A good strategy for risk-averse investors this year may be to buy dividend stocks that aren't volatile and that pay high yields. That way you can get some decent recurring income without taking on much risk. The best part of all: there's an exchange-traded fund (ETF) that's designed just for that.
The Invesco S&P 500 High Dividend Low Volatility ETF (NYSE Arca:SPHD) holds a portfolio of relatively safe, big-name stocks that you might invest in yourself if you were looking for a good dividend. Two of the fund's top holdings are telecom stocks AT&T (NYSE:T) and Verizon Communications (NYSE:VZ), each accounting for about 3% of the fund's weight.
Overall, there's some broad diversification within the fund with real estate stocks representing the largest group of stocks at around one-fifth of the ETF's total weight. Utility stocks are next at 16%, and consumer staples are also a key group, representing more than 12% of the fund's weight.
The ETF pays a yield of around 4% and so investors are getting a fairly high payout here. There are 51 holdings in the fund so there are definitely larger, more diversified funds out there. But by focusing on the S&P 500, good yields, and low volatility, this is a more specialized fund, and thus, could make it more valuable to investors. The ETF's expense ratio of 0.30% reflects that, as there are funds with lower costs out there. But for investors who want some stability this year while collecting some solid dividends, the fee could be well worth it.
Over the past 10 years, the ETF has generated total returns (which include dividends) of 161%. That's lower than the S&P 500's gains of 230%, but lower returns are to be expected when investors opt for safety over growth. And if that's your priority, then this could be a good ETF to hold in your portfolio this year.
