HDV iShares Core High Dividend

The broad U.S. equity markets have seen rough trading over the past few days as concerns over stretched valuation keep investors away from the momentum stocks. Some sluggish global economic indicators, possible interest rates hike in U.S. sooner than expected, Chinese slowdown, and ongoing turmoil in Russia-Ukraine are adding to the woes.

In such a challenging situation, several ETFs have easily managed to hold higher and are currently trending upward. In fact, these funds actually hit all-time highs, suggesting that these are better positioned to endure the ups and downs of the current volatile financial market than the other products (read: 3 Low Beta ETFs for This Volatile Market).  

The winners are not confined to a particular segment or industry but are spread across many corners of the space. Below, we have highlighted three funds surging to fresh highs that could be compelling choices for investors seeking to recycle their exposure in the equity markets.

iShares High Dividend ETF (HDV)

After fallen out of investors’ favor following the taper talk, dividend ETFs are gaining increased traction over the past few weeks. This is because interest rates have actually declined year-to-date despite the fact that the Fed is curtailing its monetary stimulus. The 10-year Treasury yield has fallen to 2.62% currently from 3.03% on April 11 (read: 3 Bond ETFs Surging as Interest Rates Tumble).   

This has resulted in dividend ETFs riding high and HDV becoming an intriguing option for investors. This ETF tracks the Morningstar Dividend Yield Focus Index, holding 75 U.S. stocks in its basket that offers relatively high dividend yields on a consistent basis. It is a large cap centric fund as 96% of total asset is allocated to this market cap level.

The product is highly concentrated on the top 10 holdings at 60.36% of assets with the largest allocation to AT&T (T), Chevron (CVX), Johnson & Johnson (JNJ). The product is slightly tilted toward consumer goods at 24.6%, closely followed by healthcare (20.07%), utilities (13.93%) and communication services (10.98%).

The fund is among the largest and most popular in the space with AUM of about $3.5 billion while charging 40 bps in fees per year. It trades in good volume of more than 342,000 shares a day and sports a dividend yield of 3.16%. HDV hit its record high of $73.62 per share on Monday, representing a gain of about 10.9% in the past one-year time frame.

iShares MSCI USA Minimum Volatility ETF (USMV)

Low volatility ETFs appear safe in the current market turbulence. These generally offer above-average returns while at the same time protect investors from downside risk. Further, investing in low volatility stocks may provide some hedge to the portfolio.

This is especially true as USMV recently hit its fresh high of $36.37 per share, and the fund has moved higher by about 10.8% in the past one year. The ETF provides exposure to 139 U.S. stocks having lower volatility characteristics relative to the broader U.S. equity market. It follows the MSCI USA Minimum Volatility (USD) Index.

The fund is widely spread across a number of securities as none of these holds more than 1.94% of assets. The ETF focuses deeply on large cap securities at 87% of total assets. Further, the product provides diverse exposure to a number of sectors with healthcare, consumer staples, information technology, financials and consumer discretionary accounting for double-digit allocation in the basket.

USMV is the second largest and a popular ETF in the low volatility space with AUM of $2.5 billion and average daily volume of around 419,000 shares. The fund is a low cost choice, charging only 15 bps in annual fees (read: 3 Dirt Cheap Top Ranked ETFs to Buy Now).

First Trust North American Energy Infrastructure Fund (EMLP)

MLPs are one of the major beneficiaries of the current turmoil in the financial market as these have solid growth potential and stable cash flows in addition to attractive yields. Additionally, the ongoing energy production boom in the U.S. continues to drive MLP firms higher.   

One of the attractive picks in this corner of the broader U.S. market is EMLP, which surged to all-time high of $25.20, representing nearly 8% gain over the past one year. EMLP is an actively managed fund designed to provide exposure to the securities headquartered or incorporated in the U.S. and Canada and are engaged in the energy infrastructure sector (read: 3 MLP ETFs Riding Out Market Volatility).      

The ETF has amassed $523 million in its asset base while trades in moderate volume of roughly 101,0000 shares a day. The fund charges a higher annual fee of 95 bps from investors. Holding 60 securities in its basket, the product is concentrated on the top two firms – Enbridge Energy and Kinder Morgan – with more than 7% share each.

From a sector look, more than half of the portfolio is allocated to pipelines while electric power companies round off the top two at 30.4%. The fund has a slight tilt toward large cap stocks with 51% share while mid and small caps take the remainder.

Bottom Line

Investors should note that while the above-mentioned products have underperformed the broad market fund (SPY) over the past one year, these easily crushed the broad fund in the past three months. HDV, USMV and EMLP added 8.26%, 5.42% and 9.24%, respectively, compared to a gain of 5.4% for SPY (see: all the Large Cap ETFs here).

These funds would continue to emerge as strong winners as long as market volatility remains in place or more political issues creep into the picture.  

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FT-NA EGY INFRA (EMLP): ETF Research Reports
 
ISHARS-HI DIV (HDV): ETF Research Reports
 
SPDR-SP 500 TR (SPY): ETF Research Reports
 
ISHARS-MS US MV (USMV): ETF Research Reports
 
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