Investors interested in dividend ETFs should watch out for large sector distributions, most notably sector exposure in financials, comments Roger Nusbaum for TheStreet. Having a fund with a high exposure to financials is fine, but it might not be such a good thing if other funds in a portfolio also include high financial exposure. It also may be exposure that you, personally, don’t want in your portfolio.

Long-term investment in dividends has its perks. The stock market has seen an average annual return of around 10% in the long run, and 40% of that return has been generated by dividends.

Since the latest financials-induced migraine, dividend funds have decreased weightings in financials or even eliminated them altogether.

iShares Dow Jones Select Dividend Index (NYSEArca: DVY): up 2.9% year-to-date; decreased its weight in financials to 14% down from its original 40%. The reason for the reduction is because some financial companies have either suspended or cut their dividends. Now the largest allocation is in utilities, at 24%, followed by industrials, at 20%, and consumer goods, at 17%.

PowerShares Intl Dividend Achievers (NYSEArca: PID): up 33.2% year-to-date, has 30% in financials compared to its original 41%. It still has a high weighting in financials because the five large Canadian banks in the fund have held up in the crisis and none had to cut dividends.

WisdomTree Dividend ex-Financials (NYSEArca: DTN): up 13.7% year-to-date; as its name states, this fund has no exposure to financials; its weightings are in utilities, 17.5%; consumer staples, 13%; telecommunications, 11.3% and industrials, 11%.

For more information on dividends, visit our dividend category.

Max Chen contributed to this article.

Stocks operating with high dividend yields could have recently experienced a drop in share prices or be an “out of favor” money maker, remarks ETF Guy for ETF Topics. A company could have also raised its dividend in the past and can be considered a dividend growth stock.

In a hypothetical situation, a dividend yield investor sees a 13.0% yield for a stock and a dividend growth investor sees a stock with 2.0% yield and an average annual dividend growth rate of 10.0%. It is calculated that the dividend yield stock will start paying out 5.0% in 10 years. But a dividend yielding stock does allow an investor to receive some extra money on a regular basis.

Investors utilizing dividend yield stocks have an opportunity to use higher dividend profits to either retire or grow an investment portfolio. Dividend growth stocks may not provide enough for retirees.

When investing into dividend stocks or ETFs, it is important to have your own strategy in place for the time frame you have in mind. ETF Guy thinks the obvious solution is to have a balanced investment in both dividend yield and dividend growth type stocks, but every investor is different. Consider your own goals and needs.

• SPDRS (SPY): yields 2.7%; up 0.8% year-to-date

• PowerShares International Dividend Achievers (PID): yields 3.4%; up 8.6% year-to-date

• PowerShares Dividend Achievers (PFM): yield 2.9%; down 9.0% year-to-date

• iShares Dow Jones Select Dividend Index (DVY): yield 5.5%; down 13.5% year-to-date

For more information on dividend ETFs, visit our dividend category.

Max Chen contributed to this article.

Some of the dividend-focused ETFs are so diversified that they could stand in as core holdings for a portfolio, remarks Paul Justice for Morningstar. When considering a dividend paying stock or ETF, the objective is to think growth over the long-term. Dividend investing is all about finding solid dividend stocks that are reasonably priced and are expected to continue raising their dividends in the future, explains Dividends4Life on iStock Analyst.

Do not confuse dividend investing with searching for high-yielding stocks to generate a high income. A majority of the time, the quality ones will not have outrageous yields, however the growing dividends over time could compensate.

Here is a small sample of dividend-paying ETFs. Note that this is not all-inclusive, and there are may other worthy ETFs delivering dividends to choose from:

• Vanguard Financials (VFH): yields 5.9%; down 5.2% year-to-date
• PowerShares International Dividend Achievers (PID): yields 6.2%; up 3.4% year-to-date
• SPDR S&P Dividend ETF (SDY): yields 6.4%; down 1.1% year-to-date
• SPDRS (SPY): yields 3.3%; up 1.4% year-to-date
• WisdomTree LargeCap Dividend (DLN): yields 4.8%; down 4.5% year-to-date
• Industrial Select Sector SPDR (XLI): yields 4%; down 2.3% year-to-date
• Diamonds Trust, Series 1 (DIA): yields 3.9%; up 2.8% year-to-date
• iShares S&P 100 (OEF): yields 3.7%; down 0.9% year-to-date
• iShares NYSE 100 (NY): yields 3.8%; down 2.9% year-to-date
• Rydex Russell Top 50 (XLG): yields 3.6%; down 1.6% year-to-date

Foreign stocks have had much more attractive yields these days, as proven by a foreign large-cap stock measure in developed markets which showed yields at 3.7% payout as of July 31, compared with 2.4% for U.S. stocks, reports Shefali Anand for The Wall Street Journal.

Dividend-paying ETFs and stocks are safer ideas in turbulent markets like the one we are experiencing, giving retiring baby-boomers an edge when looking for ways to get an income stream. Unfortunately, for now, many of the highest-paying dividend stocks in the United Sates are within the financial sector.

The same is true for those overseas, however, many of these financial institutions haven’t been as hard-hit as those domestically.

Dividend-yielding foreign stocks bring other risks to the table, as well. The main troubles are currency risk, foreign banks will slow if credit meltdown goes deeper, and share buybacks are more common now than in past years.

There was a time when U.S. companies had higher payouts, but over time, they’ve been taking those earnings and putting them back into the business. Foreign companies tend to take a more traditional approach: money earned belongs to the shareholders.

Dividends are still an objective way to add value to a company, and some of the ETFs accessing this are:

• PowerShares International Dividend Achievers Portfolio (PID): yields 4.1%, down 16.9% year-to-date
• WisdomTree International Small Cap Dividend (DES): yields 2.6%, down 7.2% year-to-date
• iShares Dow Jones EPAC Select Dividend (IDV): 8.3% yield (Caution: 50% of assets are in financials), down 24% year-to-date