For July 2022, the Best Dividend ETFs

For July 2022, the Best Dividend ETFs ...

Dividend stocks resurrected in July as investors retreated with a sense of optimism. After selling throughout much of 2022, investors began to feel that inflation might be at an end of its rate rise cycle, and corporate earnings haven't been as bad as previously assumed.

This month, dividend stocks performed poorly against the broader averages. Previous leaders, including high yielders, fell by about 4%, but dividend growth and dividend quality also fell by 1-2%. That doesn't mean that there weren't plenty of winners to be had. Many of the month's biggest winners came from smaller and relatively lesser-known issuers.

One trend that we did see play out in July was the return of riskier dividend strategies. ETFs that focused on mid-cap and small-cap dividend payers tended to perform a little better, while sector plays, including those focusing on the financials and real estate sector, performed particularly well in July. Those dividend payer strategies that took a little more risk followed suit.

Dividend stocks have only really matched the market during the previous two months, although I'd expect them to return to their previous levels in the second half of the year. The relative security of companies backed by robust balance sheets and robust cash flows should be especially attractive.

Here's a list of the best dividend ETFs for July 2022.

Dividend ETFs with the highest performance in July 2022

The funds that raised the 10% return this month are: the ProShares S&P Technology Dividend Aristocrats ETF (TDV), the First Trust SMID Cap Rising Dividend Achievers ETF (RNSC), the Invesco KBW High Dividend Yield Financial ETF (LEAD), the Hoya Capital High Dividend Yield ETF (RIET) and the Dimensional Small Cap Value ETF (DFSV).

TDV is up a notch year over year, while the S&P 500 is up more than 2%. KBWD is extremely volatile due to its high allocations to mortgage REITs and custody companies, but tends to be a leader when REITs and financials do well (its 10% yield also helps).

Given the puzzling backdrop of a Chinese real estate sector and a depreciating housing market, REIT ETFs performed admirably. It's followed by two REIT ETFs that focus on the highest of high yielders: The Global X SuperDividend REIT ETF (SRET) and the Invesco KBW Premium Yield Equity REIT ETF (KBWY). Both yield around 7% currently.

The AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF (SMIG) lands in the top 15 for a competitive advantage, under-appreciated capabilities, and robust dividend and cash flow growth. It has already over $100 million in assets, so it's getting some attention.

In July's top 30 list, WisdomTree has landed six ETFs. I'll talk about the WisdomTree International Quality Dividend Growth ETF (IQDG) that I'll be discussing here. It's a good yield of more than 3% and has minimal volatility.

Other ETFs Worth Noting:

None of the major and well-known dividend ETFs make this month's cut. The SPDR Russell 1000 Yield Focus ETF (ONEY) is the only ETF that is listed in the top 10 of my dividend ETF rankings that shows up on this month's list, where it currently ranks #7. The next highest-ranking ETF would be the FlexShares Quality Dividend Index ETF (QDF) at #18.

The funds at the top of this list have sister ETFs that follow similar strategies but are targeting different markets. KBWD, for example, has KBWY, which I mentioned earlier. RNSC focuses on small-caps, but there is also the First Trust Large-Cap U.S. Equity Select ETF (RNLC) that works well in July.

The Siren DIVCON Leaders Dividend ETF (LEAD) and the VictoryShares Dividend Accelerator ETF (VSDA) are two funds that have previously appeared on these lists in 2022. Both emphasize dividend growth and quality.

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