Two Optimized Dividend ETFs for Income Seekers

MarketsETF Trends

This article was originally published on ETFTrends.com.

As the U.S. anticipates greater rate risk ahead for the fixed-income markets, more income-minded investors are steering towards dividend stocks and dividend ETFs to bolster yield generation.

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"A lot of advisors are really sort of in a pickle trying to find income when it comes to high levels of income for their advisory - their end users, and what we're seeing is that a lot of advisors are really moving outside the more traditional fixed income portfolios and finding yields elsewhere," Lance McGray, Managing Director and Head of ETF Product at Advisors Asset Management, said at the Inside ETFs 2018 conference.

"The majority of people are looking towards dividends in their equity portfolio to give them elevated yields that they're looking for, that they need to meet the demands of their clients," McGray added.

In response to the ongoing demand for yields, Advisor Asset Management recently rolled out the AAM S&P 500 High Dividend Value ETF (NYSEArca: SPDV) and the AAM S&P Emerging Markets High Dividend Value ETF (NYSEArca: EEMD).

SPDV tries to reflect the performance of the S&P 500 Dividend and Free Cash Flow Yield Index, which targets attractively valued U.S. large cap stocks that exhibit both a high dividend yield and sustainable dividend distribution characteristics. The underlying index shows a 3.68% dividend yield.

EEMD tries to reflect the performance of the S&P Emerging Markets Dividend and Free Cash Flow Yield Index, which targets attractively valued emerging market stocks that exhibit both a high dividend yield and sustainable dividend distribution characteristics. The underlying index shows a 5.29% dividend yield.

Both strategies focus on a way to balance current cash flow with future capital growth by honing in on two key valuation indicators to identify sustainable dividend-paying stocks offering fundamental value, dividend yield and free cash flow yield.

SPDV and EEMD try "to maximize your dividend yield and minimize your exposure to dividends cuts and dividend eliminators," McGray said.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.

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