Investor interest in dividend ETFs is increasing according to recent analysis. A monthly update from State Street Investment Management’s Global Head of Research Strategists Matt Bartolini assessed a few notable trends including dividend ETF flows on the rise. Amid increasing economic pressure for investors, those funds could help add some all-important income.
Key Takeaways:
- Investors want income right now as inflation rises, especially those at or near retirement.
- According to recent analysis from SSIM, more than $6 billion came into dividend strategies in June.
- Funds like XUDV, SCHD, and VYM offer examples of the kind of reliable dividend offerings out there in the ETF wrapper.
Dividend strategies, he wrote, helped lift smart beta strategies as a whole into net inflows. He also noted that dividend strategies added more than $6 billion in flows for June. While active funds are pressuring so-called smart beta funds, he concluded, dividend funds continue to stand out for their role delivering that income.
What kind of funds, then, could stand out amid those conditions? Dividend ETFs have been active for decades, from 2006’s Vanguard High Dividend Yield Index ETF (VYM ) to 2011’s Schwab US Dividend Equity ETF (SCHD ) to 2025’s Franklin U.S. Dividend Booster Index ETF (XUDV ).
XUDV, the newest, charges a nine-basis-point (bps) fee to track the VettaFi New Frontier US Dividend Select Index. The fund looks to select and weight stocks from 500 large-cap U.S. names to maximize yield. It limits individual weights to 5% and sectors to 30%.
That has helped the fund return 21.4% YTD according to ETF Database data, outperforming the ETF Database All Cap Equities category average in that time. It provided a 3.4% distribution rate per Franklin Templeton as of July 1.
VYM and SCHD, by contrast, charge four and six bps, respectively. VYM offers exposure to large-cap value names offering strong dividends. SCHD also does, requiring a long track record of dividend payments. VYM has returned 11.6% YTD while SCHD has returned 18% YTD. VYM provided a 2.23% 30-day SEC yield as of May 31, per Vanguard. SCHD meanwhile provided a 3.35% 30-day SEC yield as of June 30, per Schwab data.
Taken together, the three funds offer strong options to get that dividend ETF exposure. With both solid performance and notable income, the trio could intrigue for the second half.
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