Dividend ETFs: Risk-Averse Investors Obsessed with Yield
July 17th 2012 at 10:23am by John Spence
As the editor of this website, I know that any story with “dividend” or “yield” in the headline more than doubles the chance that ETF investors will click it.
In other words, our readers simply can’t get enough content on dividend and high-yield ETFs.
This probably isn’t a ground-breaking insight with nervous investors clearly avoiding any kind of risk and placing a big premium on stable income. [Dividend ETFs May Lose Appeal if Tax Cuts Expire]
“Google the phrase ‘Dividend stocks’ and you’ll get 48 million items in response to your query, and 10 sponsored searches (the highlighted search results on the top and side, where Google gets click revenue from advertisers),” writes ConvergEx Group chief market strategist Nicholas Colas in a note Tuesday. “Do the same with ‘Tech stocks’ and you only get 14.7 million items and no sponsored searches, meaning that not one advertiser thinks this phrase will draw any customers to its site. Even the search term ‘Food Stamps’ gets sponsored advertisers. What a difference a decade makes.”
Dividend ETFs are attracting large sums of cash as well as online clicks. [Breaking Down a Trio of Top Dividend ETFs]
For example, Vanguard Dividend Appreciation (NYSEArca: VIG) is one of the best-selling ETFs this year. [Special Report: Surveying the Dividend ETF Landscape]
So far in 2012 through the end of June, the Vanguard dividend ETF has seen net inflows of $1.8 billion, according to ETF Industry Association data. Last year, the fund hauled in $1.8 billion so it’s on pace to top its 2011 inflows. [Appraising the Largest Dividend ETF]
Some of the other largest dividend ETFs include iShares Dow Jones US Select Dividend (NYSEArca: DVY) and SPDR S&P Dividend (NYSEArca: SDY).
“It seems impossible to recommend an individual equity or ETF without somehow inserting its dividend yield into the discussion,” Colas wrote. “A dividend appears to be the price of entry for any serious investment idea, as if a quarterly payment can transform a ‘Risky’ stock into a ‘Safe’ bond. It can’t, of course, but anything that signals ‘Real’ cash flow is a positive in today’s market.” [No Free Lunch: The Risks of Dividend ETFs]
Vanguard Dividend Appreciation
The opinions and forecasts expressed herein are solely those of John Spence, 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.