A sudden market downturn can deliver a serious blow to your portfolio. It could be devastating to see your assets diminish.
But it’s important to note that panicking would most likely make it worse. Staying invested and diversified should help you weather market storms in the long run.
Arming your portfolio with the right dividend ETFs can provide a steady stream of income as well as capital appreciation and downside protection.
But with so many dividend ETFs out there, how do you pick the ones that can remain resilient even during down markets?
The ETFs that have historically done this are known to screen for high-quality and well-established companies with strong financials and consistency in paying out and even raising dividends year over year. Many are heavily invested in defensive sectors which typically remain stable during down markets. And some also engage in alternative income generating strategies like selling options.
But here too, the list can seem daunting. So to help you out, we narrowed it down to six monthly dividend ETFs that may help protect your savings even in a down market.
So let’s take a closer look.
JPMorgan Equity Premium Income ETF (JEPI)
The JPMorgan Equity Premium Income ETF (JEPI) invests in large-cap stocks with low volatility, which could provide defense in a down market. As an actively managed fund, it also uses its proprietary research to find under-and-over valued stocks with preferable risk/adjusted return characteristics. And it also takes a secondary approach to generating income by selling options. This strategy has helped JEPI deliver a high yield of over 8%.
Among its top holdings are companies in the financial, healthcare and information technology sectors. The latter has been benefiting from the recent boom in artificial intelligence (AI).
Moreover, JEPI has earned a Morningstar Silver Medalist rating. The fund has a five-year return of over 6%. And it holds net assets of $41.49 billion.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) invests in some of the highest-yielding companies in the S&P 500 index. But it filters out companies with high volatility. This strategy could provide high income and downside protection. It’s also heavily invested in defensive sectors like utilities.
Moreover, SPHD offers a high yield of about 4%. And it has generated a five-year return of over 31%. Its expense ratio is 0.30%.
Amplify CWP Enhanced Dividend Income ETF (DIVO)
The Amplify CWP Enhanced Dividend Income ETF (DIVO) also takes a dual approach to earning income. It invests in high-quality dividend paying stocks from companies with strong financials and writes covered calls on those stocks. Additionally, it seeks low volatility to protect investors. DIVO pays a high yield of 5% and has a five-year return of over 42%.
The fund is mainly invested in the financials, information technology and consumer discretionary sectors. Stocks held by this ETF are also known for historical dividends and earnings growth.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) invests in large-cap stocks with low volatility and sells options to generate income. It focuses on stocks in the tech-heavy Nasdaq 100. It’s also an actively managed fund and its managers have a combined experience of more than 50 years.
JEPQ has an impressively high yield of over 10% and a five-year return of over 18%. Its top holdings include companies in what Wall Street refers to as The Magnificent Seven. It’s heavily concentrated in the information technology, communication services and consumer discretionary sectors. It has an expense ratio of 0.35%.
NEOS Nasdaq-100 High Income ETF (QQQI)
The NEOS Nasdaq-100 High Income ETF (QQQI) invests in high-quality stocks and also engages in a data-driven call option strategy. The actively managed fund offers an ultra-high yield of over 13%, making it particularly attractive to income seekers. And it has maintained a five-year return of over 7%. Moreover, QQQI holds about $7.42 billion in net assets and it has an expense ratio of 0.68%.
Its top holdings also include members of the Magnificent Seven.
But it’s important to note that a fund so heavily invested in one sector may pose risk if that sector faces pressure. Additionally, the fund is designed to capture a portion of the Nasdaq-100’s upside when the index increases. So this may be an ETF to complement an already well-diversified portfolio.
iShares Preferred and Income Securities ETF (PFF)
The iShares Preferred and Income Securities ETF (PFF) focuses on preferred stocks, which share the characteristics of bonds and may offer downside protection. It’s nearly entirely invested in the financials, industrials and utilities sectors. The fund pays a yield of over 6%. And it holds net assets of over $14 billion. Its expense ratio is 0.45%.
However, it’s important to note that PFF has a negative five-year return. But its strategy may hold steady in a down market. Still, it’s always important to perform your due diligence before you invest.
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