The latest Consumer Price Index (CPI) report revealed that inflation declined for the sixth consecutive month. After increasing 7.1% in November and 7.7% in October, inflation cooled in December to 6.5% compared with a year earlier. While inflation eased significantly, it continues to hover near a 40-year high and is way above the Federal Reserve’s target of 2%.
The Fed is set to slow the pace of its interest-rate hikes but debates how much more tightening is required to get inflation under control. According to Deutsche Bank, global equities could tumble drastically by mid-2023 as a looming recession hits the United States.
The market's constant ups and downs caused by macroeconomic headwinds have conditioned investors to be wary of possible rallies and turned Wall Street bearish. 17 Wall Street strategists estimate that the average S&P 500 price target for the year-end would be 4,009.
Against this backdrop, dividend-paying ETFs JPMorgan Ultra-Short Income ETF (JPST), Vanguard Health Care Index Fund (VHT), and Schwab U.S. Large-Cap Value ETF (SCHV) could make ideal investments this month for steady returns.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an ETF launched and managed by J.P. Morgan Investment Management Inc. The fund invests in fixed, variable, and floating-rate debt, including corporate issues, asset-backed securities, mortgage-related debt, and U.S. government and agency debt, including treasuries.
With $24.27 billion in assets under management (AUM), JPST’s top holding is the U.S. Dollar, which has a 51.18% weighting in the fund. It is followed by United States Treasury Notes 0.375% 15-JUL-2024 at 2.03% and FIXED INCOME (UNCLASSFIED) at 0.94% weighting. The fund has a total of 446 holdings. It has a beta of 0.04.
JPST has an expense ratio of 0.18%, lower than the category average of 0.61%. Its net inflows came in at $4.09 billion over the past six months and $5.89 billion over the past year. The ETF’s NAV was $50.30 as of January 23, 2023.
JPST pays a $1.83 annual dividend, which yields 3.64% at the prevailing price level. Its dividends have increased at a 30.9% CAGR over the past five years, and its four-year average dividend yield is 1.78%. Over the past three months, the fund has gained 0.5% to close the last trading session at $50.32.
JPST’s POWR Ratings reflect its promising prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The ETF has an A grade for Trade and Peer. It is ranked #3 out of 33 ETFs in the A-rated Ultra-Short Term Bonds group. Click here to see all JPST ratings.
Vanguard Health Care Index Fund (VHT)
VHT is an ETF launched and managed by The Vanguard Group, Inc. It invests in growth and value stocks of firms with a wide range of market capitalizations. The fund is suitable for investors who wish to implement a tactical tilt toward healthcare stocks. It can also be used as a tool in a sector rotation strategy.
VHT has $17.10 billion in AUM. It has 415 holdings in total. UnitedHealth Group Incorporated (UNH) has an 8.48% weighting in the fund as its top holding, followed by Johnson & Johnson (JNJ) at 7.94% and Eli Lilly and Company (LLY) at 5.05%.
The ETF’s net inflows were $165.90 million over the past three months and $914.30 million over the past year. In addition, its 0.10% expense ratio compares favorably to the 0.53% category average. VHT’s NAV was $247.53 as of January 23, 2023. It has a beta of 0.81.
The ETF pays a $3.30 dividend annually, yielding 1.34% at the current price level. Its four-year average dividend yield stood at 1.45%, and its dividends have grown at a 10.3% CAGR over the past five years. VHT has gained 8.7% over the past three months to close the last trading session at $247.52.
It is no surprise that VHT has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Trade and Buy & Hold. Within the B-rated Health & Biotech ETFs group, it is ranked #2 out of 42 ETFs. To see all VHT ratings, click here.
Schwab U.S. Large-Cap Value ETF (SCHV)
Launched and managed by Charles Schwab Investment Management, Inc., the fund invests in large and midcap stocks rated 1-750 by market capitalization from its parent universe of value stocks, resulting in a well-balanced portfolio of large-cap value stocks.
The fund has $10 billion in AUM. Its top holdings are Berkshire Hathaway Inc. Class B (BRK.B) with a 2.79% weighting, Exxon Mobil Corporation (XOM) at 2.32%, and JNJ at 2.25%. The fund has a total of 519 holdings.
SCHV has an expense ratio of 0.04% compared to the 0.48% category average. Its net inflows were $33.10 million over the past three months and $380.27 million over the past year. Moreover, its NAV stood at $67.99 as of January 23, 2023. It has a beta of 0.99.
The ETF pays a $1.57 annual dividend, which yields 2.34% at the current price level. Its average four-year dividend yield stands at 2.75%. SCHV’s dividends increased at 4% CAGRs over the past five years. Furthermore, the fund has gained 11.6% over the past three months to close the last trading session at $68.00.
SCHV’s POWR Ratings are consistent with its strong fundamentals. The ETF has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Trade and Buy & Hold. It ranks #14 among 86 ETFs within the A-rated Large Cap Value ETFs group. To access all of SCHV’s POWR Ratings, click here.
JPST shares were trading at $50.33 per share on Tuesday morning, up $0.01 (+0.02%). Year-to-date, JPST has gained 0.40%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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