Fixed income investors looking to chase yield may consider dividends instead of bonds. More investors have been flocking to dividend-paying companies amid an uncertain market where a potential recession could be forthcoming.
“Dividend-paying companies are typically going to have higher levels of free cash flow,” said Dave Sekera, chief U.S. market strategist at Morningstar, in a CNBC report.
“Both of those have definitely been attractive for investors this year as we see the economy softening, interest rates rising, and inflation still running hot,” Sekera added.
With rate hikes forthcoming, the search for more yield can start with a pair of dividend-focused ETF options from Global X: the Global X SuperDividend U.S. ETF (DIV ) and the Global X SuperDividend ETF (SDIV ). Of the two options, DIV keeps dividends within the safer confines of U.S. debt, which might be a safer play given the current market uncertainty regarding a recession.
Per its fund description, DIV seeks to provide investment results that generally correspond to the price and yield performance, before fees and expenses, of the Indxx SuperDividend® U.S. Low Volatility Index. The underlying index tracks the performance of 50 equally weighted common stocks, including Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs), that rank among the highest dividend-yielding equity securities in the United States.
DIV gives investors:
- High-income potential: DIV accesses 50 of the highest dividend-paying equities in the United States, potentially increasing a portfolio’s yield.
- Monthly distributions: DIV makes distributions every month and has made distributions each month for over seven years. With rates scheduled to rise in 2022 worldwide, this could translate to higher yields.
- Low volatility: DIV’s index methodology screens for equities that have exhibited low betas relative to the S&P 500 to produce low volatility returns.
- A 30-day SEC yield of 4.80%
Additional Yield Overseas
For bolder investors willing to extract additional yield in lieu of more risk, there are options for dividend-producing equities overseas with SDIV. The fund seeks investment results that generally correspond to the price and yield performance of the Solactive Global SuperDividend Index, which tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world including emerging market countries.
- High income potential: Potentially increasing a portfolio’s yield, SDIV accesses 100 of the highest dividend-paying equities around the world.
- Monthly distributions: SDIV makes distributions on a monthly basis and has made distributions each month for over ten years.
- Global exposure: Investing in equities from around the globe can help diversify geographic and interest rate exposure.
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