HDV: Great Dividend ETF To Offset Market Shift

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Vadym Plysiuk/iStock via Getty Images Overview I've personally noticed that being a dividend investor makes it a lot easier to ride out shifts in the market. Becoming emotional about your investments ...

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Becoming emotional about your investments ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710683-hdv-ishares-core-high-dividend-etf-to-offset-market-shift\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>HDV: Great Dividend ETF To Offset Market Shift</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHDV: Great Dividend ETF To Offset Market Shift\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-06 11:13 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4710683-hdv-ishares-core-high-dividend-etf-to-offset-market-shift><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Vadym Plysiuk/iStock via Getty Images Overview I've personally noticed that being a dividend investor makes it a lot easier to ride out shifts in the market. Becoming emotional about your investments ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710683-hdv-ishares-core-high-dividend-etf-to-offset-market-shift\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SSO","symbol_name":"两倍做多标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4710683-hdv-ishares-core-high-dividend-etf-to-offset-market-shift","article_id":"2457052497","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1154985879/image_1154985879.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2457052497","pubTimestamp":1722913981,"columns":[],"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Vadym Plysiuk/iStock via Getty Images Overview I've personally noticed that being a dividend investor makes it a lot easier to ride out shifts in the market. 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Becoming emotional about your investments is a great way to buy high and sell low, but regularly receiving cash distributions helps ensure that I don't make any sudden knee-jerk reactions within my portfolio in response to a falling market. I previously covered iShares Core High Dividend ETF (NYSEARCA:HDV) a quarter ago and stated that it was a great fund to experience less volatility while maintaining exposure to dividend paying companies. However, one big caveat of holding HDV was that it had a history of underperforming similar peers. We can see that HDV underperforms the below peer group when comparing the total return profile over the course of the last three years. However, this slower growth can be explained by the core holdings within HDV that tend to lean towards higher paying dividend companies that typically experience less growth. The recent shifts in the market seem to paint a picture of how an ETF like HDV can be of relevance and best utilized. Data by YCharts HDV's current dividend yield sits at a modest 3.3%. While this isn't large enough to create an instant large stream of income without needing to invest a large sum, it does provide some level of growth and serves as a nice compliment to the diverse holdings within. I believe that HDV is one of the better choices for a dividend ETF amidst a market downturn because of the more defensive holdings. For some brief context, HDV operates as an ETF that aims to provide exposure to high-quality dividend paying, US-based companies. HDV has a very low management fee of 0.08% and has an inception dating back to 2011. Let's first start by discussing the shifting market sentiment and why the holdings within HDV are a suitable way to navigate. Market Shift & Holdings Over the last month, we saw markets get rocked by a strong selloff taking place throughout most sectors. The unemployment rate landed at 4.3%, after steadily climbing up over the last twelve months. US payrolls added 114,000 jobs as of the latest July data, but this was below the initial 180,000 expectations of economists. This has shaken markets as the general sentiment out there is that we are heading towards a recession as this data indicates that the economy is weakening.   US Bureau Of Labor Stats Between the U.S. Presidential elections, geopolitical tensions, and even the fall of Japan's Index, the Nikkei 225 (NKY:IND), this has shaken markets and we are now seeing a large retraction from prior highs throughout most sectors. For about three decades, Japan has kept rates at 0% on their currency. However, they have recently increased rates 0.25% and this was a signal to investors that markets are shifting. Even the crypto market is experiencing the sell off with Bitcoin temporarily dropping below the $50,000 mark. Capital seems to be coming out of the high-flying tech sector and pouring into more defensive channels as a way to mitigate these price drops. It seems like winning sector has been the consumer staples (XLP). To help visualize this shift, I've included the recent month price shifts from major indexes. I've included the technology sector (XLK), the S&P 500 (SPY), Invesco QQQ Trust (QQQ), and Vanguard's Total Stock Market ETF (VTI). We can see that all of the mentioned sectors have experienced price declines over the last month. However, the consumer staples sector has slightly appreciated in comparison. This can be attributed to the naturally defensive nature of the sector and as a result, we see investors moving into this sector to collect those steady dividends. Data by YCharts The consumer staples sector can be a popular sector amongst market declines because of the essential goods and services that companies within this sector offer. These are products like food, household products, and personal care items that people are almost required to buy no matter what the economy or markets look like. The demand for these products is also relatively stable, which translates to a predictable cash flow for companies in this sector. So, is this all good for an ETF like HDV? Well, HDV's portfolio consists of a large focus on these defensive industries. HDV is diverse in nature but has a large focus on both Energy and Consumer Defensive, accounting for 26.06% and 21.72% of the fund's net assets respectively. The fund also holds a large exposure to Utilities, making up 11.11%. The combination of these sectors account for approximately 59% of the total fund. I believe that this makeup is a great way to minimize the volatility experienced with large market shifts or selloffs, similar to what we are currently experiencing.   Seeking Alpha The businesses in these three sectors are typically more defensive in nature because of the goods and services they provide. For instance, energy companies supply fuel and maintain the well-being of entire industries such as transportation. Without energy, there are entire areas of the market that cannot operate. Similarly, as humans we have to eat and maintain the well-being of our homes. Therefore, consumer-based companies that sell products like food, beverages, and household items are always going to have a reliable customer base. Lastly, Utilities provide the essential water or electricity that we need to function on a day-to-day basis. Therefore, these sectors in the market are less vulnerable to cyclical changes and can serve as a place to go when the growthier sector like tech start to crash. Referring to HDV's latest fact sheet, the top holdings are made up of many dividend aristocrats and kings. These are companies that have increased their dividend payouts for at least 25 consecutive years and 50 consecutive years, respectively. The largest holding is Exxon Mobil (XOM), accounting for 10.24%. This is followed by Chevron (CVX), and Johnson & Johnson, making up 7.11% and 7%. All of the top holdings have a weight of about 58% and there are a total of 75 holdings within HDV.   