Back in May 2019, I opened a new Trust account with TD Ameritrade. With the recent downturn in stock market prices, I was able to complete the process of buying five of the ETFs I had been keeping track of for this account. I wrote two articles previously about my plans for the account and how I was narrowing down my ETF choices using the TD Ameritrade ETF screener. If you want the background information, you can read these articles here: Using an ETF Screener for Investments with TD Ameritrade and My Process for Selecting Steady Dividend ETFs. Remember, my goal with this account is to use up to 50% of the money that I gain from dividends and interest each year as charitable contributions for my favorite non-profit organizations for the following year.
When I previously discussed the account, I had narrowed my choices for ETFs down to the 21 listed in the spreadsheet below. Since then I have bought shares in five of these ETFs. I decided to spread my holdings across, small value, mid-cap value, and large value ETFs, but with a greater concentration in large value to help mitigate risk.
CSB: VictoryShares US Small Cap High Dividend Volatility Weighted ETF
One of the first investments I made was in CSB, the VictoryShares US Small Cap High Dividend Volatility Weighted ETF. This fund tracks the NASDAQ Victory US Small Cap High Dividend 100 Volatility Weighted Index. I picked this fund because of its investment in smaller companies, with some of their top ten holdings including companies that I like but don’t want the wider risk involved in owning their individual shares, such as Cohen & Steers (CNS), Otter Tail (OTTR), and Cogent Communications (CCOI). Another attractive thing about this fund, was that I was able to buy it “on sale.” I ended up purchasing shares in two lots, half at the end of May and the other half in August to total 100 shares. Both times the price was at a low compared to the prices of the ETF in the days around when I made my purchases. Even as the cost of the fund still remains relatively low, the current market value of my CSB shares is slightly above the purchase price.
I am satisfied with the dividend yield at 3.1%. I also like that this fund pays its dividend monthly, even if it is only 8 cents per share each time. The market return since inception is at 9.5%.
One drawback for me is that this fund has the highest expense ratio of all of the funds I chose at .35%. I also worry that this fund has 25% of its holdings in the financial sector. This may prove to be a detrimental choice if we end up heading into a recession and that sector demonstrates higher volatility, possibly negatively effecting the value of the fund. Nevertheless, as I intend on holding this fund long term, I will be okay to ride out broader changes in the value assuming it maintains paying dividends at (at least) its current level.
ONEY: SPDR® Russell 1000® Yield Focus ETF
For my mid-cap fund choice, I picked ONEY, the SPDR® Russell 1000® Yield Focus ETF from State Street Global Advisors. As the name suggests, this tracks the total return performance of the Russell 1000® Yield Focused Factor Index. Almost immediately after deciding that I would buy this fund and before I placed an order, the price jumped up $3 per share at the beginning of June. I didn’t want to pay those additional few dollars per share, so I waited on it until August. I ended up placing 2 orders, one lot of 100 as the price started to drop down on August 5th. Then I picked up another 50 shares as the price reached down below $65.
Of course, one thing that attracted me to this fund was the annual dividend payout of $2.34 per share and the dividend yield around 3.4%. I also like the diversification in the mid-cap range with 297 holdings in many companies that are not represented in other ETFs I own in any of my other brokerage accounts — I tend to be more heavily invested in large value companies. The fund has had a reasonable performance return of 11.27% since inception. The expense ratio is at .20%.
HDV: iShares Core High Dividend ETF
The first of the three large value funds that I invested in was HDV, the iShares Core High Dividend ETF from BlackRock. HDV tracks the Morningstar Dividend Yield Focus Index. These shares were purchased in two batches, the first 75 shares were bought in May and then 50 shares were bought to lower the cost basis when the share price dipped lower than my original purchase price on August 15.
The dividend yield for this fund is currently at 3.3% with a $3.07 annual dividend payout per share. HDV’s market return since the fund’s beginning in 2011 is at 11.62%. The ETF is comprised of 79 companies with the top 10 holdings representing the energy, communication, consumer staples, healthcare sectors. The expense ratio is low at .08%.
