Federal Reserve Chair Jerome Powell said on Wednesday that the central bank could slow the rapid pace of interest rate hikes at its December meeting while indicating a protracted economic adjustment to a world where borrowing costs remain high, and inflation comes down slowly.
After the Fed Chair’s speech suggesting slower rate increases, stocks rallied. The three major indexes, the S&P 500, Dow Jones, and Nasdaq Composite, have climbed 9.7%, 8.1%, and 9% over the past month, respectively.
Despite the recent market rally, many experts have pessimistic predictions for the following year. Jake Jolly, a Senior Investment Strategist at BNY Mellon, said, “Our view is that this is not an enduring rally. The odds are there’s going to be a recession next year, and that’s going to pressure risk assets like equities.”
Moreover, Deutsche Bank forecasts a recession in the United States next year. “We see major stock markets plunging 25% from levels somewhat above today's when the US recession hits, but then recovering fully by year-end 2023, assuming the recession lasts only several quarters,” said David Folkerts - Landau, Chief Economist at Deutsche Bank.
Given the uncertain prospects of the stock market, we think it could be wise to invest in dividend-paying ETFs SPDR Dow Jones Industrial Average ETF Trust (DIA), iShares Select Dividend ETF (DVY), JPMorgan Ultra-Short Income ETF (JPST), First Trust Low Duration Opportunities ETF (LMBS), and First Trust Value Line Dividend Index Fund (FVD) this month to ensure a stable income stream.
SPDR Dow Jones Industrial Average ETF Trust (DIA)
DIA tracks the Dow Jones Industrial Average, one of the most famous benchmarks in the world. It tracks some of the most famous and profitable companies in the country, known as ‘Blue Chip Companies.’ The fund is probably one of the safest in the equity world, as the companies on the list are unlikely to be majorly affected unless there is an apocalyptic event in the economy.
DIA has assets under management of $30.68 billion. The fund has a total of 31 holdings. Its top holdings include UnitedHealth Group Incorporated (UNH) with a 10.36% weighting, Goldman Sachs Group, Inc. (GS) at 7.44%, Home Depot, Inc. (HD) at 6.21%, and Amgen Inc. (AMGN) at 5.50%.
DIA has an expense ratio of 0.16%, lower than the category average of 0.37%. DIA's fund inflows were $943.45 million over the past six months and $2.01 billion over the past year. Also, it has a beta of 0.99.
DIA has paid dividends for ten consecutive years. The ETF pays a $6.25 per share dividend annually, which translates to a 1.85% yield on the current price. Its dividend payments have grown at a CAGR of 3.1% over the past three years and 5.7% over the past five years.
DIA has gained 6.2% over the past month and 4.8% over the past six months to close the last trading session at $346.15. It has a NAV of $346.31 as of November 30, 2022.
DIA’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
DIA has a grade of A for Trade and Buy & Hold. Of the 86 ETFs in the A-rated Large Cap Value ETFs group, DIA is ranked #5.
To access all DIA’s POWR Ratings, click here.
iShares Select Dividend ETF (DVY)
DVY focuses on dividend-paying stocks, and its underlying index screens equities by factors such as dividend per share growth rate, dividend payout percentage rate, and dividend yield. It suits investors well for a long-term investment with minimum volatility.
DVY tracks Dow Jones U.S. Select Dividend Index. With $22.75 billion in assets under management, DVY’s top holdings include Valero Energy Corporation (VLO) with a 2.53% weighting, followed by Gilead Sciences, Inc. (GILD) at 2.45%, and Altria Group, Inc. (MO) and International Business Machines Corporation (IBM), at 2.20% and 2.16%, respectively. It currently has 100 holdings in total.
The ETF’s net inflows were $701.38 million over the past three months and $3.40 billion over the past year. In addition, its 0.38% expense ratio compares favorably to the 0.50% category average. Its NAV was $125.58 as of November 30, 2022.
DVY pays a $3.94 annual dividend yielding 3.19% at the current share price. Its dividends have increased at a 3.20% CAGR over the past three years and a 4.37% CAGR over the past five years. The ETF has a record of paying dividends for 17 consecutive years.
The fund has gained 6.5% over the past month and 9% over the past year to close the last trading session at $125.49.
