Dividend exchange traded fund investors who are seeking a stable return, along with exposure to the growing U.S. markets, should stick to quality instead of chasing after yields.
“Shy away from those with the highest dividend yields,” Tom Fredrickson, a financial planner in Brooklyn, said in a CNBC article, adding that “if interest rates rise, bonds will become more attractive,” and investors will sell riskier dividend stocks to get the income they want with less risk.
ETF investors have a number of options to track quality dividend stocks. For example, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks the Nasdaq US Dividend Achievers Select Index, which selects U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years. VIG has a 2.02% 12-month yield and a 0.10% expense ratio. [Stock ETFs & Fixed-Income Yield Spread Paints Bullish Picture]
The Schwab US Dividend Equity ETF (NYSEArca: SCHD) follows the Dow Jones U.S. Dividend 100 Index, which includes 100 stocks based on strong fundamentals, dividend yields and consistent dividend payouts for at least 10 consecutive years. SCHD has a 2.71% 12-month yield and a dirt cheap 0.07% expense ratio.
the SPDR S&P Dividend ETF (NYSEArca: SDY), which is benchmarked to the S&P High Yield Dividend Aristocrats Index, is about to make some changes. SDY’s underlying index mandates constituent firms have a minimum dividend increase streak of 20 years for inclusion. SDY has a 2.274% 12-month yield and a 0.35% expense ratio. [Changes Coming for Dividend Aristocrats ETFs]