low risk outlook.
First Trust NASDAQ Rising Dividend Achievers ETF provides exposure to a diversified portfolio of 50 companies with a history of raising their dividends and exhibiting the characteristics to continue to do so in the future. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 49 bps in annual fees. RDVY has key holdings in financials, industrials, consumer discretionary and technology.
First Trust NASDAQ Rising Dividend Achievers ETF has amassed $1.3 billion in its asset base and sees a good volume of 714,000 shares a day on average. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Global X SuperDividend U.S. ETF (DIV - Free Report) – Annual Yield: 6.2%
Global X SuperDividend U.S. ETF provides exposure to 50 of the highest dividend-paying equities in the United States by tracking the INDXX SuperDividend U.S. Low Volatility Index. It has key holdings in utilities, real estate, energy and consumer staples.
Global X SuperDividend U.S. ETF has amassed $639.2 million in its asset base while trading in a good volume of about 144,000 shares. It charges 45 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Why You Should Buy Dividend ETFs Now).
Barings BDC is an externally managed business development company that primarily makes debt investments in middle-market companies. The stock saw a positive earnings estimate revision of 3 cents for this year over the past 30 days, with an expected earnings growth rate of 7.56%. With a market cap of $1 billion, BBDC has a Zacks Rank #2 and a Growth Score of A.
Delek Logistics owns, operates, acquires and constructs crude oil and refined products logistics and marketing assets. Its earnings are expected to grow 5.6% this year. With a market cap of $1.9 billion, the stock has a Zacks Rank #2 and a Growth Score of B.
British American Tobacco (BTI - Free Report) – Annual Yield: 7.6%
British American Tobacco is the holding company of a group of companies that manufacture, market and sell tobacco products. The company’s earnings are expected to grow a modest 0.4% this year. British American Tobacco has a Zacks Rank #2 and a Growth Score of B. It has a market cap of $86.7 billion.
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ETFs & Stocks With Yield of More Than 5% to Buy
Wall Street has been experiencing wild swings in September. After registering the biggest weekly losses of the year, the U.S. stock market bounced back at the start of this week on expectations of Fed rate cuts. However, economic slowdown concerns continued to weigh on the stocks (read: Top and Flop ETFs of Last Week).
Amid the current market volatility and the upcoming rate cuts, investors are in search of high-yield dividend ETFs and stocks. High-yield dividend ETFs and stocks play a defensive role in a portfolio and can reduce volatility in turbulent times. These products provide greater stability in the form of mature companies that are less volatile to the large swings in stock prices while ensuring safety in the form of outsized payouts or solid yields regularly, thanks to their strong cash flow streams.
We present three ETFs, Global X SuperDividend ETF (SDIV - Free Report) , First Trust NASDAQ Rising Dividend Achievers ETF (RDVY - Free Report) and Global X SuperDividend U.S. ETF (DIV - Free Report) , and three stocks, Barings BDC (BBDC - Free Report) , Delek Logistics Partners L.P. (DKL - Free Report) and British American Tobacco (BTI - Free Report) , which yield more than 5% in dividends and could be interesting plays should the same trends prevail.
The ETFs are not confined to a particular industry but offer broad exposure to a number of sectors. The stocks either have a Zacks Rank #1 (Strong Buy) or #2 (Buy), and a Growth Score of B or better.
Rate Cuts Loom
The Fed is expected to lower interest rates by 25 bps at each of the three remaining policy meetings this year. With inflation approaching the Fed's 2% target and signs of an economic slowdown, policymakers have made it clear that "the time has come" to start reducing the federal funds rate, which has been in the 5.25%-5.50% range since July 2023.
The latest CME FedWatch tool shows that the markets are currently pricing in a 66% chance of the Fed cutting rates by 25 bps and a 34% chance of a 50-bps cut when the Fed delivers its decision on Sept. 18.