HDV Fact Sheet Dividend Importance As of the latest declared quarterly dividend of $0.9283 per share, the current dividend yield is currently at 3.3%. While the starting dividend yield may now be as high as some alternative dividend funds out there, such as Cboe Vest S&P 500 Dividend Aristocrats (KNG) with a yield of 8.9%, the yield offered by HDV is stable and well maintained by the fund's core holdings. There are no fancy option related strategies implemented here so that means no unnecessary risk taking that can jeopardize the safety of the distribution. The dividend has also provided some level of growth to help compound your annual income over time. For instance, the dividend has increased at a CAGR (compound annual growth rate) of about 5.22% over the last ten-year period, and this can help boost your overall yield on cost. Ten year holders of HDV would now have a yield on cost greater than 5%. While the growth here may be less than a peer dividend ETF like Schwab's US Dividend Equity ETF (SCHD), I am not surprised by the results. After all, HDV maintains holdings that are more seasoned in their respective sectors. HDV focuses on holdings that have already established their dividend streaks, whereas an ETF like SCHD focuses on holdings that are still actively trying to grow their dividends. Data by YCharts The focus on dividends is important because of the underlying principle behind them. While dividend oriented companies may have slower growth behind them since they are distributing a share of their profits out as a dividend, they can offer a greater sense of stability in rough market environments. A published article from Fidelity also makes a good case that a dividend can help with how quickly your initial investment is paid off. Moreover, relying on the growth of dividends is a lot easier to calculate than the speculative growth of a company's earnings. Calculating dividends can be achieved by assessing a company's free cash flows, earnings, payout ratio and health of income streams from each operating segment. The psychology of dividends also makes it a lot easier to continue investing during downturns. When your regularly scheduled distributions come in, it makes it a bit easier to forget about the short-term pain endured in a sea of red price declines. Dividends actually give you an opportunity to reinvest while valuations are suppressed, thereby increasing the amount of dividend income you receive going forward. It can be a rewarding cycle that can ultimately grow your income with consistency. Outlook As market sentiment continues to shift, there is a chance that we see more price downside before markets stabilize a bit. As inflation levels continue to slowly decrease, we may see interest rate cuts happen as early as September. The inflation rate now sits at 3%, which is getting closer to the Fed's 2% target. Inflation has been one of the main drivers that have stalled the Fed from beginning to initiate these interest rate cuts, as they wanted to wait for more economic data to roll in to ensure that inflation was, in fact, cooling. Data by YCharts While over the long term it seems like interest rates have had a very little effect on the price of HDV, I believe that future interest rate cuts can serve as a potential catalyst for some price upside. As interest rates are cut, this would create an environment more favorable for companies that heavily rely on debt financing. This would mostly effect companies in some of the top sectors of HDV, such as Energy, Consumer sectors, and Utilities. Since interest rates are at their decade high, Energy and Utility companies are less incentivized to take on debt to finance growth initiatives like acquisitions, new project developments, and other growth moves since it would be more expensive. Similarly, an environment of high inflation cause consumer spending to slow considerably. As consumers start to feel the impact of rising costs for their everyday items, they may slow down their typical spending habits and start making the conscious effort to save money. As inflation continues to cool, consumers may feel some relief and this may improve operating profit margins for companies that operate in the consumer-facing sectors, which would ultimately be positive for HDV's future. Downside & Risk Since HDV is more focused on maintaining exposure to companies that have already created a well-maintained dividend streak, there is typically less room for aggressive growth of income. These are companies that have likely already reached their peak growth rates, and their businesses have a limited runway for additional growth. For instance, here are some of the current dividend growth rates for some random top holdings of HDV over a five-year period.  Exxon Mobil (XOM) maintains a dividend growth streak of 25 years but a very slow dividend CAGR of 2.46%. Verizon (VZ) has a high dividend yield of 6.5% but has a very slow growth rate of 2%. Philip Morris (PM) has a high payout ratio of 85% and has provided a limited growth rate averaging 2.66%.  Therefore, HDV may be a weak holding for investors that are looking to have a source of income that compounds at a quick rate. HDV better matches the investor looking for a lower source of volatility and a better sense of reliability by maintaining exposure to companies that have long-established track records of paying dividends throughout all market cycles, but don't necessarily have strong growth histories. Additionally, because the holdings within HDV have limited growth prospects, there is a risk of underperformance as well. This is accompanied by the fact that HDV lacks any meaningful tech exposure. While less tech exposure may translate to more stability and less volatility, it can also translate to underperformance by bull markets. The tech sector typically consists of more 'growthier' companies that can carry market momentum. Data by YCharts For instance, looking at a quick total return performance against Fidelity's High Dividend ETF (FDVV) reveals the underlying issue here. FDVV maintains holdings that are primarily comprised of tech stocks, making up 24.4% of the fund. As a result of this, FDVV has captured more upside price growth due to the exposure to companies that opt to reinvest larger portions of their dividend back into their business rather than distribute them to shareholders. Takeaway  In conclusion, HDV is a solid ETF that is more aligned with the defensive investor due to its set of holdings. The holdings within HDV are mostly comprised of dividend companies that have already established a long track record of consistency. While this may be great for lower volatility and stability in the dividend, there are some compromises. For instance, the dividend growth rate is lacking and the upside potential may be weak due to the limited tech exposure. However, the fund remains solid and consistent in performance while also remaining low cost. Market sentiment is changing and HDV may be a great ETF to offset the higher than normal market volatility and uncertainty.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2457052497"}