Wall Street has been in a wavering mode lately, thanks to concerns related to rich artificial intelligence (AI) valuations. Investors grew increasingly cautious amid mounting economic uncertainty and stretched market valuations. Concerns over inflated stock prices, mainly in AI-related momentum names, have kept Wall Street under pressure.
Government Shutdown
With the government shutdown prevailing, investors face a shortage of official economic data. This is leaving the Fed to assess economic conditions and adopt policy decisions with limited understanding.
Meanwhile, according to Challenger, Gray & Christmas, corporate layoff announcements witnessed a 183.1% monthly spike in October, marking the sharpest jump in about two decades, as quoted on Reuters. Cost-cutting and AI-driven restructuring have been held mainly responsible for these corporate decisions.
Wall Street Valuation Too Ripe?
The U.S. stock market has surged about 36% since the April lows. But it’s now facing a warning from one of the moderately famous indicators. The so-called “Buffett Indicator” has climbed to levels last seen before the 2022 bear market, per Bloomberg, as quoted on Yahoo Finance.
The metric compares the total market capitalization of U.S. stocks, now hovering around $72 trillion, to the nation’s gross domestic product (GDP). Despite GDP recently growing at its fastest clip in nearly two years, the ratio shows that the stock market’s value has jumped to more than twice the size of the economy, indicating a likely overheating, the aforementioned article noted.
Time for Dividend ETF Investing?
In such a volatile market, dividend ETFs normally come to the rescue. The hunt for dividends in the equity market is always on, irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty, global growth worries and geopolitical crisis, the lure for dividend investing increases further.
Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering hefty current income, stocks with dividend growth point to quality investing — a prerequisite to making money in this volatile environment.
Several global dividend-based exchange-traded funds (ETFs) have been hovering around a six-month high. These securities provide investors with avenues to make up for capital losses if that happens at all.
Against this backdrop, below we highlight a few of those winning dividend ETFs. These ETFs topped the SPDR S&P 500 ETF Trust SPY (up 0.2% past month) and offer sizable yields.
ETFs in Focus
Global X MSCI Superdividend EM ETF SDEM – Up 7.2% Past Month
The underlying MSCI Emerging Markets Top 50 Dividend Index tracks the performance of 50 equally weighted companies that rank among the highest dividend-yielding equity securities in emerging markets. The fund charges 66 bps in fees and yields 5.41% annually.
Emerging Markets Dividend iShares ETF DVYE – Up 5.4% Past Month
The underlying Dow Jones Emerging Markets Select Dividend Index measures the performance of the companies in emerging market countries that have provided relatively high dividend yields on a consistent basis over time. The fund charges 49 bps in fees and yields 9.20% annually.
Franklin International Low Volatility High Dividend ETF LVHI – Up 1.8% Past Month
The underlying QS International Low Volatility High Dividend Hedged Index is composed of equity securities of developed markets outside the United States with relatively high yield and low price and earnings volatility while mitigating exposure to fluctuations between the values of the U.S. dollar and other international currencies. The fund charges 40 bps in fees and yields 4.90% annually.
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SPDR S&P 500 ETF (SPY): ETF Research Reports iShares Emerging Markets Dividend ETF (DVYE): ETF Research Reports Global X MSCI SuperDividend Emerging Markets ETF (SDEM): ETF Research Reports Franklin International Low Volatility High Dividend Index ETF (LVHI): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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