Which fund did the team like best? The answer my surprise you: Vanguard Dividend Appreciation (VIG). In fact, Scott said he felt that it was one of the best funds of the century, because of its structure.

The fund tracks the performance of the Dividend Achievers Select Index, which measures the investment return of stocks of companies that have a record of increasing dividends over time.

It holds a wide range of high-quality U.S. large-cap equities such as Wal-Mart (WMT), IBM (IBM), Coca-Cola (KO) and PepsiCo (PEP). Index components have to increase their dividends for 10 consecutive years to be included, but that isn’t all, according to Bradley Kay at Morningstar. There are more tests after that to ensure liquidity and check for financial strength. In the end, about 200 names across a range of sectors are included.

While the fund lost 35% in the year to Feb. 28, it outperformed the S&P 500, which lost 42% in the same time frame. In the last six months, VIG is up 17.6%. Year-to-date, it’s down 2.8%, it has a 2.9% yield and a 0.27% expense ratio.

Another fund Burns and his crew liked was iShares Barclays TIPS Bond (TIP), saying that it can be a great way to protect the fixed-income portion of your portfolio. The fund has been getting a lot of attention as inflation concerns gather strength.

TIPS help you maintain your purchasing power as the value of the dollar falls. They offer a fixed yield, plus the inflation rate, to keep pace with changes in the consumer price index. TIPS may be attractive, and many financial advisers recommend a permanent 15% portfolio allocation to the class, but buying these bonds at periodic Treasury auctions or in the secondary market can be a pain. An ETF made up of TIPS is easier and more cost efficient.

Thanks again to the crew at Morningstar for putting on another really informative and fun conference!

Be sure to stop by Morningstar’s new and improved ETF education section – no doubt you’ll find even more great information over there.

The typical boom-bust pattern often demonstrates that as the market turns around, the economy follows. Last week’s rally was enticing, however, there is no sure way to know that a recovery is possible or long-lasting at this point. Bradley Kay for Morningstar points out that for those of us who have cash to put back into the market, there are some criteria to look for when choosing where to go:

• Strong business, reliable cash flow. Only very profitable businesses with large moats or industries with extremely stable revenues will make it through the slump while staying in the black.
• Low leverage and low exposure to financials. The credit crunch is not going to go away or solve itself. A couple of bad quarters and debt coming due could drive even very solid businesses with too much leverage into bankruptcy, and there is no better way to permanently impair the value of equity than for debt holders to seize it all.
• Broad diversification. Is there any more to say? Find those funds that are more diversified.
• Large discount to fair market value. There should be decent to considerable price appreciation involved if you get into the market at this time, right?

Of 840 ETFs on the market, Morningstar staffers found the Vanguard Dividend Appreciation (VIG) to be the winner. This fund has an average dividend yield lower than the S&P 500, but the security of its yield and quality of its holdings are unmatched. Some of the stronger companies included, among others, Coca-Cola (KO), Procter & Gamble (PG) and Wal-Mart (WMT). These companies provide some of the products that consumers are still buying – recession or not.

While these points can be taken under advisement, watch the trend lines to see where the opportunities are.

Investors love those quarterly dividends, and they account for more than one-third of shareholders’ long-term gains, reports Renita Jablonski for Marketplace. But as the credit crisis spreads wide, many companies are cutting them by as much as half in the case of Bank of America (BAC) and Citigroup (C).

The companies don’t like doing this, because it raises a red flag about their balance sheets. But now it’s looking more and more like it’s what has to be done, because many of these companies want to have cash on hand in case they can’t get it anywhere else.

These suspensions hurt investors, particularly retirees, who depend on the checks for income. If they aren’t getting the cash, they may have to sell the stock, which could be at a lower price.

Eleanor Laise for the Wall Street Journal cautioned about dividend ETFs a few weeks ago, as some of them (not all) are heavily weighted in financials – a sector that has been particularly battered by the crisis. It’s important to look at the weightings, especially when there’s a single sector that’s been badly affected:

• iShares Dow Jones Select Dividend Index (DVY): down 21.2% year-to-date; has 50.4% of its weighting in financials (black line)
• PowerShares High Yield Dividend Achievers (PEY): down 21.4% year-to-date; holds 76.2% of financials (green line)

Among the funds that have smaller weightings in financials include:

• Vanguard Dividend Appreciation (VIG): down 24.9% year-to-date; 11% in financials (black line)
• WisdomTree Total Dividend (DTD): down 29.9% year-to-date; 29.5% in financials (green line)

Since financial companies usually dominate dividend-paying companies, it is only natural they faltered during the recent housing/credit crisis.

Gary Gordon for ETFExpert says financial stock prices lost 40% of their value (Lehman Bros. (LEH) lost that in one day!) and dividend funds shed 20% of their value.

Some funds managed to withstand the beating, though:

• Vanguard Dividend Appreciation (VIG): down 7% year-to-date vs. the S&P 500, which is down 14.7%. The Dividend Achievers Index is tracked and these companies tend to increase dividends over time. Low allocation to financials (11%) and telecom (4%) has kept this ETF afloat. Yields 2% annually.
• WisomTree Small Cap Dividend Fund (DES): down 3.6% year-to-date; Small-caps have outperformed their larger competitors, and this has helped DES. You are getting paid to own great companies for the long haul, but beware of the small bank exposure.
• Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ): Up 0.6% year-to-date. Diversification, income stream and risk management are three pluses right in the title. This is actually a closed-end fund (CEF), but the 10% payout on a quarterly basis make this ETF worth owning an income-focused fund.