In this article, we discuss 5 best ETFs to diversify your portfolio and avoid risks. If you want to see more exchange traded funds in this list, click 10 Best ETFs to Diversify Your Portfolio and Avoid Risks.
5. Schwab U.S. Dividend Equity ETF (NYSE:SCHD)
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) aims to track the total return of the Dow Jones U.S. Dividend 100 Index. The fund offers potential tax efficiency and an expense ratio of just 0.06%. As of September 21, Schwab U.S. Dividend Equity ETF (NYSE:SCHD) has net assets amounting to over $36 billion, and the SEC 30 day yield is 3.51%. It is one of the best ETFs to diversify a portfolio, given its solid distribution yield and the robust portfolio.
Texas Instruments Incorporated (NASDAQ:TXN) occupies the biggest position in Schwab U.S. Dividend Equity ETF (NYSE:SCHD)’s portfolio, representing 4.12% of the total securities. It is a legacy American semiconductor firm that sells its products to electronics designers and manufacturers worldwide. On September 15, Texas Instruments Incorporated (NASDAQ:TXN) declared a $1.24 per share quarterly dividend, a 7.8% increase from its prior dividend of $1.15. The dividend is payable on November 15, to shareholders of record as of October 31. The board of directors also authorized repurchasing another $15 billion in common stock over time. This is in addition to the $8.2 billion of priorly authorized repurchases that remained at the end of the second quarter of 2022.
Among the hedge funds tracked by Insider Monkey, Jean-Marie Eveillard’s First Eagle Investment Management is the leading stakeholder of Texas Instruments Incorporated (NASDAQ:TXN), with 3.5 million shares worth over $542 million. Overall, 55 hedge funds were bullish on the stock at the end of June, up from 46 funds in the earlier quarter.
Here is what Davis Opportunity Fund has to say about Texas Instruments Incorporated (NASDAQ:TXN) in its Q4 2021 investor letter:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel, Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
4. iShares Core Dividend Growth ETF (NYSE:DGRO)
iShares Core Dividend Growth ETF (NYSE:DGRO) invests in companies that have a history of sustained dividend growth and belong to diversified industries. The fund seeks to track the performance of the Morningstar US Dividend Growth Index. iShares Core Dividend Growth ETF (NYSE:DGRO) has 413 stocks in its portfolio, and offers a 30 day SEC yield of 2.30% as of August 31. The ETF is relatively affordable, with an expense ratio of 0.08%.
Johnson & Johnson (NYSE:JNJ) is one of the top holdings of iShares Core Dividend Growth ETF (NYSE:DGRO). Johnson & Johnson (NYSE:JNJ), the American multinational healthcare giant, announced on September 14 that its board has authorized repurchasing up to $5 billion worth of common stock, citing robust cash flow and lowest level of net debt in five years.
According to Insider Monkey’s Q2 data, Johnson & Johnson (NYSE:JNJ) was part of 83 hedge fund portfolios, with collective stakes worth $6.7 billion. Rajiv Jain’s GQG Partners is the biggest stakeholder of the company, with 6.5 million shares worth $1.16 billion.
Here is what Mayar Capital has to say about Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter:
“J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.
Here’s how JNJ makes and spends a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.
To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…” (Click here to see the full text)
3. Vanguard High Dividend Yield Index Fund (NYSE:VYM)
Vanguard High Dividend Yield Index Fund (NYSE:VYM) aims to track the performance of the FTSE High Dividend Yield Index, which consists of common stocks of companies with high dividend yields. The ETF follows a passively managed, full-replication approach. Vanguard High Dividend Yield Index Fund (NYSE:VYM) has an expense ratio of 0.06% and offers a 30 day SEC yield of 3.02% as of August 31. The ETF has a median market cap of $128.5 billion and 443 stocks in its portfolio. It is one of the best ETFs to diversify a portfolio, especially for income investors who are on the hunt for high dividend yields.
Exxon Mobil Corporation (NYSE:XOM) is one of the premier holdings of Vanguard High Dividend Yield Index Fund (NYSE:VYM), occupying 2.94% of the total portfolio. On September 12, Piper Sandler analyst Ryan Todd maintained an Overweight rating on Exxon Mobil Corporation (NYSE:XOM) but lowered the price target on the stock to $108 from $109. The analyst remains constructive on the integrated oils group, citing near-record distillate margins that will drive upside in refining estimates through the winter and into an “equally tight” 2023.
