The S&P 500 and the Nasdaq Composite declined for a second straight session in a lackluster start to September. A lackluster manufacturing report for the U.S. economy and the tech selloff mainly led to the slump.
The S&P Global US Manufacturing PMI was revised slightly down to 47.9 in August 2024 from a preliminary reading of 48 and hints at the deterioration in the health of the U.S. manufacturing sector so far this year.
Production decreased for the first time in seven months as sales continued to decline amid increasing reports of demand weakness. A renewed reduction in employment was also recorded due to spare capacity in the sector.
Meanwhile, OPEC+ plans to boost output, which is putting pressure on oil prices. Weakness in China’s economy has also been dragging prices lower. A report that Libya’s oil production is set to be restored weighed on oil prices too.
If these were not enough, there has been an upheaval in technology stocks as shares of the artificial intelligence king NVIDIA NVDA have been under pressure due to growth slowdown. NVIDIA’s steep decline erased almost $300 billion in market cap off the chipmaker and weighed on the broader market.
The VanEck Semiconductor ETF SMH, an index that tracks semiconductor stocks, was down 7.5% on Sept. 3, 2024, marking its worst day since March 2020. No wonder, Wall Street has started September on a wobbly note. Investors cut exposure to stocks at their fastest pace since November 2020 in the last week of August, according to Bank of America’s client flows data, as quoted on CNBC.
Here’s why dividend ETFs should be considered now.
Time for Dividend ETFs?
Dividend-paying stocks provide a steady income stream and help mitigate potential losses during weaker market periods. These stocks offer the best of both worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices.
The Power of High-Dividend ETFs
High-dividend ETFs can be a good investment during times of economic uncertainty, as they provide a steady source of income regardless of market conditions. These types of stocks and ETFs typically pay out a higher percentage of their profits as dividends than other stocks, which means that they can make up for the capital losses, if there are any.
Examples of such ETFs are Vanguard High Dividend Yield ETF VYM (which charges 6 bps in fees and yields 2.83% annually), Global X SuperDividend ETF SDIV (which charges 58 bps in fees and yields 10.90% annually) and Global X SuperDividend U.S. ETF DIV (which charges 45 bps in fees and yields 6.26% annually).
Dividend-Growth ETFs in Focus
High-quality dividend stocks with a history of consistent dividend payments and growth can offer both income and the potential for capital appreciation over the long term. Examples of such ETFs are Vanguard Dividend Appreciation ETF VIG and ProShares S&P 500 Dividend Aristocrats ETF NOBL. The VIG ETF and NOBL ETF charge 6 bps and 35 bps in fees, respectively.
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
Global X SuperDividend U.S. ETF (DIV): ETF Research Reports
Global X SuperDividend ETF (SDIV): ETF Research Reports