These funds are made up of a diversified basket of dividend-paying stocks
If you’re an income investor, your primary concern is finding solid investment vehicles paying out impressive dividends. Sure, there are plenty of individual stocks out there with high yields, but trying to pick the best ones can be is a trying task. Fortunately, the exchange-traded fund (ETF) landscape is wide enough now that you don’t have to venture into individual equities to get a diversified basket of high-yielding dividend stocks. Today, there are many dividend ETFs that do just that, and the following five are the highest-yielding of the bunch.
iShares S&P U.S. Preferred Stock Index (PFF)
Topping our list of high-yield dividend ETFs is the iShares S&P U.S. Preferred Stock Index (NYSE: PFF). This fund seeks to track the price and yield performance of the S&P U.S. Preferred Stock Index. Preferred shares held in this ETF include Ford Motor (NYSE: F), General Motors (NYSE: GM) and HSBC Holdings Plc (NYSE: HBC) among many other stellar dividend payers. As of March 31, the annual dividend yield on PFF was 7.35%.
PowerShares Preferred (PGX)
In second place is the PowerShares Preferred (NYSE: PGX). This fund seeks investment results that correspond generally to the price and yield performance of an index called The BofA Merrill Lynch Core Fixed Rate Preferred Securities Index. Basically, with PGX you own preferred stock in some of the best financial companies around, including Barclays (NYSE: BCS), JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo (NYSE: WFC). As of March 31, the annual dividend yield on PFF was 6.65%.
SPDR Wells Fargo Preferred Stock (PSK)
Coming in third on our list of top-yielding dividend ETFs is the SPDR Wells Fargo Preferred Stock (NYSE: PSK). This fund seeks to replicate as closely as possible the total return of the Wells Fargo Hybrid and Preferred Securities Aggregate index. As of March 31, the annual dividend yield on PFF was 5.83%.
As you can see, all three of our top-yielding dividend ETFs hold preferred shares. The key difference between preferred stock and common stock is that similar to bonds, the primary source of return in preferred stock is usually generated by a fixed dividend payment that must be paid out before dividends to common stockholders. The structure of preferred shares is one reason why the top three dividend ETFs all feature preferred stock.
Guggenheim S&P Global Dividend Opportunities Index (LVL)
Our next ETF dividend winner proves that not all high yields require preferred stock. TheGuggenheim S&P Global Dividend Opportunities Index (NYSE: LVL) seeks investment results that correspond generally to the performance of an equity index called the S&P Global Dividend Opportunities Index. The index consists of a variety of equities, including Penn West Petroleum (NYSE: PWE), Franklin Resources (NYSE: BEN) and National Retail Properties (NYSE: NNN) common stock. As of March 31, the annual dividend yield on LVL was 5.53%.
WisdomTree High-Yielding Equity Income (DHS)
Rounding out our top five list is the WisdomTree High-Yielding Equity Income (NYSE: DHS). Appropriately, this dividend ETF seeks to track the price and yield performance of the WisdomTree Equity Income index. That index tracks many of the biggest large-cap stocks in the market today, including AT&T (NYSE: T), Chevron (NYSE: CVX), Pfizer (NYSE: PFE) and Johnson & Johnson(NYSE: JNJ). With DHS, you get the best of the best in dividend paying common stock. As of March 31, the annual dividend yield on DHS was 3.8%.