With a monthly dividend payout and a yield that beats inflation, the Global X SuperDividend ETF (NYSEARCA:DIV) is a tempting choice for dividend investors. However, there are several pros and cons that investors should weigh when it comes to this high-yield ETF.
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What Does the DIV ETF Do?
DIV is another one of Global X’s family of monthly-dividend ETFs, which also includes the likes of the Global X SuperDividend ETF (NYSEARCA:SDIV) and the Global X SuperDividend REIT ETF (NYSE:SRET). DIV “seeks to track the performance of the Solactive Global SuperDividend Index.”
The key difference between DIV and SDIV is that while SDIV focuses on investing in the highest-yielding dividend stocks globally, DIV narrows it down to just the United States by accessing fifty of the highest-yielding equities in the U.S. market. This gives investors less international diversification but also less volatility and possibly a higher-quality group of holdings.
DIV currently yields 7.3%, dwarfing the S&P 500’s dividend yield of 1.7% and more than doubling the yield of the 10-Year Treasury note. It even beats the rate of inflation (a high hurdle of 6%), making it a compelling play from an income perspective. The ETF has a sterling track record when it comes to the consistency and longevity of its payout — DIV has paid out a monthly dividend every month for over 10 years.
In addition to generating monthly dividend income, part of DIV’s strategy is to also reduce volatility by screening for equities with low betas in relation to the S&P 500.
Solid Diversification
This is a nicely-diversified ETF. It contains 51 stocks, and DIV’s top 10 holdings make up just 22.6% of the fund, while no single position makes up more than 2.75%.
DIV is also fairly diversified by sector. While real estate makes up nearly 30% of holdings, basic materials stocks account for 16.8%, industrials account for 13.4%, energy makes up 12.4%, and financials make up 10.5%. Generally speaking, these are lower-growth, more cyclical sectors of the stock market but ones that are also known for their dividend payouts and typically higher dividend yields.
You’ll find a pretty wide mix of holdings here — top position B&G Foods (NYSE:BGS) is a packaged foods company perhaps best known for its B&G Pickles and brands like Crisco and Cream of Wheat. It yields nearly 5% even after slashing the size of its dividend payout last year.
The energy sector is well-known for high yields, and there are plenty of energy stocks and MLPs here among DIV’s top holdings, including San Juan Basin Royalty, MPLX LP and Magellan Midstream Partners.
Tobacco companies have been strong dividend payers for a long time, and you’ll also find tobacco stalwarts like Altria and Philip Morris on the list of DIV’s holdings. Altria and Philip Morris currently sport dividend yields of 8.4% and 5.5%, respectively.
DIV’s holdings also include a few other well-known U.S. large-cap stocks like Verizon, 3M, and AbbVie, and then beyond these names, there are plenty of REITs and shipping companies.
Below you’ll find an overview of DIV’s top 10 holdings along with their Smart Scores. The Smart Score is TipRanks’ proprietary quantitative stock scoring system that evaluates stocks on eight different market factors. The result is data-driven and does not involve any human intervention.
A large number of the stocks listed above score very well when using TipRanks’ Smart Score system. For instance, Iron Mountain and Magellan Midstream Partners receive coveted ‘Perfect 10’ scores, while San Juan Basin Trust, AbbVie, USA Compression, MPLX LP, and Kraft Heinz all have scores of 8 or better, which equates to an Outperform rating.
DIV itself has an ETF Smart Score of 7, which is a Neutral rating, but it is right on the cusp of being an Outperform rating. Further, DIV’s blogger sentiment and crowd wisdom metrics are both positive.
Is DIV a Buy, According to Analysts?
The analysts’ current view on DIV is a mixed bag. The ETF has a Hold analyst consensus rating, but its $19.56 price target suggests an upside potential of 14%.
TipRanks uses proprietary technology to compile analyst forecasts and price targets for ETFs based on a combination of the individual performances of the underlying assets. Further, TipRanks calculates a weighted average based on the combination of all the ETFs’ holdings. The average price forecast for an ETF is calculated by multiplying each individual holding’s price target by its weighting within the ETF and adding them all up.
DIV’s Long-Term Performance
In addition to the tepid view from analysts, there’s an additional reason for caution when it comes to this ETF — it hasn’t been a winner over the long term. As of the end of February 2023, the ETF had a one-year total return of -4.3%, which actually isn’t bad since the broader market struggled in 2022.
But zooming further out, DIV has returned 3.1% per year over a three-year time frame, and its 1.3% return per year over a five-year time frame leaves more to be desired. In fact, since its inception in 2011, DIV has returned just 3.6% per year, meaning that investors who held the ETF would have been much better off simply investing in one of the three major U.S. indices, which all enjoyed a decade of banner gains in that time.
The Takeaway
DIV presents an interesting investment opportunity thanks to its high yield and frequent dividend payout. However, its mixed analyst ratings and lackluster long-term performance detract from its appeal. With its 7.3% yield, DIV can be a useful vehicle to boost your portfolio’s yield, but given its subpar long-term track record, I wouldn’t make it into a large allocation. There are also a growing number of other dividend ETFs that pay distributions on a monthly basis that investors can consider instead.
One final thought on DIV is that it looks more attractive than other monthly-dividend ETFs from Global X that I’ve recently covered, like SDIV and SRET. While it has a lower yield, it has posted a better long-term performance than those two. Also, the strong Smart Scores of many of its top 10 holdings indicate that it has a higher-quality group of components and that it likely has a bit more potential for growth and capital appreciation than those two ETFs.
