Today’s episode - Dividend ETF

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Navigating the vast world of ETFs can be overwhelming. With over 9,000 options globally, finding the perfect dividend-focused ETFs requires careful consideration. This guide will illuminate your path, showcasing five top dividend ETFs that can potentially deliver long-term value. Whether you dream of traveling the world, perfecting your golf swing, or enjoying a peaceful retirement, these ETFs can help pave the way.

Join us as we delve into the world of dividend investing and uncover the gems that can help you build a brighter financial future!

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Dividend investing is a powerful strategy for building wealth, similar to how a dog reacts instantly when it spots a squirrel. However, with over 9,000 exchange-traded funds (ETFs) available globally, selecting the best dividend-focused ETFs can be overwhelming. In this guide, we will explore five top dividend ETFs that are worth considering for long-term investment, allowing you to enjoy life’s pleasures like traveling, playing golf, or simply relaxing.

Criteria for Selection

To identify the best dividend ETFs, we use the following criteria:

1. Historical Performance: We aim to maximize returns based on past performance.

2. Price Growth: We want funds with positive price appreciation, not just rising dividends. This helps avoid dividend traps where the fund’s overall value is declining.

3. Diversification: We ensure that the ETFs do not overlap more than 50% in their holdings, preventing redundancy.

4. Unique Dividend Strategies: Each ETF should have a distinct approach to generating dividends, making them complementary in a diversified portfolio.

1. Amplify CWP Enhanced Dividend Income ETF (DEVO)

The Amplify CWP Enhanced Dividend Income ETF (DEVO) stands out with a unique strategy that combines dividends with option premiums.

• Strategy: This fund aims for a dividend income of 4% to 7% by writing call options on the top 25 S&P 500 companies. This approach provides downside protection but may limit upside growth.

• Top Holdings: Includes strong companies such as Microsoft, Caterpillar, Walmart, and Visa.

• Expense Ratio: 0.56%, which is higher due to active management of options.

• Dividend Yield: 4.6%, one of the highest in this group.

• Performance: Over the past 12 months, DEVO has had a price growth of over 7%, with a total return exceeding 12%. Although the three-year compounded annual growth rate (CAGR) for price was low, the overall total return was solid.

2. VanEck Energy Income ETF (EINC)

The VanEck Energy Income ETF (EINC) focuses on Master Limited Partnerships (MLPs), which are generally associated with resource-related companies.

• Strategy: Targets MLPs that benefit from lower interest rates and have a pass-through tax structure.

• Top Holdings: Features companies like OneOK, which operates in natural gas processing and transportation.

• Expense Ratio: 0.46%, relatively high due to its specific focus.

• Dividend Yield: 3.61%, though historically higher when interest rates were lower.

• Performance: The ETF has shown impressive results over the trailing 12 months and a three-year total return of over 18%. However, the five-year CAGR for price was only 3.7%, with a total return CAGR of over 9%. Note the negative dividend CAGR due to recent interest rate hikes.

3. Schwab US Dividend Equity ETF (SCHD)

The Schwab US Dividend Equity ETF (SCHD) is highly regarded for its solid track record of dividend payments and growth.

• Strategy: Invests in companies with a strong history of dividends and dividend growth.

• Top Holdings: Includes major players like Lockheed Martin, Chevron, Pepsi, and Coca-Cola.

• Expense Ratio: 0.06%, the lowest among the group.

• Dividend Yield: 3.53%, offering a reliable income stream.

• Performance: Consistently strong with positive returns across the 12-month, three-year, and five-year periods. Analysts forecast an average upside of over 13%.

4. JP Morgan Equity Premium Income ETF (JEPI)

The JP Morgan Equity Premium Income ETF (JEPI) employs a strategy similar to DEVO but with more holdings and a higher dividend yield.

• Strategy: Uses an actively managed approach to sell options, generating additional income.

• Top Holdings: Includes major companies such as Progressive, Amazon, and Trane.

• Expense Ratio: 0.35%, moderate compared to others.

• Dividend Yield: 7.68%, the highest among the ETFs discussed.

• Performance: While JEPI’s trailing 12-month total return is over 11%, it has a negative three-year price CAGR of -1.37%. Despite its recent popularity, it has a limited track record.

5. WisdomTree US Quality Dividend Growth ETF (DGRW)

The WisdomTree US Quality Dividend Growth ETF (DGRW) combines dividend income with growth potential.

• Strategy: Focuses on companies with strong earnings estimates and historical return on assets and equity.

• Top Holdings: Includes growth-oriented companies like Microsoft, Apple, Procter & Gamble, and Coca-Cola.