Exxon Mobil Corporation (NYSE:XOM) was part of 72 hedge fund portfolios at the end of Q2 2022, compared to 83 in the last quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 47.5 million shares worth over $4 billion.
2. Vanguard Dividend Appreciation Index Fund (NYSE:VIG)
Vanguard Dividend Appreciation Index Fund (NYSE:VIG) seeks to replicate the performance of the S&P U.S. Dividend Growers Index. It is a passively managed fund that remains fully invested. As of May end, the expense ratio for Vanguard Dividend Appreciation Index Fund (NYSE:VIG) is 0.06%. The median market cap stood at $143.9 billion on August 31, and the fund has 289 stocks in its portfolio. The 30 day SEC yield came in at 1.89%. It is one of the best ETFs to diversify a portfolio as investors are protected by safe and growing dividends in the currently volatile market. Dividends are a solid hedge against inflation.
Vanguard Dividend Appreciation Index Fund (NYSE:VIG)’s largest holding is UnitedHealth Group Incorporated (NYSE:UNH), which operates as a diversified healthcare company in the United States. On September 22, investment advisory Raymond James raised the price target on UnitedHealth Group Incorporated (NYSE:UNH) to $635 from $620 and maintained a Strong Buy rating on the shares. Analyst John Ransom issued the ratings update.
According to Insider Monkey’s Q2 data, 91 hedge funds were bullish on UnitedHealth Group Incorporated (NYSE:UNH), compared to 103 funds in the prior quarter. Boykin Curry’s Eagle Capital Management is one of the leading stakeholders of the company, with 2.8 million shares worth $1.5 billion.
Here is what Baron Durable Advantage Fund has to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q2 2022 investor letter:
“UnitedHealth Group Incorporated is a leading diversified health and wellbeing company whose divisions include insurance arm, United Healthcare and health care services arm, Optum, which offers care delivery and other services. Shares increased 1.1% on strong first quarter results (revenues were up 14% year-over-year), and the company increased its annual guidance.
The performance was driven by Optum as a result of a growing adoption of value-based solutions. We believe UnitedHealth leads the health care industry in innovation and execution as evidenced by its strong value proposition leading to Medicare Advantage share gains, strong cost controls, and its leadership position in the shift to value-based care.”
1. VanEck Oil Services ETF (NYSE:OIH)
VanEck Oil Services ETF (NYSE:OIH) aims to replicate the price and yield performance of the MVIS US Listed Oil Services 25 Index, which tracks the overall performance of American companies specializing in the upstream oil sector. As of September 22, the ETF has $2.1 billion in total net assets and a net expense ratio of 0.35%. VanEck Oil Services ETF (NYSE:OIH) has registered YTD gains of 13.24% as of September 22. It is one of the best ETFs to diversify a portfolio and avoid risks, as crude oil will climb yet again in the winter.
Schlumberger Limited (NYSE:SLB) is the largest holding of VanEck Oil Services ETF (NYSE:OIH), representing 20.02% of the total net assets. Schlumberger Limited (NYSE:SLB) is a Texas-based company providing technology for the energy industry worldwide. In late July, Benchmark analyst Douglas Becker upgraded Schlumberger Limited (NYSE:SLB) to Buy from Hold with a $55 price target, supported by a positive inflection point in international spending and activity. The analyst expects the company to reach its 25% EBITDA margin target in Q3 2023, a quarter earlier than initial forecasts. He sees the reward-risk being “skewed nearly 3:1 to the upside”.
According to Insider Monkey’s data, 64 hedge funds were bullish on Schlumberger Limited (NYSE:SLB) at the end of June 2022, up from 58 funds in the last quarter. William B. Gray’s Orbis Investment Management is a prominent stakeholder of the company, with 12.8 million shares worth $457.65 million.
Here is what ClearBridge Investments specifically said about Schlumberger Limited (NYSE:SLB) in its Q2 2022 letter.
“We further added to our positioning for the accelerating energy transition with the purchase of Schlumberger Limited (NYSE:SLB), a global provider of oilfield services. As a technology leader, Schlumberger should generate strong free cash flow over the next few years as the industry recovers, using its excess cash to gain market share from smaller players and to expand into new areas of growth. Through its scale, presence, partnerships and technology, Schlumberger is targeting expansion into new large addressable markets such as carbon capture, hydrogen, geothermal and lithium extraction.”
You can also take a look at 10 Best Quality Stocks To Buy and 10 Best Consumer Discretionary Stocks To Buy.
