The S&P 500 witnessed a record worst performance in the first half of 2022 and officially entered the bear market in mid-June. The benchmark index has lost 20% year to date. Moreover, UBS recently slashed its year-end price target for the S&P 500 to 4,150, down from its previous estimate of 4,850.
Furthermore, June inflation data came in higher than expected. The consumer price index rose 9.1% on a year-over-year basis last month, higher than May’s 8.6%. And the 75 bps federal rate hike in July seems inevitable.
The concerning macro environment is raising the odds of a recession. Morgan Stanley chief strategist Mike Wilson expects the S&P 500 to hover around as low as 3,000 by the 2022 end in case of a recession.
Amid the market uncertainties, defensive ETFs such as iShares Select Dividend ETF (DVY), Vanguard Dividend Appreciation Index Fund (VIG), and Invesco S&P 500 Low Volatility ETF (SPLV) could be wise additions to your portfolio.
iShares Select Dividend ETF (DVY)
DVY focuses on dividend-paying stocks, and its underlying index screens equities by factors such as dividend per share growth rate, dividend payout percentage rate, and dividend yield. It suits investors well for a long-term investment with minimum volatility.
With $21.28 billion in assets under management (AUM), DVY’s top holdings include International Business Machines Corporation (IBM), with a 2.17% weighting, followed by Altria Group, Inc. (MO) at 2.09%, and Valero Energy Corporation (VLO) at 2.07%. It currently has 101 holdings in total.
Over the past three months, the ETF’s net inflows were $1.03 billion. In addition, its 0.39% expense ratio compares favorably to the 0.50% category average.
DVY pays a $3.63 annual dividend, which yields 3.08% at the prevailing share price. Its four-year average dividend yield stands at 3.50%. Its dividends have increased at a 2.5% CAGR over the past three years and 5.2% over the past five years. Over the past year, the fund has gained marginally.
DVY has a B grade for Buy & Hold in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Vanguard Dividend Appreciation Index Fund (VIG)
VIG tracks the performance of the NASDAQ US Dividend Achievers Select Index and offers exposure to dividend-paying large-cap companies that exhibit growth characteristics within the U.S. equity market.
It has 291 holdings in total. Johnson & Johnson (JNJ) has a 3.84% weighting in the fund as its top holding, followed by Microsoft Corporation (MSFT) at 3.82% and UnitedHealth Group Incorporated (UNH) at 3.80%.
VIG has $61.02 billion in AUM. Its net inflows came in at $1.10 billion over the past three months. Its 0.06% expense ratio is lower than the 0.37% category average.
VIG pays a $2.86 dividend annually, yielding 1.97% at the current price. Its four-year average dividend yield stood at 1.76%. Its dividends have increased at an 11.6% CAGR over the past three years and 8.4% over the past five years. The fund has lost marginally over the past month.
Invesco S&P 500 Low Volatility ETF (SPLV)
SPLV tracks an index consisting of some of America’s largest companies, usually known as ‘Blue Chips’; they are some of the country’s most famous and profitable companies. It is one of the safest and most stable in the equity world and tends to outperform in a bear market.
The fund has $9.67 billion in AUM. Its top holdings include PepsiCo, Inc. (PEP) with a 1.34% weighting, Verizon Communications Inc. (VZ) with 1.29%, and JNJ with 1.28%. In addition, it has 102 holdings in total. Its net inflows came in at $767.05 million over the past three months. Its 0.25% expense ratio is lower than the 0.67% category average.
SPLV pays a $1.21 annual dividend, which yields 1.95% at the prevailing share price. Its average four-year dividend yield stands at 2.02%. SPLV’s dividends increased at a 3% CAGR over the past three years and a 6.6% CAGR over the past five years. Over the past month, the stock has lost marginally.
SPLV’s POWR Ratings reflect solid prospects. It has an overall B rating, equating to a Buy in our proprietary rating system.
In addition, it has an A grade for Peer and a B for Buy & Hold. SPLV is ranked #6 out of 86 ETFs in the B-rated Large Cap Value ETFs group. Click here to check all the SPLV ratings.
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DVY shares were trading at $116.52 per share on Wednesday morning, down $0.87 (-0.74%). Year-to-date, DVY has declined -3.63%, versus a -19.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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