Investors turned to income stocks last month as central banks signalled higher interest rates.
The hunt for dividends amid a rout for fast-growing technology shares was the biggest exchange-traded fund (ETF) investment theme in April.
ETFs tracking the FTSE 100 and 250 indices and returning dividend payments to investors all rose up the ranks, with the Vanguard FTSE 250 UCITS ETF moving from ninth to third place and the Vanguard FTSE 100 UCITS ETF going from fifth to fourth.
The most-bought ETF, however, was still the iShares Core FTSE 100 UCITS ETF.
A new entry on the most bought ETF list was the iShares UK Dividend ETF, which tracks British stocks that pay high dividends. The ETF’s 49 companies together yielded 5.45% over the past 12 months, driven by firms in the mining, oil and finance sectors.
The FTSE 100 yields 3.5% and the FTSE 250 pays 3.3%, based on last year’s payouts. The latter index makes up the 151st to 350th largest companies in the UK.
Investors sought the safety of income stocks as central banks voiced concern about inflation and prepared investors for higher interest rates.
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In April, the FTSE 100 was flat, while the FTSE 250 fell 2%. Meanwhile, the technology-heavy S&P 500 index of large US companies fell 9%.
While higher rates are bad for technology stocks as they eat into the value of future earnings, dividend stocks tend to make a lot of money today so are not downgraded in the same way as “growth” stocks. Moreover, collecting dividend payments as the cost of living rises is another way of shoring up household finances.
Investors also turned away from gold and clean energy stocks last month, two of the most popular investments following Russia’s invasion of Ukraine.
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The start of the conflict had raised the profile of clean energy as a means of reducing dependence on Russian oil and gas and highlighted gold’s strength as a safe-haven asset.
However, in April investors focused their attention on rising inflation and the reaction from central banks.
Top 10 most-popular ETFs April 2022
|Position||ETF||Change from March||One-year performance to 30 April 2022 (%)||Three-year performance to 30 April 2022 (%)|
|1||iShares Core FTSE 100 Ucits ETF||No change||12.2||14|
|2||Vanguard S&P 500 Ucits ETF (distributing)||Up one||11.5||54.1|
|3||Vanguard FTSE 250 Ucits ETF (distributing)||Up seven||-6||11.9|
|4||Vanguard FTSE 100 Ucits ETF (distributing)||Up one||12.3||13.9|
|5||iShares Physical Gold ETC||Down three||19.1||55.4|
|6||iShares Core MSCI World Ucits ETF||New entry||6.5||41|
|7||Vanguard FTSE All-World Ucits ETF||No change||4.9||37.1|
|8||iShares UK Dividend Ucits ETF||New entry||11.1||16.3|
|9||iShares Global Clean Energy Ucits ETF||Down three||-8.9||99|
|10||Vanguard S&P 500 Ucits ETF (accumulating)||New entry||11.5||
Source: interactive investor. Performance figures: FE fundinfo. Note: the top 10 is based on the number of “buys” during the month of April.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.