There are two types of dividend-paying stocks: aristocrats and achievers.

The so-called dividend aristocrats are S&P 500 companies that have increased their payouts for 25 consecutive years without missing a beat, reports Gary Gordon for ETF Expert. The numbers say that aristocrats have bested the S&P 500 over five, 10, 15, 20 and 25 years with less beta volatility, Gordon notes.  [Dividends Are Making a Comeback.]

• SPDR S&P Dividend Fund (NYSEArca: SDY) is the main aristocrat-only ETF that seeks to replicate the price and yield of the S&P High Yield Dividend Aristocrats Index. Only the 50 highest yielders are included. It’s one of the top domestic dividend ETFs year-to-date, up 3.6%. It’s also up 72.9% in the last year and yields 3.8%. [ETF Spotlight on SDY.]

• Vanguard Dividend Appreciation (NYSEArca: VIG): This ETF tracks the the Mergent Dividend Achievers Select Index. To earn the “achiever” moniker, a company has to increase its dividends for at least 10 consecutive years and meet trading volume minmums. This fund did outdo the S&P 500 over the past four-year period. It’s up 1.7% year-to-date and up 51.7% in the last year. It yields 2.1%.

Other notable dividend achiever ETFs include PowerShares Dividend Achievers Portfolio (NYSEArca: PFM) and the PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEArca: PEY). PFM yields 2.4%, while PEY yields 4.6%.

For more stories about dividends, visit our dividend ETFs category.

After the financial crisis, many banks and other financial companies reduced or suspended dividend payments, remarks Alexander Green for Investment U. But according to Howard Silverblatt, senior index analyst at S&P, “the worst is over for dividends. Standard & Poor’s believes that a dividend recovery is under way.” [How to Play the Dividend Comeback.]

While dividends may still be low at this point, Green points out that over time, they rise and sometimes it’s by a lot. [How to Protect Yourself from the Big Deficit.]

Gary Gordon for ETF Expert makes another case for dividends: the markets are showing no definitive signs of a fast revival or another downturn. In that situation, Gordon suggests, you might want to go after cash flows from income ETFs or dividend-yielding ETFs. [4 Ways to Use ETFs.]

For more information on dividend ETFs, visit our dividend category. Among the many dividend ETFs available for the picking (just watch the trend lines) include the ones listed below. You can find the fund’s current yield by clicking on the ticker:

• PowerShares HighYield Dividend Achievers (NYSEArca: PEY)
• WisdomTree SmallCap Dividend (NYSEArca: DES)
• First Trust DJ Global Select Dividend (NYSEArca: FGD)
• WisdomTree Total Dividend (NYSEArca: DTD)
• Claymore/Zacks Dividend Rotation (NYSEArca: IRO)
• iShares Dow Jones Select Dividend Index (NYSEArca: DVY)
• Vanguard Dividend Appreciation ETF (NYSEArca: VIG)

Max Chen contributed to this article.

Yesterday, the Federal Reserved hiked what it charges banks for emergency loans. The move won’t affect corporate or consumer loans, but it’s a reminder that as the economic recovery advances, we’ll be seeing more rate increases.

The Federal Funds rate has been sitting around a low of between 0% and 0.25%, which has helped encourage borrowing and lower the cost of capital for individuals and businesses, comments Amanda B. Kish for The Motley Fool. As the Fed moves off these lows, you might find yourself needing to make adjustments to your portfolio. [Fed Hikes Rates.]

Bonds will be the first to take a hit. As rates rise, bonds become less lucrative since investors can buy newer ones with higher yields. One way to offset some interest-rate risk is by keeping bond allocations in short-term bond investments. Another option is to keep some money in inflation-protected securities (TIPs), which are indexed to inflation. More risk-tolerant investors may consider high-yield bonds – the likelihood of corporate defaults also drops as the economy improves. [Protect Against Big Deficits.]

