3 Must-Have ETFs for Income Investors

The US economy is recovering at a strong speed with increase in consumer and rising government spending. The GDP has reflected significant growth as compared to the first quarter of 2024. Thus, investing in ETFs which pick low volatility, high-dividend paying stocks could perform well and diversify portfolio efficiently.

Given the backdrop, let’s look at the must-have ETFs Global X NASDAQ 100 Covered Call ETF (QYLD), Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), and Global X SuperDividend U.S. ETF (DIV) for investors seeking regular income.

The US economy is regaining its growth as indicated in the second quarter results. The U.S. economy grew faster than expected levels in the last quarter thanks to the rising consumer spending, business investment coupled with boost from inventory building and increased government spending.

Also, the easing inflation pressures have strengthened the expectations of a September interest rate cut from the Federal Reserve. GDP increased at a 2.8% annualized rate in the second quarter, compared to the 1.4% growth pace in the first quarter.

Driven by the attraction of higher yields, potential for price appreciation amid anticipated Federal Reserve rate cuts, and declining corporate credit risks, the U.S. high-yield bond funds registered their biggest inflows of the year in May. U.S. high-yield bond funds totaled $5 billion in inflows in May, the highest level marked since December.

In the current year, the total inflows reached $6.10 billion, making it the highest in three years during January to May this year. Also, in terms of returns, high-yield bond ETFs have performed well on a total return basis. Over 80% of high-yield bond ETFs have seen positive returns for the year.

Considering these conducive factors, let’s look at some of the must have ETFs such as QYLD, SPHD, and DIV for regular income.

Global X NASDAQ 100 Covered Call ETF (QYLD)

QYLD seeks yield from the Nasdaq-100 via options premium. The fund tracks an index that holds Nasdaq 100 stocks and sells call options on those stocks to collect their premiums. The fund tracks the CBOE Nasdaq-100 BuyWrite V2 Index.

The fund has assets under management (AUM) of $7.94 billion. QYLD’s top holdings include Apple Inc. (AAPL) with a 9.16% weighting, followed by Microsoft Corporation (MSFT) at 8.33%, and NVIDIA Corporation (NVDA) and Meta Platforms Inc. Class A (META) at 7.12% and 4.99%, respectively.

The ETF has a total of 103 holdings, with its top 10 assets comprising 49.91% of its AUM. QYLD’s expense ratio is 0.61%, higher than the category average of 0.37%. Over the past six months, its fund inflows were $378.68 million and $117.85 million over the past year.

QYLD pays an annual dividend of $2.05, which translates to a 11.77% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 2.7% over the past ten years. Notably, QYLD has paid dividends for 9 consecutive years.

QYLD has surged 2.4% over the past nine months to close the last trading session at $17.45. It has a beta of 0.71. The fund’s NAV was $17.45 as of August 13, 2024.

QYLD’s POWR Ratings reflect its solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

QYLD has an A grade for Buy & Hold and a B grade for Trade. Within the A-rated Large Cap Blend ETFs group, it is ranked #141 of the 280 ETFs.

To access all QYLD’s POWR Ratings, click here.

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

SPHD invests in the least volatile, highest dividend-yielding S&P 500 stocks. The fund picks the 50 least volatile stocks selected from a shortlist of the S&P 500's 75 highest dividend-yielding securities. The fund tracks the S&P Low Volatility High Dividend index.

The fund has an AUM of $3.35 billion. Its top holdings include Altria Group, Inc. (MO) with a 2.98% weighting, followed by Crown Castle Inc. (CCI) at a 2.87% weighting, and Verizon Communications Inc. (VZ) and VICI Properties Inc. (VICI) at 2.79% and 2.56%, respectively. SPHD has a total of 51 holdings, with the top 10 assets comprising 25.90% of its AUM.

The fund has an expense ratio of 0.30%, compared to the category average of 0.72%. Over the past month, SPHD fund inflows came in at $213.99 million and over the past three months, its inflows were $189.66 million. Also, it has a beta of 0.85.

SPHD pays an annual dividend of $1.83, which translates to a 3.83% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 3.1% over the past three years. Further, SPHD has paid dividends for 11 consecutive years.

SPHD has gained 15.8% over the past six months and 14.2% over the past year to close the last trading session at $47.64. The fund has a NAV of $47.63 as of August 13, 2024.

SPHD’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

SPHD has an A grade for Buy & Hold, Peer, and Trade. The fund is ranked #25 in the list of 89 ETFs in the A-rated Large Cap Value ETFs group.

To access all the POWR Ratings for SPHD, click here.

Global X SuperDividend U.S. ETF (DIV)

DIV invests in 50 of the highest dividend yielding equity securities in the United States. The fund invests across the overall US equity space seeking for companies with large, consistent dividends and low volatility to Indxx's market benchmark. DIV tracks the INDXX SuperDividend U.S. Low Volatility Index.

With $620.20 million in AUM, DIV’s top holdings are Virtu Financial, Inc. Class A (VIRT) with a 3.31% weighting, Telephone and Data Systems, Inc. (TDS) at 2.75%, and National Health Investors, Inc. (NHI) and Philip Morris International Inc. (PM) at 2.68% and 2.47%, respectively. The ETF has a total of 51 holdings, with its top 10 assets comprising 25.25% of its AUM.

The fund has an expense ratio of 0.45%, lower than the category average of 0.72%. DIV fund inflows were $1.78 million over the past month.

DIV pays an annual dividend of $1.14, which translates to a 6.41% yield at the current price level. Further, the fund’s dividend payouts have increased at a CAGR of 0.4% over the past three years. DIV has paid dividends for 10 consecutive years.

DIV has gained 8.7% over the past six months and 4.4% over the past year to close the last trading session at $17.73. It has a beta of 1.02. The fund’s NAV was $17.75 as of August 13, 2024.

DIV’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

The fund has an A grade for Trade, Peer, and Buy & Hold. Of the 26 ETFs in the A-rated Mid Cap Value ETFs group, DIV is ranked #8.

Click here to see all the DIV ratings.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

QYLD shares were trading at $17.42 per share on Wednesday afternoon, down $0.03 (-0.17%). Year-to-date, QYLD has gained 7.64%, versus a 15.05% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

More...