Wednesday 28 April 2021

Annual Review of Income ETFs

Exchange Traded Funds (ETFs) come in all shapes and sizes. Those that are income-oriented now form the core of the DIY Income Investor portfolio. They can provide cost-effective diversification (and thus a measure of safety), simplify the running of your portfolio plus give easy access to income-oriented securities from around the world, in various currencies.

For this post I have reviewed my previous reporting on both dividend and fixed-income ETFs.
This DIY Income Investor has a new ISA allowance to invest, so I thought it was time to take stock of the options for ETFs that would fill out and balance the portfolio. Therefore, I have reviewed and updated my previous articles and put together the following list of potential ETFs.

Data Sources

I have researched ETFs quoted in London as there would be tax complications buying on other markets. Sometimes there is a choice in the currency that the ETF is quoted in - I usually buy the Sterling (GBX=pence, GBP=pounds) one but you might want to diversify your currencies. All follow a specific index and many are based on physical holdings and pay out the dividends; others are more synthetic (using tools like swaps) and do not pay out any income, but just roll up the total return. I'm not keen on 'accumulation' ETFs, as I see the portfolio income as an important mechanism for rejuvenating the portfolio itself.

For consistency in comparison, I have used the 'dividend indicated gross yield' provided by Bloomberg. The actual income you would receive would be less, depending on the charges applied by the ETF provider.

What is slightly surprising to me (given the wealth of data available online) is that these high-yield ETFs are not so easy to find - there does not seem to be a comprehensive list that is ranked by yield. 
  • Topyields is one of the more useful sites for identifying high-yielders, including some ETFs - but it does not have a page specifically for the London market ETFs (and you should be aware that you may need to double-check some of the numbers that appear).
  • One of the most comprehensive lists of ETFs quoted on the London Stock Exchange (LSE) is published by The Financial Times and Morningstar, which seems to be comprehensive. 
  • has a great screener for the income-oriented ETFs quoted on the LSE - as well as almost any other category you could think of. But again you will have to do more research to find out what the yields actually are.
  • Twenty20 offer an ETF search tool that provides a selection of 18 'High Yield' ETFs quoted in London - a useful starting point.
  • justETF also have an ETF screener, although not specifically for the London market. The search identifies 28 ETFs quoted in £ Sterling. If any catch your fancy you will have to do more research.
My portfolio is constructed as follows:
  • 50%/50% split between dividends and fixed-income
  • geographical diversification: UK, Europe, US, Asia/Pacific, Emerging Markets, Global
  • buy the highest yield ETF type in the appropriate region, whilst limiting any one security to 5% of the portfolio
Note: Yields are as at the date of publication - they will change!

Dividend ETFs

UK Dividend

iShares UK Dividend UCITS ETF IUKD  The 50 highest-yielding FTSE 350 stocks, excluding investment trusts, selected and weighted by one-year forecast dividend yield - 3.7%

SPDR S&P UK Dividend Aristocrats ETF UKDV - just 30 constituents - 2.1% 

Xtrackers FTSE 100 Income UCITS ETF XUKX - 3% but entry/exit charges

US Dividend

SPDR S&P US Dividend Aristocrats ETF UDVD USD  - 100 constituents - 2.3% 

WisdomTree US Equity Income UCITS ETF DHS - 2.8% - but entry/exit fees

Euroland Dividend

iShares EURO STOXX Select Dividend 30 UCITS ETF IDVY  - the 30 highest-yielding eurozone companies - 3.1%

db x-trackers Euro Stoxx® Select Dividend 30 UCITS ETF 1D XD3E - 30 holdings  - 2.6% but entry/exit fees

SPDR S&P Euro Dividend Aristocrats ETF EUDV  (EUR version: EUDI) - 0.8%

Asia Pacific Dividend

iShares Asia Pacific Dividend UCITS ETF IAPD  (USD version: IDAP) - 2.9%

SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF PADV USD version ASDV) - 2.8%

Emerging Markets Dividend

SPDR S&P Emerging Markets Dividend ETF EMDV (USD version EDVD) - 2.7%

iShares Emerging Markets Dividend UCITS ETF SEDY   (USD version IEDY) - 1.8%

Global Dividend

SPDR S&P Global Dividend Aristocrats UCITS ETF GBDV (USD version GLDV) - 3.4% 

Vanguard FTSE All-World High Dividend Yield UCITS ETF VHYL (USD version VHYD) - 2.4%  

db x-trackers Stoxx® Global Select Dividend 100 UCITS ETF 1D XGSD (USD version XGDD) - 100 holdings - 4.8%  but entry/exit fees.

Lyxor ETF SG Global Quality Income (SGQL) Accumulation  

Fixed-Income ETFs

UK Fixed-Income

ISXF: iShares Markit iBoxx £ Corporate Bond ex-Financials ETF ISXF - 2.4%.

US Fixed-Income

iShares $ Short Duration High Yield Corporate Bond UCITS ETF SDHG (USD version: SDHY) - 5.0% 

iShares $ High Yield Corporate Bond UCITS ETF SHYU (USD version IHYU) - 4.7% 

Euroland Fixed-Income

Vanguard USD Emerging Markets Government Bond UCITS ETF VEMT - 3.4%

Global Fixed-Income

iShares Global High Yield Corp Bond UCITS ETF IGHY  (USD version HYLD) Tracks the performance of the Markit iBoxx USD Liquid High Yield Capped Index - 4.1%

iShares Global High Yield Corp Bond GBP Hedged UCITS ETF GHYS - 4.0%

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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