High Dividends & Low Volatility? Fin Pros Pick This ETF

While markets deliver great returns over the long-run, not everyone wants or can stand to see huge portfolio drawdowns…

…Folks looking for steady income especially.

That’s why a unique brand of ETFs aims to give holders equity exposure with lower volatility across multiple strategies.

Top of the list for financial pros is Franklin Templeton’s Low Volatility/High Dividend ETF.

Sound enticing?

Key Facts About LVHI

• Net assets: $500 million
• 12-month trailing yield: 7.37%
• Inception: July 27, 2016
• Expense ratio: 0.40%
• Number of holdings: 107

Franklin Templeton’s ETF is one of the most unique we’ve come across.

As an international ETF, the LVHI holds stocks across the globe, with only a small amount from the U.S.

Source: Franklin Templeton

Interestingly, the fund (dark blue) doesn’t hold that closely to the benchmark (turquoise), with the biggest variances in Japanese and French holdings.

Nonetheless, it’s a diverse ETF focused on lower volatility stocks and high paying dividends.

That lends it to more established names such as Mitsubishi, Stellanis, BHP, and more, with a third of the stocks bearing a market cap over $50 billion and less than 10% with a market cap below $3 billion.

Source: Franklin Templeton

Financials make up almost 20% of the portfolio, with information technology a paltry <1%.

Source: Franklin Templeton

Oddly, management chose not to invest in Healthcare.

Performance

The overall performance of the ETF is pretty solid, with a 14.3% return over the last year.

Source: Franklin Templeton

A hefty dividend yield of over 7%, though that often varies quite a bit.

Competition

There are no other international ETFs that combine low volatility and other strategies that showed up on our radar.

However, we found several within the U.S. markets worth a look.

• Invesco S&P Small Cap Low Volatility ETF (XSLV): The low volatility small-cap ETF attempts to invest in small caps with lower than typical price fluctuations, pretty uncommon in the small cap world.
• Invesco S&P 500 High Dividend Low Volatility ETF (SPHD): Like our main ETF, the SPHD looks for high dividend payers from the S&P 500 with lower than average volatility.
• Invesco S&P Mid Cap Low Volatility ETF (XMLV): If you want to invest in mid-gap companies with lower volatility, the XMLV is your ETF.
• Invesco S&P 500 Low Volatility ETF (SPLV): Last up is the general low-volatlity ETF for the S&P 500. This ETF is helpful for those who don’t want to see huge moves in their portfolio.

All the ETFs have surprisingly low expense ratios. The XSLV shows the futility of trying to find low-volatility stocks amongst a group of stocks that’s volatile by nature.

One of the drawbacks from low-volatility strategies is they often exclude the biggest winners, which can also lead to the largest drawdowns (think Tesla).

Plus, low-volatility strategies can be upended when the entire market drops as it did during the pandemic.

Our Opinion 10/10 

Although the volume is small and the net assets aren’t huge, this ETF is pretty solid for what you get.

It won’t expose you to those big movers around the globe. But if you’re just looking for good old-fashioned dividends with less volatility and more diversification than the U.S., you can’t get much better than the LVHI.