• iShares Barclays 1-3 Year Treasury Bond (NYSEArca: SHY)
• iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG)
• SPDR Lehman High Yield Bond (NYSEArca: JNK)
• PIMCO Broad U.S. TIPS (NYSEArca: TIPZ)
• PIMCO 15+ Year U.S. TIPS (NYSEArca: LTPZ)
• PIMCO 1-5 Year U.S. TIPS (NYSEArca: STPZ)
• iShares Barclays TIPS Bond (NYSEArca: TIP)
• SPDR Barclays Capital TIPS (NYSEArca: IPE)

The Fed may find itself in the position of needing to raise rates while unemployment remains relatively high, which likely means that the stock market won’t react to the decision favorably. Higher rates affect how companies borrow money and how they conduct business. Dividend-producing stocks may be a good choice in the long-term. Interest rate hikes usually coincide with an improving economy and companies tend to dish out higher dividends as an economy improves. [How to Play a Dividend Comeback.]

• Wisdom Tree Dividend ex-Financial (NYSEArca: DTN)
• iShares Dow Jones Select Dividend Index (NYSEArca: DVY)
• PowerShares High Yield Dividend Achievers (NYSEArca: PEY)
• Vanguard Dividend Appreciation (NYSEArca: VIG)

For full disclosure, some of Tom Lydon’s clients own shares of SHY and TIP.

Max Chen contributed to this article.

As the threat of more dividend cuts are likely behind us and the global economy regains its health, dividend-focused investors are coming back on the scene. Aaron Levitt for Investopedia says that dividend ETFs  are also making a safe place for investors  to stash gains that have previously been made from riskier asset sales. [Why dividend ETFs are good for a portfolio.]

Dividend ETFs are an ideal way to get exposure to dividend stocks. The providers behind such funds have worked hard to assemble a basket of the highest quality and most reliable dividend payers, saving you time and money.

There are a number of dividend ETFs available, including the ones listed below.  [Are dividend ETFs solid for 2010?]

For more stories about dividend ETFs, visit our dividend ETF category.

• Wisdom Tree Dividend ex-Financial (NYSEArca: DTN): yields 3.9%; Especially interesting because it excludes the financial sector, something many investors may be wary of right now. WisdomTree is one of the most prominent names in the industry when it comes to dividend investing.
  
• iShares Dow Jones Select Dividend Index (NYSEArca: DVY): 4.2% dividend yield; The most popular dividend ETF, this fund holds the bulk of the assets in this space, and uses Treasury-beating, growth stocks.
  
• PowerShares High Yield Dividend Achievers (NYSEArca: PEY): offers a 4.7% dividend yield. PEY also may be of interest to investors because of the ETF’s policy of monthly income distributions. The fund is heavily weighted towards financial stocks, with 39% of assets in the sector.
• Vanguard Dividend Appreciation (NYSEArca: VIG): yields 2.1%; VIG tracks the stock of companies that have a history of increasing dividends. Investors are sacrificing current income for the chance to take part in long-term income potential, Levitt says.
  

The Feds will likely raise interest rates this year as a way to finance the ballooning federal debt from all that economic stimulus, writes Eve Mitchel for Philly. Generally, when interest rates rise, investments such as bonds, Treasuries and long-term bond portfolios become less lucrative.

Karl Mills, president and chief investment officer of Jurika Mills & Keifer investment firm, thinks investors should consider stocks that pay dividends to replace income payments that would have come from bonds. [Why dividend ETFs are portfolio-compatible.]

Mills also suggests technology, pharmaceuticals and global companies as good investments. Technology companies are thought to have reasonable valuations and the ability to grow, and pharmaceutical firms are currently very cheap, notes Mills. [12 ETFs for 10 economic surprises.]

Henry Gold, president of San Francisco’s betterinvesting.org nonprofit investment educator, also believes that now isn’t the time to get into fixed-income and bonds; however, he and Mills both think that short-term fixed incomes can still remain an option for investors. Gold urges investors to look for “companies that have managed to keep the top line and bottom line growing” – keep an eye on an investment’s revenue and stock earnings growth. [A solid 2010 for dividend ETFs?]

Eric Flett, chief executive officer of Concentric Wealth Management, says that there are opportunities in stocks. Flett likes energy, technology, health and industrial companies with a global reach.

For more information on dividends, visit our dividends category.