Slowdown Concerns
The bouts of data show that the economy is slowing. The United States created 142,000 jobs in August, lower than 160,000 anticipated by economists. Prior month job growth was also revised lower, indicating signs of continued cooling in the labor market. The recent Job Openings and Labor Turnover Survey showed that job openings dropped to the lowest level since January 2021 in July. Last week’s ISM manufacturing survey also came weaker (read: Tap Dividend ETFs as Wall Street Wobbless).
Additionally, the decline in the mega-cap tech stocks took a toll on the stock market. Concerns that big technology companies’ shares, particularly those investing heavily in artificial intelligence (AI), have been overvalued continued to weigh.
Volatility Ahead
Volatility is expected to continue in the weeks ahead, given geopolitical tensions and the looming November elections. If we go by history, September is a weak month for the stock market. The seasonal phenomenon took a toll on the stocks as investors are more prone to selling than buying when they return from their summer vacations. Also, trading volume after Labor Day is mostly bearish, many mutual funds have fiscal years ending Sept. 30, window-dressing is rampant, and investors generally sell stocks to pay tuition bills for their kids’ private schools and colleges (read: 5 ETF Strategies to Survive a Historically Weak September).
ETFs in Focus
Global X SuperDividend ETF (SDIV - Free Report) – Annual Yield: 10.8%
Global X SuperDividend ETF provides exposure to 104 highest-dividend-paying equities around the world by tracking the Solactive Global SuperDividend Index. It has key holdings in financials, energy, real estate and materials.
Global X SuperDividend ETF has amassed $789.2 million in its asset base and sees a good trading volume of about 200,000 shares a day on average. It charges 58 bps in annual fees and carries a Zacks ETF Rank #3 (Hold) with a Low risk outlook.
First Trust NASDAQ Rising Dividend Achievers ETF (RDVY - Free Report) – Annual Yield: 8.5%
First Trust NASDAQ Rising Dividend Achievers ETF provides exposure to a diversified portfolio of 50 companies with a history of raising their dividends and exhibiting the characteristics to continue to do so in the future. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 49 bps in annual fees. RDVY has key holdings in financials, industrials, consumer discretionary and technology.
First Trust NASDAQ Rising Dividend Achievers ETF has amassed $1.3 billion in its asset base and sees a good volume of 714,000 shares a day on average. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Global X SuperDividend U.S. ETF (DIV - Free Report) – Annual Yield: 6.2%
Global X SuperDividend U.S. ETF provides exposure to 50 of the highest dividend-paying equities in the United States by tracking the INDXX SuperDividend U.S. Low Volatility Index. It has key holdings in utilities, real estate, energy and consumer staples.
Global X SuperDividend U.S. ETF has amassed $639.2 million in its asset base while trading in a good volume of about 144,000 shares. It charges 45 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Why You Should Buy Dividend ETFs Now).
Stocks in Focus
Barings BDC (BBDC - Free Report) – Annual Dividend: 10.70%
Barings BDC is an externally managed business development company that primarily makes debt investments in middle-market companies. The stock saw a positive earnings estimate revision of 3 cents for this year over the past 30 days, with an expected earnings growth rate of 7.56%. With a market cap of $1 billion, BBDC has a Zacks Rank #2 and a Growth Score of A.
Delek Logistics Partners L.P. (DKL - Free Report) – Annual Yield: 10.6%
Delek Logistics owns, operates, acquires and constructs crude oil and refined products logistics and marketing assets. Its earnings are expected to grow 5.6% this year. With a market cap of $1.9 billion, the stock has a Zacks Rank #2 and a Growth Score of B.
British American Tobacco (BTI - Free Report) – Annual Yield: 7.6%
British American Tobacco is the holding company of a group of companies that manufacture, market and sell tobacco products. The company’s earnings are expected to grow a modest 0.4% this year. British American Tobacco has a Zacks Rank #2 and a Growth Score of B. It has a market cap of $86.7 billion.