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When you look at dividend ETFs with high yields, most of them end up being options ETFs or have other dealbreakers attached. However, ETFs like Global X SuperDividend REIT ETF (NASDAQ:SRET), State Street SPDR Portfolio High Yield Bond ETF (NYSEARCA:SPHY), and Global X SuperDividend US ETF (NYSEARCA:DIV) get you a 6%-plus yield, and they manage to do this without options or leverage.
Income investors are starving for yield, and the market has responded with an explosion of “high-yield” products. Many of these are genuinely worth looking into, but when you have an ETF that promises both “exposure to the S&P 500” and a double-digit yield, that comes with asterisks. The most important thing to keep in mind is that you’re essentially trading away upside for the yield. At the end of the day, you could end up worse off since you’re more exposed to the downside than the upside. It takes these covered call options ETFs a longer time to recover than the market due to the capped upside. A rally is a great veneer, but these ETFs are not meant to be long-term plays.
Here are three ETFs you can genuinely buy and hold for the long run.
Global X SuperDividend REIT ETF (SRET)
SRET holds exactly 30 of the highest-yielding REITs in the world, selected purely on the basis of dividend yield. That’s it. No derivatives, no options overlays, no leverage. It tracks the Solactive Global SuperDividend REIT Index. The strategy is very simple, and this issuer is quite reputable if you are looking for ETFs with high yields. It has some of the highest-yielding ETFs on the market right now.
You may ask why I’m looking into REITs specifically, and there’s a good reason for it. Interest rates are coming down worldwide, and REITs are well-positioned to benefit from it. First things first, the real estate industry benefits when interest rates are cut. And more importantly, REITs must distribute 90% of their income as dividends to their shareholders. You get direct exposure to their success, and they’re becoming much more attractive.
SRET’s long-term chart does not look pretty post-2020, but I expect a strong recovery in the coming years. This is mainly a recovery bet in my eyes.
The yield is 7.67% with a monthly distribution, and the expense ratio is 0.58%.
State Street SPDR Portfolio High Yield Bond ETF (SPHY)
SPHY is a completely different animal from SRET. Where SRET buys equity REITs, SPHY is a bond fund that holds U.S. corporate junk bonds and pays out the interest income. Yield and cost are where SPHY really shines. It is one of the cheapest high-yield bond ETFs in existence, with a 0.05% expense ratio against a 7.29% monthly dividend yield.
The portfolio is essentially 100% corporate bonds with a heavy North American tilt. Bond prices have par values, so SPHY has traded sideways, and you’ll have to reinvest if you want snowballing dividends. I do see 10-20% gains in the coming years as interest rates come down. High-yield bonds will rise in value as risk-free government bonds offer declining yields.
It’s a good idea to buy SPHY if you don’t like high expense ratios and you want an income vehicle detached from the stock market. It’s highly unlikely that interest rates will go up from here, so I don’t expect a decline anytime soon.
Global X SuperDividend US ETF (DIV)
DIV is essentially the domestic-only version of Global X’s SuperDividend family. It’s a U.S.-focused high-yield equity ETF, and it’s a good pick if you don’t want international exposure. DIV holds 50 of the highest-dividend-paying equities in the United States, selected from a universe that also screens for low beta relative to the S&P 500. That second part is important and often overlooked, because this isn’t just a yield-chasing fund. The index methodology actively tries to tilt toward lower-volatility names, which is why DIV has a markedly lower beta versus the SPY, for example.
The catch again is that DIV’s performance since 2020 is awful due to investors chasing Treasuries that yield sub-5% instead of high-yield dividend stocks. Thankfully, declining interest rates are finally pushing investors back into this ETF. It has gained nearly 8% in just the past month and is up over 11% year-to-date. There’s a strong possibility it willoutperform the S&P 500 even when you exclude the dividends simply due to capital rotating back to dividend stocks.
It has a 6.59% monthly yield and an expense ratio of just 0.45%.