• WisdomTree Dividend ex-Financials (NYSEArca: DTN): yield 3.89%

• iShares Dow Jones Select Dividend Index (NYSEArca: DVY): yield 4.16%

• PowerShares High Yield Dividend Achievers (NYSEArca: PEY): yield 4.72%

• First Trust Value Line Dividend Index (NYSEArca: FVD): yield 3.30%

Max Chen contributed to this article.

A dividend-focused ETF can help boost returns during bear markets and provide an income stream during bulls. Ilan Moscovitz for The Motley Fool reports that when he ran the numbers for the 2000-2002 bear market, he found that dividend-paying stocks outperformed non-dividend-paying stocks by an incredible 47% on average. Furthermore, according to research from professors Kathleen Fuller and Michael Goldstein, from 1970 to 2000, dividend-paying stocks outperformed non-dividend payers during down markets by an average of 1.5% per month. [Other reasons 2010 is shaping up for dividends.]

First off, to consider a dividend stock, it should fit this criteria:

• A greater-than-3% yield
• A recent dividend increase
• Growing revenue

Dividend ETFs can give you an added benefit: the providers have done the sorting for you, and one fund can give you exposure to dozens of high-quality dividend payers. Look under the hood to see if you’re getting the exposure you want when shopping for a dividend fund. Keep in mind, too, that some of them have heavy weightings in the financial sector.

Utility stocks tend to do well with high dividend yields for the long term. Considering that, the biggest appeal of utility ETFs may continue to be what has been the sector’s main drawing point. As of late December, the median yield of the 26 utilities funds followed by Morningstar was 2.9%, outpacing the 1.2% yield for large-company “blend” funds and the 2.3% yield of the S&P 500, reports Dale Buss for The Wall Street Journal.[Why dividend ETFs are worthy of your portfolio.]

Overall, most forecasts are calling for dividend growth in 2010 as many of the dividend slaughters are over and large  firms should boost their 2010 payouts, reports ETF Professor on Benzinga.

For more stories about dividend ETFs, visit our dividend ETF category. Here’s a sampling of a few of the many dividend ETFs out there:

• iShares Dow Jones Select Dividend Index (NYSEArca: DVY): yields 4.16%

• PowerShares High Yield Dividend Achievers (NYSEArca: PEY): yields 4.72%

• First Trust Value Line Dividend Index (NYSEArca: FVD): yield 3.30%

• WisdomTree Dividend ex-Financials (NYSEArca: DTN): yield 3.9%

Dividend-yielding stocks tended to lag the broader stock market in this year as the market showed its preference for high-risk and tech companies, which generally don’t pay dividends. That’s on top of the wreckage of the financial crisis, which had many financial firms cutting payouts. [Why dividends have outperformed growth.]

In fact, from September 2008 until March 2009, companies in the S&P 500 stopped paying $65.4 billion in dividends. Of that, 68% was because of cuts at financial firms, Ben Steverman for BusinessWeek reports.

Dividend stock strategies are most popular among conservative investors seeking consistent income. [Earning dividends with international ETFs.]

Those who mind such things are predicting that 2010 could mark a rebound. Why? Many of the larger dividend-paying companies have already made their huge cuts. But experts caution that it could be around 2013 when dividend payouts hit their previous levels. [Why dividends are good for a portfolio.]

The key? The economy

will have to remain strong and continue to improve.

Instead of going for dividend-paying stocks, why not use a dividend ETF? The fund managers have done the legwork for you, looking for high-quality names that have kept up their dividend payouts. You can capitalize on their expertise with just one fund, including the ones listed below.

For more stories about dividends, visit our dividend ETF category.

• SPDR S&P Dividend ETF (NYSEArca: SDY): up 18.4% year-to-date; yields 4.1%

• WisdomTree Large-Cap Dividend (NYSEArca:DLN): up 17.6% year-to-date; yields 2.8%

• iShares Dow Jones Select Dividend Index (NYSEArca: DVY): up 11.7% year-to-date; yields 4.2%

Yields upwards of 3% are being offered by some well-known names, including Kraft Foods (NYSE: KFT), Clorox (NYSE: CLX), Sara Lee (SLE), Sysco (NYSE: SYY), Johnson & Johnson (NYSE: JNJ) and Verizon (NYSE: VZ).