One thing I don’t like is that Philip Morris (PM) is in the top 10 holdings at 5.49% of the fund. I do not like companies that make profit from tobacco sales and I especially dislike PM for their Juul product and its role in teen addiction to nicotine. To make up for having PM in this ETF, and for any other tobacco/smoking focused companies that may show up lower down the rankings in any of my ETF holdings, I will be donating 20% of all dividends I earn annually from the HDV ETF, and 10% of any realized profits from the sale of HDV shares to the Campaign for Tobacco-Free Kids. This is just one of the non-profit organizations I will be supporting. I intend to expand on my charitable contribution plans related to earnings from this account at the beginning of 2020, when I will know the final earnings from 2019.
SCHD: Schwab US Dividend Equity ETF
SCHD, the Schwab U.S. Dividend Equity ETF, is a large value ETF that I already own shares of in my personal E*Trade Trust portfolio. This ETF tracks the Dow Jones U.S. Dividend 100 Index and has a healthy annual market return of 13.5%. Dividends currently payout at $1.55 per year, at a yield of 2.96%. Having experience holding this ETF in my E*Trade Trust account, I knew when it appeared on the narrowed down ETF screener list, that it was one that I would like to have as part of the TD Ameritrade Trust account. As with ONEY, it took some time for this ETF to reach a price in which I wanted to buy in. I scooped up 100 shares when the price made its first big dip of the summer on August 5th. The expense ratio is the lowest of this set of five ETFs, at merely .06%.
The SCHD top holdings have some crossover with individual stocks I hold in my E*Trade Trust account (particularly PFE, INTC, PG and TXN), but there is enough variety in this ETF as a whole to spark my interest in investing in it. I also feel that if the fund is committed to these companies it provides reassurance about my personal investments in those businesses.
SPYD: SPDR ® Portfolio S&P 500 ® High Dividend ETF
Finally, we reach SPYD, the SPDR® Portfolio S&P 500® High Dividend ETF also brought to us by State Street Global Advisors. This fund tracks the performance of the S&P 500 High Dividend Index. You may remember me talking about this fund previously as it is one of the funds I chose for my Grow Your Dough Challenge account at E*Trade. This is one of my favorite funds. Is it normal to have a favorite ETF? I have purchased three lots of 100 each of SPYD for the TD Ameritrade Trust account. I made my initial purchase of 100 shares of SPYD at the end of May. Then in August, I snapped up another 100 shares when the price dropped five cents below the price I had previously bought it at. The lowest ask price kept dropping incrementally, so a few days later, I decided to add the third lot of 100. Now I am waiting for the price to recover!
In the meantime, I am happy that SPYD pays out an annual dividend of $1.70 per share, with the current dividend yield at 4.67%. The return since inception, four short years ago, is 11.29%. One thing I like about this ETF is that 20% of their holdings are in REITs. The other is that though there are only 81 holdings, the risk is spread fairly equally among them with the weightings ranging from .89% to 1.49%. The ETF also has a low expense ratio of .07%.
Possible Future Investments: FREL and DGRO
There are a couple remaining ETFs that I am considering adding positions into when the price is right. The first is the Fidelity MSCI Real Estate Index ETF (FREL). I may have missed a good point to get in on August 5th, and now am left waiting as I don’t want to pay the current price, which is close to the 52-week high. If it doesn’t come back down, I might have to let this one go. Also, the return since inception is 5.9%, which is all right, but not as high as any of the other ETFs I selected. The benefit of diversification in a number of popular REITs among its holdings, the $1.24 annual payout with a 4.66% dividend yield, and the low expense ratio of .08% are what make FREL attractive for me.
Another fund that receives honorable mention that didn’t quite make the cut on the ETF screener is the iShares Core Dividend ETF (DGRO). It failed at the annual payout level (of $.87), which is below the dividend 12-month payout total of $1.00+ I had required in the screener. However, it does have a market return since inception of 11.3% and a low expense ratio of .08%. It has 483 holdings, with nearly half comprised of companies in the financial, healthcare, and technology sectors. It holds a mix of value and growth stocks and tracks the Morningstar U.S. Dividend Growth Index. There is some crossover in holdings with other ETFs I own. If the price were to drop into the low 30s as it did at the end of 2018, I would consider adding this ETF to my portfolio, in order to have more exposure to some growth stocks. DGRO has a current P/E ratio of 18.1, which is higher than any of the P/E ratios for the ETFs I purchased.
Disclaimer: Remember that these are my financial choices based on my personal financial situation, risk tolerance, timeline, and life goals, and it does not constitute financial advice. Please do your own research into any investment options before putting your money into anything!