There are now quite a few dividend ETFs that pay dividends on a monthly basis, giving investors who are looking for frequent dividend payouts plenty of options to choose from. However, SoFi (NASDAQ:SOFI) has taken this idea one step further with its SoFi Weekly Dividend ETF (NYSEARCA:WKLY), which pays its investors dividends on a weekly basis.
It is a novel idea, and receiving a payment every week certainly has its appeal, but is it truly worth it when all factors are considered? Let’s find out.
What is WKLY ETF’s Strategy?
WKLY is a small, $10.7 million ETF from fintech pioneer Sofi. The fund’s underlying index is the SoFi Sustainable Dividend Index. It is “the first equity ETF that intends to pay out income distributions on a weekly basis,” according to SoFi.
It focuses on dividend sustainability, investing in stocks that have a track record of consistently paying dividends over the past five years and are expected to pay them over the coming year. It also runs additional screens to remove stocks that are at risk of reducing their dividend payouts.
Diversified Holdings
WKLY is exceptionally diversified, with a well-rounded group of 336 positions, and its top 10 holdings account for just 26.7% of assets. Take a look at WKLY’s top 10 holdings below.
WKLY also offers investors geographic diversification, as blue-chip U.S. dividend stocks like JPMorgan Chase (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), and Procter & Gamble (NYSE:PG) are joined by international dividend payers like Roche Holding (OTC:RHHBY) and Nestle (OTC:NSRGY).
Is WKLY Stock a Buy, According to Analysts?
Turning to Wall Street, WKLY has a Moderate Buy consensus rating, as 52.9% of analyst ratings are Buys, 40.1% are Holds, and 7.0% are Sells. At $53.18, the average WKLY stock price target implies 10.7% upside potential.
The Weekly Dividend
WKLY’s dividend yield of about 3.0% certainly isn’t bad. It’s just about double the current dividend yield of the S&P 500 (SPX).
However, for investors looking for a higher yield and a frequent payout schedule, albeit a monthly one, there are plenty of options with significantly higher yields — for example, the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) currently yields 10%, while the NEOS S&P 500 High Income ETF (BATS:SPYI) yields 10.7%.
Sure, getting a payout weekly is perhaps more appealing than getting a monthly payout, but an investor holding JEPI or SPYI also receives more than three times the yield of a WKLY investor. At that point, it’s worth considering just waiting a few extra weeks for the larger payout from JEPI or SPYI or dividing this payment into four and accessing one-quarter of it each week, as this would be more or less the same as a weekly payout.
WKLY’s Performance Track Record
Here’s another less exciting part about WKLY. For all of its painstaking effort to create a diversified portfolio of sustainable dividend payers (which I certainly give it credit for) and to create a weekly payment schedule, the ETF hasn’t done much in terms of total performance since its inception in 2021.
In fact, it has now been around for over two years, and as of the end of the most recent month, it has only managed to eke out a total annualized return of 1.4%. Keep in mind that this total return includes the proceeds from dividends, so WKLY investors don’t have much to write home about.
Investors looking for a dividend ETF that combines a solid payout with strong long-term performance can instead take a look at an ETF like the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD), which not only has a higher dividend yield than WKLY (at 3.5%), but also boasts a strong long-term track record with annualized total returns of 15.8%, 11.8%, and 11.7% over the past three, five, and 10 years respectively (as of the end of the most recent quarter).
This clearly isn’t an apples-to-apples comparison, as WKLY hasn’t been around for as long as SCHD and past performance is no guarantee of future results, but it’s just to illustrate that there are dividend ETFs out there with higher yields and more impressive track records.
Expense Ratio
One other concern about WKLY is its expense ratio of 0.49%. While this isn’t egregious, it’s on the more expensive side of what I would be willing to pay for an ETF, and many of the dividend ETFs mentioned above have lower expense ratios. For example, JEPI, which pays a monthly dividend and yields 10%, has a lower expense ratio of 0.35%. The aforementioned SCHD has a much lower expense ratio of just 0.04%. WKLY’s expense ratio is lower than that of SPYI, though, which charges 0.68%.
An expense ratio of 0.49% means that an investor putting $10,000 into WKLY would pay $49 in fees in year one. These fees add up over time. Assuming the fee remains the same and WKLY returns 5% per year, this same WKLY investor would pay a total of $616 in fees after 10 years.
Conclusion
I will give WKLY some credit because the idea of an ETF that pays dividends on a weekly basis is an innovative one, and honestly, it’s a pretty cool concept. It’s also very well diversified.
On the other hand, beyond the novelty of receiving a weekly payout, it’s hard to see a reason to pick WKLY over some of the other dividend ETFs out in the market today. An investor who wants a frequent payout can pick an ETF like JEPI or SPYI and still receive a monthly payout, not to mention one that is substantially higher.
Also, an investor could, in theory, more or less create the effect of receiving a weekly payout for themselves by buying a few different monthly dividend payers and staggering them so that they receive payouts on different dates (for example, JEPI usually pays its dividend early in the month whereas SPYI pays later in the month).
An investor looking for a great long-term performance track record should consider an ETF like SCHD, which also has a higher yield than WKLY and a much lower fee. So, while WKLY is a neat idea, I don’t see a compelling reason to buy it at this point in time.
