This Invesco ETF Offers a 4.71% Yield with 50 Low-Volatility Dividend Stocks (Three Times the S&P 500)

Invesco High Dividend Low Volatility ETF Overview

The Invesco High Dividend Low Volatility ETF (NYSEARCA:SPHD) currently yields 4.71%, which is nearly triple the S&P 500’s existing dividend yield. This fund focuses on a portfolio of 50 U.S. stocks known for high dividends and low volatility. With assets totaling around $3.1 billion and an expense ratio of 0.30%, SPHD emphasizes defensive sectors such as utilities, real estate investment trusts (REITs), healthcare, and consumer staples. The income generated comes directly from the dividends paid by the underlying companies, which makes the sustainability of these dividends crucial for investors.

SPHD consists of 50 equally weighted stocks from defensive sectors and boasts an expense ratio of 0.30%. Its yield stands at 4.71%.

Key holdings include Pfizer (yield 6.53%), Altria (yield 7.04%, dividend payout ratio 77.9%), and Healthpeak REIT (yield 7.14%).

Meanwhile, SCHD offers a lower yield of 3.5%, but requires a rigorous quality assessment that includes a minimum of ten years of dividend growth.

The reliance on SPHD’s largest stocks plays a significant role in its overall safety. The top five holdings comprise about 14% of the portfolio and predominantly include well-established dividend payers across various sectors.

Pfizer (NYSE:PFE), for instance, boasts a yield of 6.53% and a payout ratio of 36.4%, having raised its dividend for 19 consecutive years. Despite facing a decline in post-COVID-19 revenues, its operational portfolio saw a 4% growth, largely attributed to strong sales of products like Eliquis. However, the pace of dividend growth has decelerated recently, dropping to 2.4% annually from a historical average of 6.9%.

Altria (NYSE:MO), on the other hand, yields 7.04% with a payout ratio of 77.9% based on adjusted earnings. This tobacco industry mainstay has also consistently increased dividends for nearly two decades, although challenges from declining volumes in smokable and oral tobacco could pose long-term risks.

Healthpeak Properties (NYSE:DOC) stands out with a yield of 7.14%, yet it currently shows negative GAAP earnings. As a REIT, its valuation should focus on funds from operations rather than net income, and its expected FFO of $1.78 to $1.84 per share will need close monitoring.

Additionally, Verizon (NYSE:VZ) maintains a 58% payout ratio, supported by $11.3 billion in operating cash flow, allowing for a 6.53% yield. The company has consistently increased dividends over the last 19 years despite its considerable debt of $170.5 billion.

Overall, while the payout ratio and business fundamentals warrant regular oversight, SPHD’s dividend appears relatively secure based on its strongest holdings. For those comparing options, the Schwab US Dividend Stock ETF (NYSEARCA:SCHD) delivers a 3.5% yield but is grounded in a more stringent review process requiring a decade of dividend increases. Although SCHD offers a lower yield, its focus on robust companies with sustainable growth might appeal to long-term investors.

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