Forget SCHD, This Dividend ETF Pays Monthly

All of us could use a little more monthly income; it’s not just for retired folks anymore. Considering the state of the economy and the rising household expenses, the idea of receiving a monthly dividend income is attractive. If you’re constantly worried about the ebbs and flows of the market, investing in an exchange-traded fund can be a smart choice.

You can benefit from capital appreciation while enjoying steady passive income, at low risk. Stocks will pay you a quarterly dividend, while bonds will pay every six months, but ETFs can generate monthly income to cover your expenses or to reinvest.

Getting paid 12 times a year means you enjoy a higher income and can budget for your expenses accordingly. If you’re looking for dividend ETFs that pay monthly, move over the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD | SCHD Price Prediction). I’ve a better option for you- Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD).

The fund

Invesco S&P 500 High Dividend Low Volatility was launched in 2012. It has a simple method where in large and financially stable companies are chosen from the S&P 500, and it then narrows it down to companies with the highest yield. This leads to a heavy concentration in utilities and REITs. The stocks in the fund carry equal weight, so each investment has the same impact on performance. Since there’s no extra weightage on any stock, it reduces the risk and volatility.

SPHD has a dividend yield of 4.29% and $10,000 invested in the fund in 2015 would be worth $12,680. Compared to SCHD, which has a yield of 3.81%, SPHD offers a higher return.

It has an expense ratio of 0.30%, compared to SCHD’s miniscule 0.060%. SPHD is all about the S&P 500 index and holds the 52 best stocks out of the 500. These are the least volatile and high-yield stocks within the index.

SPHD ensures the right risk-return balance, and its dividend yield is more than three times that of the S&P 500. It is a fund that doesn’t invest in the tech sector. Hence, if you already own the Magnificent Seven or aren’t keen on the tech industry, this is an ideal income ETF for you.

Its sector allocation is as follows:

• Real estate: 22.82%
• Consumer staples: 17.88%
• Utilities: 13.65%
• Healthcare: 11.42%

SCHD doesn’t have any exposure to REITs and very limited exposure to utilities. These gaps are filled by SPHD. It has the highest allocation to the real estate sector, allowing investors to participate in the real estate industry without a large capital.

Low-risk, high reward