Finding these names is a matter of doing a little detective work. One clue is “value” stocks. Because they’re generally more stable, they can be a better long-term investment, explains Brett Arends for Yahoo Finance. Defensive industries include food and beverage, health care, personal care, household goods and telecommunications. (Why have dividends outperformed growth shares).

Arends cautions investors to beware dividends that are too high – one in the double digits can be a red flag because it means the market expects the payout to be cut or that the business is being wound down.

Top dividend stocks are appealing to investors who seek something other than bonds, and also yield some extra in come. But why single-stock pick? Instead, you can own a basket of these handsomely yielding companies in one ETF. ETFs will also help spread your risk around, especially if more volatile companies are held within the fund alongside the more stable, defensive ones.

For more stories about dividends, visit our dividend ETF category.

• iShares Dow Jones Select Dividend (NYSEArca: DVY): up 8.5% year-to-date; yields 4.4%

• PowerShares International Dividend Achievers (NYSEArca: PID): up 36.5% year-to-date; yields 2.4%

• WisdomTree Dividend ex-Financials (NYSEArca: DTN): up 21% year-to-date; yields 4.1%

The number of ETFs available in the market may be confusing, but there are so many choices that investors can customize their portfolios according to their personal preferences and strategy. The ultimate goal is usually the same (to make money), there are two primary categories investors fall into: those who use a fundamental strategy and those who prefer a sector strategy, explains Don Dion for TheStreet. We throw in a third strategy below, too.

Fundamental Strategy: Fundamental ETF portfolios are suitable for investors looking to take advantage of the cost efficiency and tax efficiency of ETFs over an extended time period. These portfolios are usually not traded very often and provide exposure to the broad market while meeting their needs for income.

Investors who find this strategy appealing often cite taxes as the primary lure.

• iShares Dow Jones Select Dividend Index (NYSEArca:DVY): up 4.8% year-to-date

• PowerShares QQQ (NYSEArca: QQQQ): up 42.9% year-to-date

Sector Strategy: A sector ETF strategy is designed to actively capture market trends. Some prefer  a momentum-based strategy to indicate the best times to enter and exit funds. ( The strategy you choose is just as important as the approach). These portfolios are considered active, as they are traded and monitored constantly.

• iShares iBoxx $ High Yield (NYSEArca: HYG): up 23.8% year-to-date

• PowerShares DB U.S. Dollar Bullish (NYSEArca: UDN): up 8.1% year-to-date

A Blend Strategy. We use trend following by monitoring the 200-day moving average in order to find those areas that are moving. By getting in and out of the market at set signals, you give yourself the opportunity to be in the markets for any potential long-term uptrend. The stop loss enables you to put a cap on your losses. The benefit of relying on market signals to determine where and when you invest also removes the “noise” that emotions can generate and cloud your judgment. Any ETF works with this strategy, whether it’s a broad-based, plain-vanilla fund or a more exotic, niche ETF. (How to get in on the rebound).

Always do some research on what you are implementing and consider the liquidity, underlying stocks and pricing taking place in the ETFs you choose.

For more stories about trend following, visit our trend following category.

Investors looking for dividend-paying stocks will encounter the argument that “growth” stocks may be better than those paying dividends, remarks John Jagerson for Learning Markets. (Read about how dividends can help).

Dividend-paying stocks, however, have usually outperformed major growth indexes as a result of lower volatility returns. For example, the Dow Jones Select Dividend Index has outperformed the S&P 500 and the Russell 2000 by almost 100% in the last 10 years.

Jagerson commented that an investor does not need to decide on a dividend-paying portfolio over a growth-oriented portfolio. A reasonable alternative may be a combination of the two.

You could take the time to scrounge up individual stocks that pay dividends, but you may also consider ETFs as an easy way to gain exposure to dividend-paying stocks. (Read about strategies to rebuild your portfolio).

For more information on dividends, visit our dividend category.

• SPDR S&P Dividend ETF (NYSEArca: SDY): up 16.4% year-to-date; yields 4.27%

• WisdomTree LargeCap Dividend (NYSEArca: DLN): up 15.8% year-to-date; yields 2.94%

• iShares Dow Jones Select Dividend Index (NYSEArca: DVY): up 7.1% year-to-date; yields 4.32%

Max Chen contributed to this article.