S&P Endorses Two Dividend ETFs

An ugly August and a similar start to September has led to some juicy yields for select dividend ETFs and the folks at S&P Equity Research have identified a pair that have the right mix of diversified holdings, low costs and high yield. By S&P's own admission, finding dividend ETFs that sport all three of those traits is not easy task, especially when screening for those funds that the firm also has “overweight” ratings on, but two ETFs made the cut: The WisdomTree Equity Income Fund DHS and the iShares Dow Jones Select Dividend Index Fund DVY. With an expense ratio of 0.38% and a current distribution yield of 3.69%, DHS ranks as S&P's top choice of the pair. The ETF allocates 18.6% of its sector weight to consumer staples and nearly 17% of its weight to health care names. Utilities, telecom and financials also receive double-digit weights in the ETF, which is home to nearly 300 stocks. Dow components AT&T T, Pfizer PFE, Chevron CVX, Johnson & Johnson JNJ and Verizon VZ are the top-five holdings in DHS. Most of DHS' top-10 holdings receive “strong buy” ratings from S&P. DVY, which has an expense ratio of 0.4% and a yield of about 3.5%, is home to 101 and is far less diverse at the sector level than DHS, but the ETF still garners an “overweight” rating from S&P. Utilities account for 35% of the fund's sector weight, followed by consumer goods (21.7%) and industrials (12.7%). Chevron also appears among DVY's top-10 holdings as does fellow Dow component McDonald's MCD. VF Corp VFC and Kimberly Clark KMB are also top-10 holdings in DVY, which has over $6.9 billion in assets under management. Year-to-date, DHS has slightly outperformed DVY.