Many income-focused investors are using dividend exchange traded funds to anchor the equity component of their portfolio. Dividend ETFs are more volatile than bonds, but some investors like the combination of yield and chance for capital appreciation.
As we witnessed in 2011, dividend-paying ETFs have held their own during rough market conditions. During tumultuous times, investors have sought out dividend stocks to offset losses in other areas. For instance, while dividend payers were hit along with the rest of the markets during 2008 and 2002, dividend stocks gave up less ground than their non-paying counterparts. [Can Dividend ETFs Sustain Their Performance?]
Still, companies that are able to generate dividends and continue to increase dividends will also be able weather poor markets. When the markets are good, they will enjoy capital appreciation as earnings growth supports their dividends.
Dividend growth is still gradually rising. As companies expand, the firms reward their investors through higher dividend payouts. [Dividend ETF Can Anchor a Portfolio]