Dividend investing with exchange traded funds (ETFs) has had enough time in the game to see which ones are the most successful.
Dan Caplinger for The Motley Fool reports that after the tech bubble in the 1990s, dividend investing came back into style and Wall Street responded with the advent of dividend-paying ETFs. Many investors have had a rough time lately, and current market conditions have yielded bigger losses on dividend stocks than what they’ve gotten back in quarterly checks.
Here are five major dividend ETFs, all assembled in different ways:
- WisdomTree LargeCap Dividend Index Fund (DLN): Takes the 300 largest dividend-paying stocks and weights them according to the total amount of dividends each company pays.
- iShares Dow Jones Select Dividend Index Fund (DVY): Includes dividend-paying stocks that have maintained or increased dividends in the last 5 years.
- PowerShares Dividend Achievers (PFM): Screens for companies that have increased dividend payouts for the past 10 years and takes the highest paying stocks among them.
- SPDR S&P Dividend ETF (SDY): Takes 50 high-yielding companies that have raised dividends over the last 25 years.
- First Trust Value Line Dividend Index Fund (FVD): Uses value-line safety rankings to screen for stocks that are safer-than-average, and then takes high dividend yields of companies with market caps over $1 billion; takes an equal-weight approach.
After years of strong performance from financial stocks, many investors who got into the game late got burned. Many financial companies paid out beautiful dividends, but this is not the case right now. As of 2007, the bottom fell out of the sector and the ETFs suffered more than the broad market.
To approach dividend investing by what stock shave the highest yields is not the best way to go about your strategy. Instead, think about diversification and this will help avert the chance of big losses in little time.
For more dividend yields, you can visit WisdomTree’s Dividend Yield Analysis page.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.