• Expense Ratio: 0.28%, lower than average.

• Dividend Yield: 1.68%, the lowest in this selection.

• Performance: Strong performance with a 20% total return over the past 12 months. The three-year and five-year CAGR for total return are impressive, at nearly 13% and 14%, respectively.

Overlap Analysis

Here’s the overlap in holdings among these ETFs:

• DEVO and DGRW: 28%

• JEPI and DGRW: 25%

• SCHD and DGRW: 22%

• EINC: Minimal overlap with other funds

Conclusion

Each of these five dividend ETFs offers distinct advantages depending on your investment strategy. Whether you prefer high dividend yields, strong historical performance, or a blend of growth and income, there’s an ETF here to fit your needs. 

Remember, investing is a journey, not a sprint. While August and September may present challenges, they're also rife with opportunities for those willing to do their homework. Keep your eyes on the horizon, stay informed, and never stop learning.

If you find this review helpful, you might also find our IWA portfolio useful. If you're interested in ETFs, take the first step towards a safer and more profitable investment journey by checking out our IWA portfolio today. ⬇️.

IWA PORTFOLIO

The Market Panic of August 5, 2024

🟢 +172.65%

On August 5, 2024, one of the most panic-stricken days hit the financial markets in recent years. We are all familiar with the events that triggered this widespread fear and the subsequent chain reaction.

🟢🟢 Made on that day and reflection:

• Nvidia: +24.85% ✅

• Meta: +15.99% ✅

• Amazon: +13.46% ✅

• Apple: +10.42% ✅

• Booking: +10.76% ✅

• Microsoft: +7.46% ✅

• Google: +3.85% ✅

I wanted to share with you the purchases I made that day. In hindsight, it might seem opportunistic since these acquisitions are now profitable, showing remarkable returns in a short period of time.

However, the most relevant aspect here is the approach I adopted that day. It wasn't just about taking advantage of the market downturn, but rather a strategy focused on acquiring high-quality businesses at heavily discounted prices. In moments of extreme panic, such as the one we experienced that day, the most valuable opportunities arise.

What matters is not whether those positions would be in the red or green today, but the fact that good businesses were bought with discounts of 15% to 20% due to market irrationality. These kinds of opportunities are rare, and when they arise, they are the essence of successful long-term investing.

Today, we hold 15 stocks for the Quality Growth Stocks Portfolio. As a Premium member, you can access them.

Investing in good businesses at a discount and maintaining a long-term vision is undoubtedly one of the best strategies for building wealth over time.

The IWA Portfolio is only available to Premium Subscribers.

IWA Quality Growth Stocks Portfolio

Return YTD 21.09% ➡️ 22.20%

Return 2Y 83.18% ➡️ 84.86%

Profitable Weeks 55.36%

IWA Quality ETF Portfolio

It’s one of the newest portfolios, having just celebrated its first anniversary. We are pleased with its progress, as it's safe, reliable, and stable.

Return YTD 18.65% ➡️ 18.79%

Return 2Y 53.28% ➡️ 53.47%

Profitable Weeks 60.71%

IWA High Dividend Portfolio

I am immensely proud of my holdings, which have grown from a small investment into a strong portfolio of 40 reliable stocks spanning stable industries, focusing on quality dividend growth.

Return YTD 11.66% ➡️ 12.41%

Return 2Y 15.73% ➡️ 16.51%

Profitable Weeks 57.14%

Portfolio Indicated Dividend Yield 2.66%

Upgrade to Investing Wise Academy Premium to get hold of our stocks!

The Stock Market Fear and Greed Index

Recently, the Fear and Greed Index, which measures the overall sentiment of investors in the stock market, has undergone a significant shift. This indicator, previously in the “Fear” level, currently stands at 51 points out of 100.

This change indicates a shift in how investors view risk and opportunity. When an index is in the "Fear" zone, it suggests heightened caution and risk aversion. Moving towards a "Neutral" state means that market participants are starting to express more confidence, albeit without reaching a greedy or overly optimistic stance.

The Fear and Greed Index is determined by considering various factors such as market volatility, bond demand, market breadth, and trading volume in safe and riskier assets. The move to a "Neutral" position suggests a balance between bullish and bearish forces, indicating that investors are evaluating market risks and opportunities more evenly.

It's essential to closely monitor this index in the upcoming weeks, as it could offer insights into the potential direction of the market. A sustained move toward increased greed could indicate a rise in risk-taking, while a shift back toward fear might signal a return to caution.

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Cheers to wealth, wisdom, and a dash of madness!

The Investing Wise Academy Team

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.