4 Things to Consider When Looking at Dividend ETFs

February 13th at 1:00pm by Tom Lydon

Dividend ETFsIn turbulent times, the conservative investors tends to turn to a safe zone, in particularly, dividend-focused exchange traded funds (ETFs).

Dividend-focused ETFs are great in that they enable your money work for you on its own while enabling investors to gain access to various markets and sectors.  One may wonder how to chose a stable dividend ETF. After all, at the end of 2008 there were 14 different such ETFs to chose from.

Here are some things to consider when choosing a dividend ETF:

  • Pick ETFs that hold stocks with nice, sustainable dividend yields
  • Focus on ETFs that hold stocks with a history of paying out dividends and are hoarding enough cash to cover the current payout, states John Spence of Market Watch.
  • Be mindful of ETFs that are heavily concentrated on a single sector which may be in trouble. For example, financials. After all, when earnings fall, dividends do, too.
  • Know exactly what stocks your ETF holds and how concentrated these holdings are.

As uncertainty and volatility continue to overshadow the market, investors will continue to look for ways to moderate the risk of their portfolios, making dividend ETFs attractive.  We may sound like a broken record, but do your homework, assess your appetite for risk and know what your overall financial goals are when choosing the right ETF for your portfolio.

Some ETFs to consider are:

First Trust Value Line Dividend Index (FVD): down 6.8% over the last month and generating a yield of 4.2%

WisdomTree International SmallCap Dividend (DLS): down 8.9% over the past month and generating a yield of 6.5%

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers

DLS FVD