Today’s episode - High-Yield Dividend ETF

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Ready to break free from the ordinary and discover dividend ETFs that pack a punch? In this guide, we're venturing off the beaten path, steering clear of suspects like JEPI and SEHD. Instead, we're spotlighting six high-yield dividend ETFs that boast yields exceeding 5% and a track record of at least five years. These aren't just any funds; they've been handpicked for their consistent stock price growth and reliable dividend payouts. Whether you're a seasoned investor or just starting, this guide will equip you with the knowledge to make informed decisions and potentially supercharge your portfolio's income stream. Let's dive in and explore these hidden gems!

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In this guide, we’ll explore six high-yield dividend ETFs with yields of over 5% and a track record of at least five years. These ETFs are selected for their consistent growth in stock price and reliable dividends. We’re not including well-known funds like JEPI or SEHD, as they don’t meet our criteria. Let’s dive into these investments and understand their features.

Understanding Dividend Yields

Before we jump into the ETFs, let's clarify some basic concepts about dividends:

• Dividend Yield: This is the annual dividend paid by a fund divided by its share price. For instance, if a fund has a 5% annual dividend yield, it means for every $100 invested, you’ll receive $5 in dividends over a year.

• Payout Frequency: Dividends can be paid monthly, quarterly, or annually.

Example Quiz: Suppose a fund has a 5% annual dividend yield, paid monthly. On a $100 investment, how much will you receive each month?

• Answer: $0.42 (or 42 cents).

This is calculated by dividing the annual dividend of $5 by 12 months.

Another Quiz: If a dividend ETF shows a total annual return of 10% with a 3% dividend yield, does that mean you’re getting a 13% return?

• Answer: No, the 10% total return already includes the 3% dividend yield.

These quizzes help clarify common misconceptions about dividends and returns.

Top 6 High-Yield Dividend ETFs

Let’s review our top picks:

1. Franklin International Low Volatility High Dividend Index (LVHI)

• Yield: 6.64%

• Expense Ratio: 0.4%

• Payout Frequency: Quarterly

• Strategy: Focuses on profitability, high dividends, and low volatility, excluding U.S. stocks.

• Performance:

  • 12-month: 16% growth

  • 3-year CAGR: 9% growth

  • 5-year CAGR: Positive growth over 3%

• Key Holdings: Mercedes-Benz, Tesco, Novartis

LVHI aims to provide stable international dividends with low price volatility. Its performance has been solid, with healthy dividend payouts and positive price growth.

2. Pacer Global Cash Cows Dividend ETF (GCOW)

• Yield: 5.98%

• Expense Ratio: 0.6%

• Payout Frequency: Quarterly

• Strategy: Invests in large-cap stocks based on free cash flow yield and dividend yield, excluding REITs.

• Performance:

  • 12-month: Over 11% growth

  • 3-year CAGR: Consistent growth

  • 5-year CAGR: Positive growth

• Key Holdings: Bristol-Myers Squibb, AbbVie, Gilead Sciences

• Beta: 0.69 (indicating lower volatility)

GCOW focuses on companies with strong cash flow and dividend yields, offering stability and consistent performance.

3. InfraCap MLP ETF (AMZA)

• Yield: 7.54%

• Expense Ratio: 2.18%

• Payout Frequency: Monthly

• Strategy: Actively managed fund investing in midstream MLPs related to energy products.

• Performance:

  • 12-month: Over 28% growth

  • 3-year CAGR: 25% growth

  • 5-year: Mixed results with negative growth in price CAGR and dividend CAGR

• Key Feature: High monthly dividends

AMZA stands out for its high yield and monthly payouts, though it has a higher expense ratio and mixed long-term performance.

4. Cambria Orange Shareholder Yield ETF (FYLD)

• Yield: 5.48%

• Expense Ratio: 0.59%

• Payout Frequency: Quarterly

• Strategy: Invests outside the U.S. in top 100 stocks based on fundamentals and technicals.

• Performance:

  • 12-month: 15% growth

  • 3-year CAGR: 4.6% growth

  • 5-year CAGR: 10.8% growth

• Key Holdings: Tamron, BP

FYLD is actively managed with a focus on global stocks, offering a solid yield and steady performance.

5. Global X Uranium ETF (URA)

• Yield: 6.78%

• Expense Ratio: 0.69%

• Payout Frequency: Quarterly

• Strategy: Invests in uranium mining and engineering companies.

• Performance:

  • 12-month: Strong growth

  • 3-year CAGR: Impressive

  • 5-year CAGR: Over 23% growth

• Key Feature: Benefits from increased energy demand due to technological advancements

URA focuses on the uranium sector, benefiting from increased energy demands and technological innovations.

6. Invesco S&P Mid-Cap Quality ETF (XMHQ)

• Yield: 5.06%

• Expense Ratio: 0.25%

• Payout Frequency: Quarterly

• Strategy: Tracks the S&P Mid-Cap 400 Index, selecting top-performing mid-cap stocks.

• Performance:

  • Year-to-date: Over 23% growth

  • 5-year CAGR: Over 17%

• Key Holdings: Williams-Sonoma, Dick's Sporting Goods

XMHQ offers exposure to quality mid-cap stocks with strong performance and a reasonable expense ratio.

Performance Comparison

We compared these ETFs against a benchmark fund using Snowball Analytics:

• Performance: The portfolio of these ETFs outperformed Jeppy, with a balance of $1.6 million versus Jeppy’s $1.1 million.

• Dividends Received: $309,000 compared to Jeppy’s $401,000.

• Overall Net Performance: Our portfolio showed better results, with a 6.32% yield.

Illustration:

• Portfolio Balance: $1.6 million

• Jeppy Balance: $1.1 million

• Annual Dividends: $99,000 from our portfolio

The comparison demonstrates how this diverse selection of high-yield ETFs can potentially outperform well-known funds and provide a steady income.

That’s it for this episode!

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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.