Discover three dividend ETFs for straightforward and low-cost access to income Shares has identified three products with yields above 4% and with maximum annual charges of 0.4%
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surge in global inflation has forced central bankers to start raising interest rates. However this has not yet translated into significantly higher returns on cash deposits for savers. Investors continue to inhabit a world characterised by abnormally low interest rates, which poses a conundrum for those looking to generate an income from their money. High-dividend ETFs or exchange-traded funds, offer income-seeking investors a low cost way of achieving this goal. To help with idea generation Shares discusses three dividends ETFs that offer yields above 4%, with maximum ongoing charges of 0.4% Our trio of trackers are iShares UK Dividend ETF (IUKD), Wisdom Tree UK Equity Income ETF (WUKD), and SPDR UK Dividend Aristocrats (UKDV). ISHARES UK DIVIDEND ETF A notable and appealing feature of the iShares UK Dividend ETF is its 6.6% yield. This is marginally higher than the 6.4% yield offered by Wisdom Tree UK Equity Income ETF, but noticeably more generous than the 4% yield provided by the SPDR UK Dividend Aristocrats ETF – though the latter also captures dividend growth. The £879 million fund has delivered a return of 6.75% over one year and an 11.7% return over a three-year period. It tracks the FTSE UK Dividend+ index, which is drawn from a universe of the top 250 companies by market capitalisation from the FTSE 350. 50 stocks with leading dividend yields are selected by ranking them in descending order using a combination of one-year historic, and one-year
forecast dividend yields. A risk with a product which purely tracks high-yielding stocks is that a high yield can be a signal that a pay-out is vulnerable to being cancelled or cut. However, no stock can have a weighting of more than 5% in the index – which helps reduce the risk of performance being badly affected by one constituent cutting their dividend. SECTOR BREAKDOWN AND KEY EQUITY HOLDINGS The financials and consumer staples sectors together constitute nearly 50% of the fund’s exposure. The former comprises a little below 30% and the latter a touch shy of 20%. The high consumer staples weighting differentiates the fund from its peers and is reflected in the fund’s list of top holdings, specifically the 5% and 4.78% respective weightings in tobacco stocks British American Tobacco (BATS) and Imperial Brands (IMB). Year to date both BATS and Imperial Brands have performed strongly, rising by 23.9% and 28 July 2022 | SHARES |
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