The ETF Underdogs, Part 11: High Dividend Strategies

WBI Power Factor High Dividend ETF

WBIY

The WBI Power Factor High Dividend ETF (WBIY) has been around since December 2016 and currently manages approximately $58.44 million in assets. It's a smart beta ETF, meaning it follows a rules-based index methodology rather than relying on discretionary active management.

Specifically, WBIY tracks the Selective Power Factor High Dividend Index, which starts with approximately 3,000 large-, mid- and small-cap stocks from a broad U.S. equity universe.

The first step removes pass-through securities, including real estate investment trusts (REITs), master limited partnerships (MLPs), preferred stocks and business development companies (BDCs). These securities can have different distribution requirements, accounting conventions and tax characteristics that make their yields less directly comparable with those of conventional operating companies.

From there, eligible stocks are ranked by dividend yield, with the bottom half eliminated. The remaining companies are evaluated using three fundamental measures: trailing 12-month diluted earnings from continuing operations relative to price, free cash flow relative to price, and sales relative to price.

The bottom half of stocks based on these factors is eliminated, followed by additional screens addressing dividend safety, company size, and trading liquidity. The remaining candidates are ranked again by dividend yield, with the 50 highest-yielding qualifying stocks selected for the portfolio.

The result is a concentrated, rules-based portfolio combining high dividend yields with multiple fundamental value screens. WBIY currently offers a 30-day SEC yield of 4.73%.

AAM S&P 500 High Dividend Value ETF

SPDV

The AAM S&P 500 High Dividend Value ETF

is another index-based smart beta strategy, but one that goes beyond the relatively straightforward dividend yield and valuation screens associated with some first-generation value ETFs.

SPDV tracks an index of 55 dividend-paying S&P 500 stocks, with five selected from each of the 11 Global Industry Classification Standard (GICS) sectors. This equal sector representation helps prevent the portfolio from becoming overly concentrated in traditionally high-yielding industries.

The methodology also incorporates free cash flow yield alongside dividend yield. That's an important distinction because a high dividend yield isn't always a sign of an attractive investment. Sometimes it simply reflects a falling share price, deteriorating business fundamentals or an unsustainable payout.

Free cash flow provides an additional check on those risks. Companies generating substantial cash after their operating expenses and capital expenditures generally have more flexibility to maintain dividends, reduce debt or reinvest in their businesses. Screening for free cash flow yield can therefore help identify attractively valued companies while reducing exposure to potential value traps.

The approach has performed well in 2026. As of September 30, SPDV had returned 14.87% year-to-date, compared with 12.75% for the S&P 500 Index. SPDV currently manages just over $100 million in assets and offers a 30-day SEC yield of 3.61%.

Hoya Capital High Dividend Yield ETF

RIET

Dividend yields vary considerably across the real estate investment trust universe. Some property sectors, particularly those with mature assets and relatively predictable cash flows, can support higher distributions. Others retain more capital to fund development and expansion.

Data center REITs are a good example of the latter. The infrastructure needed to support cloud computing and artificial intelligence requires substantial capital expenditure, so these companies often prioritize reinvestment and growth over maximizing current dividend yields.

The Hoya Capital High Dividend Yield ETF

takes a different approach by tracking the Hoya Capital High Dividend Yield Index, which selects 100 high-dividend-yielding real estate securities. Its methodology incorporates quality screens, particularly around leverage, before selecting securities based on dividend yield across 14 property sectors and three market-capitalization tiers.

Compared with a conventional market-cap-weighted REIT ETF, RIET tends to have greater exposure to higher-yielding property categories, including experiential real estate such as hotels, resorts and casinos. These businesses can offer attractive distributions, although their cash flows are generally more sensitive to economic conditions and consumer spending.

RIET also allocates to mortgage REITs. Unlike traditional equity REITs, which own and operate physical properties, mortgage REITs invest in real estate loans and mortgage-backed securities. They typically use leverage to earn a spread between their financing costs and investment returns, which can support higher distributions but introduces additional interest rate, credit and financing risks.

RIET distributes income monthly and currently offers a 30-day SEC yield of 10.51%. For investors prioritizing current income, that's an attractive headline figure, although the higher yield comes with greater exposure to economically sensitive property sectors and leveraged real estate financing.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.