2 Elite Dividend ETFs That Yield Over 5%

Exchange-traded funds are the go-to for conservative investors who have a long timeframe. The yield you get today is very generous compared to just five years ago. Yet, it may not be the wisest idea to have your portfolio concentrated entirely in ETFs that yield in the low single digits. Having some higher-yielding ETFs can give you extra income with negligible added risk if you hold them for the long run.

If anything, the pros can outweigh the cons due to the diversification you get. High-yield dividend ETFs have exploded in popularity precisely because they solve two problems at once. They deliver the regular cash flow that retirees and near-retirees crave, while also spreading the single-stock risk that once haunted anyone who stretched for yield. The best of the group combine seasoned management, rock-bottom fees, and strict quality screens, so the payout is not just high but durable.

Here are two to look into:

iShares International Select Dividend ETF (IDV)

iShares International Select Dividend ETF (BATS:IDV) tracks the performance of 100 high dividend-paying companies across Europe, the Pacific, Asia, and Canada (EPAC region). It gives larger weightings to companies with higher dividends. IDV’s recent performance could be the start of a broader trend that may let it recoup years of underperformance vs. U.S.-listed dividend ETFs. The dollar is weakening, and international companies, specifically European ones, are doing surprisingly well.

The ETF replicates the performance of the Dow Jones EPAC Select Dividend Index.

Its holdings include British American Tobacco (NYSE:BTI), TotalEnergies (NYSE:TTE), Enel S.p.A. ADS, BHP Group (NYSE:BHP), and National Grid. No single stock has more than a 5% weighting, with BTI’s weighting at 4.74%, followed by TTE at 3.17%.

Diversifying into international stocks is a smart idea in the current environment, as trade wars and tariffs are unpredictable.

IDV comes with an 8.61% dividend yield and an expense ratio of just 0.50%, or $50 per $10,000 invested. This is much better than your run-of-the-mill ETF that gets you 3% or 4% with little upside. IDV is up 33.97% year-to-date, and will appreciate more if the USD keeps weakening. Dividends are paid quarterly.

iShares Advantage Large Cap Income ETF (BALI)

iShares Advantage Large Cap Income ETF belongs to an emerging type of ETF that uses options to amplify its income. It is a good idea to take advantage of this class of ETFs, as they give you some exposure to the underlying index and can consistently generate high yields by writing out options. Options investing is becoming increasingly popular due to the influx of retail investors, so it’s unlikely to be a shortage of people willing to pay high premiums for options. BALI gives you some of the highest yields in this class at 7.84%. The expense ratio is 0.35%, or just $35 per $10,000. Better yet, it pays monthly.

This ETF targets the large-cap segment of the market, and these stocks are traded more regularly. It uses a buy-write strategy, which involves holding large-cap stocks or S&P 500 futures while selling call options on them. This generates premium income from the options and boosts the overall yield, but it can cap upside potential during strong market rallies.

I expect such ETFs to get even more popular as interest rate cuts start. Treasuries yield higher than 4% at the moment, but rate cuts could cause these risk-free assets to yield much lower, sending higher yield seekers to ETFs like BALI.

The post 2 Elite Dividend ETFs That Yield Over 5% appeared first on 24/7 Wall St..