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Part of my investment portfolio is also into Income investing. This might sound conservative, but this kind of investing is to generate cash flow.

Hence, I would look at high yield dividend ETF, hoping to gain maximum return while maintaining a medium-high risk appetite.

First, we understand what is a Dividend ETF.

What Is a Dividend ETF?

Dividend ETFs are exchange-traded funds that hold stocks with a strong history of paying dividends to their shareholders.

When we own a dividend ETF, the fund managers will help to ensure that the holdings always are the ones which pay out good dividends.

Similar to other exchange-traded fund (ETF), the managers of a dividend ETF will choose a portfolio of stocks to match the composition of a dividend index.

The resulting portfolio provides us with an inexpensive income-generating investment asset.

Why we invest in Dividend ETFs

I would see Dividend ETFs to be a more convenient way to pursue income investing, this is on top of owning and managing our own individual dividend stocks.

Something we need to be aware of unlike the coupon payments on bonds, dividend payments are never guaranteed.

This would make individual retail investors spending a lot of time and effort to maintain a portfolio of dividend stocks.

Why Invesco S&P 500 High Dividend Low Volatility ETF

I was performing a scan for income generating (dividend) ETF, and I found that $Invesco S&P 500 High Dividend Low Volatility ETF(SPHD)$ is benchmarked against the S&P 500 Low Volatility High Dividend Index.

And this fund typically owns 90% of the S&P 500 index’s constituent stocks.

As we can see that the S&P 500 have been performing pretty well during the 1st quarter of 2023.

The S&P 500 index (US 500) has gained close to 6.5% year-to-date in 2023.

The US benchmark index began its rebound late last year, rising from a near two-year low of 3,491 points to close at 4,109.21 points on 31 March 2023.

No doubt, it has yet to show year-on-year gains as there have been more hawkish sentiment and contractionary monetary policy from the Federal Reserve.

But I foresee that this is going to change as the previous rate hike and the recent banking woes would have make the result of falling inflation much clearer.

Advantage to invest in Invesco S&P 500 High Dividend Low Volatility ETF

As its name suggests, SPHD combines high-dividend yields and low volatility, this appeal to me as we have been experiencing choppy market in Q1 2023.

The average price-to-earnings (P/E) ratio  is reasonable at 14.8, while the average return on equity (ROE) is above 22%.

These metrics show that the fund consist of stable, value companies.

SPHD Portfolio Holdings

SPHD’s holdings has around 50% of them in utilities, financial services, consumer staples  and real estate sector stocks. The fund’s holdings lean toward the large-cap value universe, with a decent exposure to the mid-cap value group.

Current Dividend Yield, Expense Ratio and Average Annualized Return

The dividend yield (3.76%) is much superior compared to other Dividend achiever funds.

With 161 ETFs traded on the U.S. markets, Dividend ETFs have total assets under management of $354.98B. The average expense ratio is 0.52%.

Its expense ratio is 0.30%, but it is acceptable to me, as it is lower than the average expense ratio for Dividend ETFs.

I would be looking a 5 year horizon return, which SPHD has a pretty decent return of 6.63%.

Why now is the time to invest?

Looking how the price of SPHD has moved over the last quarter, it has been on an upward trend since late March 2023, and the price is still reasonable, as we are investing for dividend.

I believe a good entry price would benefit in the long term.

Dividend yield might go higher as S&P 500 would be entering the bull run soon if the economic condition does not pose any surprise events.

Summary

What I have shared is based on what I use to choose Dividend Yield ETF. Basically, I look at these 3 factors:

• Holdings Composition

• Dividend Yield (over time)

• Expense Ratio

I hope to take advantage of the next bull run to capture a good Income yielding ETF.

Do share your thoughts in the comment section on what do you think of this ETF? Are you also looking into income investing?

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Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Technical Analysis, and there