DVY’s fundamental strength and strong outlook are reflected in its POWR Ratings. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
DVY has a grade of A for Trade and Buy & Hold and B for Peer. It is ranked #8 out of 86 ETFs in the A-rated Large Cap Value ETFs group. Click here to see all the DVY ratings.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital. The fund makes investments in fixed-rate, variable-rate, and floating-rate debt, including corporate issues, asset-backed securities, and debt pertaining to mortgages, as well as U.S. government and agency debt, including treasury securities.
JPST has an AUM of $22.29 billion. The fund has a total of 476 holdings. Its top holdings include the U.S. Dollar with a 46.67% weighting, fixed income (unclassified) at 1.75%, BNP Paribas S.A. 3.5% at 0.95%, and Nordea Bank AB (New York) FRN at 0.83%.
JPST has an expense ratio of 0.18%, lower than the category average of 0.60%. JPST’s fund inflows came in at $3.06 billion over the past six months and $3.83 billion over the past year. Also, it has a beta of 0.04, indicating extremely low volatility compared to the broader market.
The ETF pays an annual dividend of $0.84, which yields 1.68% on the current price. Its dividend payouts have increased at a CAGR of 25.2% over the past five years. JPST has gained marginally over the past month to close the last trading session at $50.25.
JPST’s POWR Ratings reflect this strong outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system.
JPST has a grade of A for Trade, Buy & Hold, and Peer. Of the 32 ETFs in the A-rated Ultra-Short Term Bonds group, JPST is ranked #3.
To access all JPST’s POWR Ratings, click here.
First Trust Low Duration Opportunities ETF (LMBS)
LMBS is an actively managed exchange-traded fund that invests in various mortgage-backed securities with a target duration of fewer than three years. The ETF’s primary objective is to generate current income with a secondary goal of capital appreciation.
The fund has $4.78 billion in assets under management. It has a total of 1307 holdings. The fund’s major holdings include United States Treasury Notes 1.5% with 3.61% weighting, U.S. Dollar with 3.10% weighting, and FNMA 30yr Pool#FM3003 4% with 2.17%.
LMBS has an expense ratio of 0.66% compared to the 0.31% category average. The ETF pays an annual dividend of $1.44, yielding 3.05% at the current price. LMBS’ fund outflows were $142.01 million over the past month. Its NAV was $47.61 as of November 30, 2022.
LMBS has gained 1% over the past month to close the last trading session at $47.32. It has a beta of 0.04.
LMBS’ strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
LMBS has an A grade for Trade, Peer, and Buy & Hold. It is ranked #2 among 49 ETFs in the B-rated Intermediate-Term Bond ETFs group.
To access all the POWR Ratings for LMBS, click here.
First Trust Value Line Dividend Index Fund (FVD)
FVD tracks an equal-weighted index of dividend-paying companies. It gives investors balanced exposure to dividend-paying stocks, spreading exposure across various sectors and market capitalizations and avoiding any significant concentrations in individual securities. The fund relies on rankings assigned by Value Line, a research company that analyzes stocks using a proprietary methodology.
FVD tracks Value Line Dividend (TR) Index. The fund has $12.62 billion in AUM. It has a total of 177 holdings. The fund’s major holdings include MAXIMUS, Inc. (MMS) with 0.63% weighting, Fidelity National Information Services, Inc. (FIS) with 0.62% weighting, and Cal-Maine Foods, Inc. (CALM) and Otter Tail Corporation (OTTR) with 0.60% and 0.59% weightings, respectively.
FVD has an expense ratio of 0.67% compared to the 0.48% category average. Its fund inflows came in at $226.88 million over the past six months and $459.51 million over the past year.
FVD pays an annual dividend of $0.79, which yields 1.94% at the prevailing share price. Its dividend payouts have increased at a 1% CAGR over the past three years and 5.1% over the past five years. The ETF has a record of paying dividends for 14 consecutive years.
FVD has gained 7.2% over the past month and 3.2% over the past year to close the last trading session at $41.46. It has a beta of 0.81.
The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
FVD has an A grade for Trade and Buy & Hold and a B for Peer. It is ranked #11 among 86 ETFs in the Large Cap Value ETFs group.
To access all the POWR Ratings for FVD, click here.
DIA shares fell $0.31 (-0.09%) in premarket trading Thursday. Year-to-date, DIA has declined -3.08%, versus a -13.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
The 5 Best ETFs to Buy Now for December 2022 StockNews.com
