Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Worried About Dividend ETFs' Rally? 5 Low P/E Plays For You

Published 11/04/2019, 08:00 PM
Updated 07/09/2023, 06:31 AM

If there’s any equity ETF segment that almost always comes to investors’ rescue, then it is definitely dividend. This year too, the segment has rescued investors to sail through trade tensions.

There have been two main market movers so far in 2019 — U.S.-China trade relation and a dovish Fed. U.S.-China trade relation showed some signs of easing in the first quarter but flared up in the middle of the year and again subsided in October with the signing of the phase-one trade deal. Ebbs and flows in trade tensions raised the appeal for apparently safer choices – dividend stocks and ETFs (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).

And citing trade issues and sensing its impact on global growth, the Fed has already enacted three rate hikes. Not only the Fed, but also the ECB harped on the same string. Also, several developed and emerging economies have walked the same route this year (read: Fed Cuts Rates, Signals Pause: Trick or Treat for ETFs?).

This has brought down bond yields materially. Yield on benchmark 10-year U.S. Treasury yield slipped to 1.79% on Nov 4 from 2.66% recorded at the start of the year. Some parts of the yield curve inverted in the middle of this year on cues of recessionary fears.

The accommodative Fed does good for stocks as there will be more months of cheap money inflows. Among stocks, income-producing securities might do even better for investors in search of solid and steady current income.

Rally in Dividend ETFs Make Them Pricey

First Trust’s dividend ETFs have been star performers this year. First Trust NASDAQ Rising Dividend Achievers ETF RDVY, First Trust Dorsey Wright Momentum & Dividend ETF DDIV and First Trust NASDAQ Technology Dividend Index Fund TDIV have returned in the range of 27% to 30% (read: 5 Market-Beating Dividend ETFs of 1H).

Such rally is likely to push up the valuation of dividend ETFs. As per an article published on Market Watch, the price-to-earnings ratio for dividend-heavy utilities fund Utilities Select Sector SPDR Fund XLU (up 21.6% this year) has surged from 15.1x in December 2018 to around 22.8x now, on a trailing 12 month basis, while the price-to-earnings ratio of the S&P 500 has risen from 17.5x to 19.5x.

Against this backdrop, it would prudent to note some low P/E dividend ETFs that could be solid choices in a low-rate environment.

ETFs in Focus

Invesco Emerging Markets Ultra Dividend Revenue ETF (AM:REDV) – Yield 5.21%; P/E 7.38x

VictoryShares Emerging Market High Dividend Volatility Weighted ETF (LON:CEY) – Yield 4.76%; P/E 8.26x

Cambria Emerging Shareholder Yield ETF EYLD – Yield 3.60%; P/E 8.82x

Deep Value ETF (HM:DVP) – Yield 2.75%; P/E 9.98x

Invesco KBW High Dividend Yield Financial ETF KBWD – Yield 8.70%; P/E 9.99x

Want key ETF info delivered straight to your inbox?

Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>



Deep Value ETF (DVP): ETF Research Reports

Cambria Emerging Shareholder Yield ETF (EYLD): ETF Research Reports

Invesco KBW High Dividend Yield Financial ETF (KBWD): ETF Research Reports

Utilities Select Sector SPDR Fund (XLU): ETF Research Reports

First Trust NASDAQ Technology Dividend Index Fund (TDIV): ETF Research Reports

VictoryShares Emerging Market High Div Volatility Wtd ETF (CEY): ETF Research Reports

First Trust Rising Dividend Achievers ETF (RDVY): ETF Research Reports

Invesco Emerging Markets Ultra Dividend Revenue ETF (REDV): ETF Research Reports

First Trust Dorsey Wright Momentum & Dividend ETF (DDIV): ETF Research Reports

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.