8 Dividend ETFs With Minimal Financial Exposure

by on September 24, 2012 | ETFs Mentioned:

Many dividend-focused ETFs have significant exposure to financial institutions, since this sector generally has a long history of making substantial cash payouts to shareholders. But investors looking to lower overall volatility and focus on more stable companies may find big allocations to the financial sector to be incompatible with their risk tolerance [see Free Report: How To Pick The Right ETF Every Time].

Fortunately, there are a number of ETFs that offer exposure to dividend-paying stocks with little or no allocations to the financial sector. Below, we profile eight of them:

1. iShares High Dividend Equity Fund (HDV)

This ETF is linked to the Morningstar Dividend Yield Focus Index, a benchmark that is designed to target U.S. stocks that have provided relatively high yields on a consistent basis. That methodology results in top holdings such as AT&T, Pfizer and Johnson & Johnson, but relatively little weighting to banks and financial stocks [see DARS Ratings for T, JNJ and PFE with a free trial to Dividend.com Premium].

HDV allocates only about 1% to the financial sector; the bulk of the portfolio is in healthcare (about 29%), consumer goods (21%), telecoms (18%) and utilities (16%).

2. Dividend Achievers Portfolio (PFM)

PFM follows the Broad Dividend Achiever Index, which is designed to identify a diversified group of companies that have consistently raised dividends over the last ten years. Some of the companies featured in this ETF include AT&T, Coca Cola, Walmart, Chevron and other giant cap companies all in the United States, but with relatively few holdings in real estate and financial institutes [try our Free ETF Stock Exposure Tool].

The bulk of this ETF is in the consumer defensive (about 27%), energy (16%), industrials (14%) and healthcare sectors (11%), with minority holdings in real estate (1.5%).

3. Morningstar Dividend Leaders Index Fund (FDL)

This ETF is linked to the Morningstar Dividend Leaders Index, which is a modified market capitalization weighted index of the top 100 consistent dividend growing companies. This approach results in top holdings such as  AT&T, Johnson & Johnson, Verizon and Merck, but with little weighting to technology and consumer cyclical companies [see also Monthly Dividend ETFdb Portfolio].

Besides financials, FDL also allocates no holdings to real estate; the bulk of the portfolio is devoted to healthcare (about 27%), utilities (26%) and communication services (20%).

4. US Dividend Equity ETF (SCHD)

This ETF follows the Dow Jones U.S. Dividend 100 Index, which only tracks financially strong and consistent dividend paying stocks in the United States. This criteria has led to major holdings with companies such as Chevron, Wal-Mart, Exxon Mobil and other large or giant cap companies traded in the United States.

SCHD allocates no holdings to real estate and only about 1% to communication services; the bulk of the portfolio is in consumer defensive (about 30%), industrials (18%) and healthcare (16%).

5. Global Natural Resources Fund (GNAT)

GNAT is linked to the WisdomTree Global Natural Resources Index, a fundamentally weighted index that measures the performance of natural resources companies around the world that also pay a dividend. This results in majority holdings in companies such as KGHM Polska Miedz SA, Israel Chemicals and Southern Copper Corporation [see also Dividend ETFs: Going Beyond The United States].

This ETF allocates about half of its portfolio to energy and the other half to basic materials, with minority holdings in consumer defensive (about 4%) and industrials (1%).

6. International Dividend Ex-Financials Fund (DOO)

This ETF is linked to the WisdomTree International Dividend ex-Financials Index, which holds companies based in developed markets,outside of the United States, that have high-yielding dividends. The largest companies represented are the United Kingdom (16%), France (15%), Australia (12%) and Germany (12%), with major holdings in companies like France Telecom, Singapore Airlines and Telstra Corp.

DOO has a fairly even coverage of holdings between all the other sectors, with a little extra weighting to communications (about 16%), utilities (13%) and energy (13%).

7. Dividend Ex-Financials Fund (DTN)

This ETF follows the WisdomTree Dividend ex-Financials Index, which only holds companies based in the United States that have high-yielding dividends without exposure to the financial sector. This results in top holdings such as Frontier Communications, Southern Copper, Duck Energy, and CenturyLink Inc. [see also How To Find The Right Dividend ETF].

DTN, like DOO, has fairly even coverage of all market sectors, excluding finance and real estate, but does have a tilt towards industrials (about 16%), utilities (13%), consumer defensive (13%) and communications (13%).

8. China Dividend Ex-Financials ETF (CHXF)

CHXF is the newest ETF on this list and using the Wisdom Tree China Dividend ex-Financials Index, exclusively offers exposure to China. This index follows only the 10 highest dividend yielding companies in each sector, outside of financials. Top holdings in China Mobile, PetroChina, China Shenhua Energy, and other state-owned companies make up the majority of this ETF [try our Free ETF Country Exposure Tool].

This ETF has a slant to the energy sector (about 25%), but also even coverage of materials, telecom, industrials and consumer staples (all 14%). Included in this ETF is also minority exposure to information tech (7%), utilities (6%) and consumer discretionary (5%).

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Disclosure: No positions at time of writing.