The technology, finance, communications, and consumer discretionary sectors make up about 65% of the S&P 500. Since the year began, these sectors have seen declines ranging from 4.9% to 10.8%. Interestingly, exchange-traded funds (ETFs) that focus heavily on value stocks—particularly those with substantial energy stock holdings—have significantly outperformed the S&P 500 this year.
Here are three ETFs worth considering this April, along with tips to help you choose based on your risk appetite and investment objectives.
1. Schwab US Dividend Stock ETF
The Schwab US Dividend Stock ETF has a notable focus on energy, consumer staples, and healthcare sectors. A lot of companies in these areas tend to use dividends to return capital to shareholders.
By leaning heavily into the value sector, this ETF offers a decent yield of 3.3%. Sure, these low-growth sectors often lag behind the S&P 500 over time, but they really do shine when the market dips, as they serve as a haven for investors seeking low-risk value stocks.
Taking a quick look at performance, the Schwab U.S. Dividend Stock ETF is up over 10% year-to-date, largely due to its 19.9% stake in the booming energy sector. Meanwhile, the S&P 500 has dipped about 5%, especially feeling the pinch from double-digit declines in consumer discretionary and financial sectors.
2. iShares Core High Dividend ETF
Similarly, the iShares Core High Dividend ETF also has a significant overweight in the energy sector. However, the Schwab fund is more diversified among major oil companies, while a large portion of the iShares ETF is concentrated in just a few firms like Exxon Mobil and Cerro, which constitute 18.3% of the fund.
This ETF heavily emphasizes daily necessities with stocks like Procter & Gamble, Philip Morris, Coca-Cola, PepsiCo, and Altria. They hold about 19.6% of the consumer staples allocation, while giants like Johnson & Johnson and AbbVie account for 15.6% of health-related stocks.
If you want a straightforward investment in major, high-dividend stocks, this ETF might suit you well. The yield here is 2.8%, slightly less than Schwab’s.
3. Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF stands out for having the lowest expense ratio in this group at just 0.04%. That said, its yield is also the lowest at 2.3%.
This ETF differs primarily in its sector focus, giving less attention to energy and consumer staples while instead leaning towards reliable tech stocks like Broadcom and financial players like JPMorgan Chase.
Despite some downward pressure in both tech and finance sectors, the Vanguard ETF continues to perform nearly in line with the iShares Core High Dividend ETF over a five-year total return period, and both are ahead of the Schwab U.S. Dividend Stock ETF.
Overall, the Vanguard High Dividend Yield ETF seems to be a solid choice for those seeking diversification through high-dividend blue-chip stocks.
