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Why Wait? Get Paid Dividends Every Month (Or Week)

Investors can’t control that S&P 500 dividends are shrinking. But they at least control how often they get paid with ETFs.




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More than 500 ETFs, including SoFi Weekly Income ETF (TGIF), Global X Nasdaq 100 Covered Call ETF (QYLD) and Invesco S&P 500 Low Volatility ETF (SPLV), pay dividends at least monthly, says an Investor’s Business Daily analysis of data from Morningstar Direct. And of those, more than 160 yielded 3% or more over the past 12 months.

These fast-payout ETFs are unusual. A vast majority of ETFs, more than 2,000 funds, pay dividends either semi-annually, quarterly, or just once a year.

But getting more frequent payments can help make up for falling yields in the S&P 500 and beyond. The SPDR S&P 500 ETF (SPY), which pays quarterly, yields just 1.4%, down from 1.54% a year ago and 1.97% five years ago, says S&P Global Market Intelligence. And the yield on the iShares Core U.S. Aggregate Bond ETF (AGG), which pays a dividend monthly, is down to 1.8% from 2.5% a year ago.

So if yields are falling, at least you can get paid more often.

“We have found that people love getting what they’re due as quickly as possible,” said a spokesperson at SoFi, which launched the SoFi Weekly Dividend ETF (WKLY) in May. “Many of our members are newer investors so a frequent distribution helps keep investors activated and reminds them of the reasons they invested in the first place (cash flow and growth).”

Looking For Frequent Dividends

A vast majority of ETFs that pay dividends monthly are bond funds. That’s because most interest-bearing bonds pay a monthly payment to investors, says Todd Rosenbluth, head of ETF and mutual fund research at CFRA. ETFs just pass them along.

For instance, the $88 billion-in-assets iShares Core U.S. Aggregate Bond ETF is the largest ETF that pays out monthly. It pays like clockwork in the first week of every month. The ETF is loaded up with 39% of its assets in government bonds, 26% in corporates and 21% in secured debt.

And yet, you might find ways to speed up bond payments, too. The SoFi Weekly Income ETF pays out bond income to investors weekly — usually on Friday. It owns mostly investment grade and high-yield bonds. One of its top holdings, at 1.9% of the portfolio, is Ford Motors (F) debt, paying 8.5%.

Getting Dividends More Frequently Than The S&P 500

You can get dividend payments more often with stocks, too.

The $30 billion in assets SPDR Dow Jones Industrial Average ETF (DIA) is the largest non-bond ETF that pays monthly. It owns the 30 stocks in the Dow Jones Industrial Average and yields 1.6%.

The $8.2 billion in assets Invesco S&P 500 Low Volatility ETF also pays monthly. But it owns stocks expected to smooth the ups and downs of the S&P 500. It puts just 5% of its portfolio in technology, much less than the roughly 20% allocation of the S&P 500. Instead, it’s loaded 24% up on consumer staples like Colgate-Palmolive (CL) and Procter & Gamble (PG). It yields 1.74%.

SoFi’s Weekly Dividend ETFs looks to make monthly payments look late. The ETF owns consistent dividend payers. Big holdings are mostly multinationals with steady dividends like JPMorgan Chase (JPM) and Procter & Gamble. The ETF aims for its average yield of its roughly 300 holdings to be at least 1.2 times higher than most large firms’ yields. WisdomTree US Quality Dividend Growth (DGRW), which has a similar approach and pays monthly, yielded 1.8% over the past 12 months.

Offbeat Dividend Approaches

And yet other ETFs paying dividends monthly look to alternate methods. One way to goose both the size and frequency of dividends is by using covered call options. Here, an ETF generates income by selling options contracts tied to stocks it owns.

The $2.9 billion-in-assets Global X Nasdaq 100 Covered Call ETF is one of the larger funds running this strategy. It owns the 100 largest non-financial stocks on the Nasdaq, just like the Invesco QQQ Trust (QQQ). But unlike the QQQ, it yielded more than 11.7% over the past 12 months. And Global X Nasdaq 100 Covered Call pays monthly. The QQQ, on the other hand, yields just 0.5% and pays just quarterly.

Getting more frequent dividends is certainly attractive to investors hungry for income, says Ben Johnson, director of global ETF research at Morningstar. But don’t overlook more important ETF traits like the strategy, dividend growth and safety of the dividends. “Ultimately, it is the size, volatility, and durability of funds’ dividend distributions that will matter most to investors,” he said.

Why Wait?

Select ETFs that pay dividends at least monthly

Name Ticker Category Assets ($ billions) 12-month % yield  Expense Ratio Why notable?
iShares Core US Aggregate Bond (AGG) Taxable Bond $87.8 2.06% 0.04% Largest monthly payer
SPDR Dow Jones Industrial Average (DIA) U.S. Equity 30.2 1.64 0.16 Largest monthly stock payer
Invesco S&P 500 Low Volatility (SPLV) U.S. Equity 8.2 1.74 0.25 Largest monthly stock payer with low volatility
Global X NASDAQ 100 Covered Call (QYLD) Nontraditional Equity 2.9 11.73 0.60 Largest monthly payer with a high yield
SoFi Weekly Income ETF (TGIF) Taxable Bond 0.02 n/a* 0.59 Pays weekly dividend
 Sources: IBD, Morningstar Direct, * — ETF existed less than 12 months

Follow Matt Krantz on Twitter @mattkrantz

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