The Zacks Analyst Blog Highlights: ALPS Sector Dividend Dogs ETF, Vanguard High Dividend Yield ETF, Vanguard Dividend Appreciation ETF, WisdomTree LargeCap Dividend Fund and Lockheed Martin
CHICAGO, May 15, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the ALPS Sector Dividend Dogs ETF (AMEX:SDOG-Free Report), Vanguard High Dividend Yield ETF (AMEX:VYM-Free Report), Vanguard Dividend Appreciation ETF (AMEX:VIG-Free Report), WisdomTree LargeCap Dividend Fund (AMEX:DLN-Free Report) and Lockheed Martin Corporation (NYSE:LMT-Free Report).
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Here are highlights from Wednesday's Analyst Blog:
Dividend ETFs Hitting New Highs
Dividend-focused ETFs have been gaining immense popularity and are riding higher this month on investors' drive for higher income. This is especially true as interest rates remain at lower levels despite the fact that the Fed is curtailing its monetary stimulus and bond yields are close to their all-time lows.
Additionally, the latest comments from Fed Chairperson Janet Yellen are fueling a rally in dividend funds. Yellen has again committed to keep short-term interest rates near zero levels for a considerable period of time to support the gradually improving economy.
Further, the most popular trading proverb 'sell in May and go away' has boosted the demand for dividend-paying stocks. This is because most of the investors believe in this old saying and sell their stocks in May to avoid the seasonal decline in the equity markets during the summer months (from May end to early September). As a result, investors duly turned their focus on dividend paying stocks (read: Sell in May and Go Away with These Inverse ETFs).
If this wasn't enough, investors should note that most of the dividend paying companies are stable and mature with solid cash flows that provide greater stability and safety in a volatile environment. Though the U.S. market is hitting new highs, dumping of growth and momentum stocks and growing tensions in Ukraine remain concerns for the stock market.
In such a scenario, the companies that pay dividends generally act as a hedge against economic uncertainty and most of the dividend ETFs are climbing, reaching new highs this month. Notably, dividends accounted for more than 40% of total market returns over a long time horizon (say over the past 80 years).
Below, we have highlighted some dividend ETFs for those investors seeking both stability and higher income. These funds are hitting all-time highs and have a potential to move higher in the coming months as well (read: 3 ETFs Hitting All-time Highs in Rocky Market).
ALPS Sector Dividend Dogs ETF (AMEX:SDOG-Free Report)
This fund applies the 'Dogs of the Dow Theory' on a sector-by-sector basis using the S&P 500. This could be easily done by selecting five highest yielding securities in each of the 10 GICS sectors and equally weighing them. These higher yielding stocks will appreciate in order to bring their yields in line with the market, potentially leading to outsized gains.
This approach results in a portfolio of 51 stocks with each security accounting for 2.6% of total assets. The fund focuses on yield in the large cap market while giving investors roughly equal exposure to all sectors. SDOG has amassed $664 million in its asset base while trades in volume of more than 105,000 shares. It charges 40 bps in annual fees and has a 30-day SEC yield of 3.56%.
The ETF hit its all-time high of $36.31 per share in yesterday's trading session, representing a gain of about 5.2% over the past one month.
Vanguard High Dividend Yield ETF (AMEX:VYM-Free Report)
This large cap centric fund provides exposure to the high yielding U.S. dividend stocks by tracking the FTSE High Dividend Yield Index. The ETF is one of the largest and popular choices in the dividend ETF space with AUM of over $7.9 billion and average volume of around 549,000 shares. Expense ratio came in at 10 bps (read: 3 Excellent Dividend ETFs for Growth and Income).
Holding 391 securities, the product is concentrated on the top two firms - Apple and Exxon Mobil – making up for more than 5% share each while other security holds less than 4% of assets. In terms of sector, the fund is widely spread out with technology, consumer goods, financials, industrials, health care and oil & gas taking double-digit exposure in the basket.
VYM hit its fresh high of $64.74 per share yesterday and has moved higher by about 4.6% in the trailing one-month period. The ETF yields 3.00% in 30-day SEC yield and has a Zacks Rank of 2 or 'Buy' rating with a Medium risk outlook.
Vanguard Dividend Appreciation ETF (AMEX:VIG-Free Report)
This is the largest and most popular ETF in the dividend space with AUM of $19.4 billion and average daily volume of about 940,000 shares. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high quality stocks that have a record of increasing dividends for at least 10 consecutive years.
The fund holds 164 securities, which are pretty spread across various securities as none holds more than 4.1% of total assets. IBM, Wal-Mart and Exxon Mobil are the top three elements in the basket. However, the ETF is skewed toward industrials at 23.5% while consumer goods, consumer services and technology round off to the top four (read: Manufacturing Boom Will Benefit These 3 Industrial ETFs).
The product charges 10 bps in annual fees while its 30-day SEC yield comes at 2.02%. This fund also reached its all-time high of $77.17 per share yesterday, adding about 4.4% over the past one month. It has a Zacks Rank of 2 with a Medium risk outlook.
WisdomTree LargeCap Dividend Fund (AMEX:DLN-Free Report)
This ETF provides exposure to the large cap segment of the U.S. dividend paying stocks. It tracks the WisdomTree LargeCap Dividend Index, which is dividend weighted annually to reflect proportional share of cash dividend that each company is expected to pay in the coming year. The fund has been able to manage assets of $1.8 million and trades in good volume of 86,000 shares a day on average. Expense ratio came in at 0.28% (see: all the Large Cap ETFs here).
With less than 300 stocks in its basket, the product is widely diversified across each component as none of these holds more than 3.63% of assets. Top three holdings include AAPL, XOM and Microsoft. From a sector look too, the fund is well spread out including information technology (16.06%), consumer staples (14.90%), financials (13.44%), health care (11.53%) and energy (10.99%).
The fund has a 30-day SEC dividend yield of 2.45% and was up 4.2% over the past month. DLN made a fresh high of $69.19 per share yesterday and has a Zacks Rank of 2 with a Medium risk outlook.
Lockheed Martin Wins $101.9M DoD Contract
Lockheed Martin Aeronautics Company, a key division of Lockheed Martin Corporation (NYSE:LMT-Free Report), received a modification contract worth $101.9 million from the U.S. Department of Defense (DoD) under the Foreign Military Sales (FMS) program.
Per the contract, the company will provide non-recurring engineering and maintenance support for mission systems software and autonomic logistics development of the F-35A Conventional Take Off and Landing Air System for the government of Israel. Lockheed Martin will also provide autonomic logistics hardware to support Israeli pilot training. Work under this contract will be performed in Fort Worth, TX and is scheduled to be completed by Apr 2015.
The Aeronautics business segment includes the company's largest program – the F-35 fighter jet. Lockheed expects rising F-35 aircraft deliveries to allied countries besides its wide uptake in the U.S. Armed Forces. Net sales from the F-35 program comprised approximately 16% of total consolidated net sales for the first quarter 2014.
The F-35 continues to receive strong support from Congress and the administration despite persistent threats of defense budget cuts. The company expects to generate 20% of total revenues from international sales on the back of strong orders for its F-35 program in 2014.
Recently, the company received another sizable contract of $12.4 billion from the government of Australia. Per the contract, the company will supply 58 F-35s with first delivery by 2018.
Currently, Lockheed Martin holds a Zacks Rank #3 (Hold).
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