The latest job report has rekindled interest in high dividend ETFs and stocks. This reflects the highest number of job addition by the economy in February since July 2016 with a slowdown in wage growth, easing fears of rising inflation.
The news has dismissed chances of faster-than-expected rate hikes, which would sharply increase borrowing costs for consumers. The Fed is now expected to move toward gradual normalization of the monetary policy, providing some relief to high dividend products, which were battered by the recent aggressive stance adopted by the Fed. As a result, these products are positioned to be the biggest potential movers in the weeks ahead.
Additionally, Trump’s tariff plan is weighing heavily on investor sentiments as it could lead to a trade war. Further, geopolitical tension, instability in Washington, mid-term election and stretched valuations are adding to the woes.
Amid this backdrop, dividend paying securities are the major sources of consistent income for investors, creating wealth when returns from the equity market are at risk. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Given this, we have highlighted four ETFs and stocks that yield more than 5% in dividends and could be interesting plays for the coming months.
Using our database, we have selected ETFs that offer broad exposure to a number of sectors and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) with a decent AUM of above $50 million.
SPDR Portfolio Total Stock Market ETF (SPTM – Free Report) – Annual Yield: 7.12%
This fund offers exposure to the broad market by tracking the SSGA Total Stock Market Index, holding 2,791 stocks in its basket. It is a low-cost choice charging just 3 bps in annual fees and trades in average daily volume of 121,000 shares. The product has AUM of $1.5 billion and has a Zacks Rank #3.