Dividend-focused exchange traded funds (ETFs) usually get torn up pretty bad after a bear attack, however, there are some funds that have beat the odds.
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.
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.