As investors hunt for yield, exchange traded fund providers are churning out more dividend stock funds to satiate the growing demand, but some are skeptical that the new wave of dividend ETFs may not be up to par with the older generation.

Morningstar analyst Michael Rawson points out that dividend ETFs are “clearly the most popular equity style this year” as over 44 dividend ETFs, or 40% more than in 2010, gathered 13% of all net flows in stock ETFs so far this year, reports Murray Coleman for Dow Jones. [Dividend ETFs: What Obama Win Means for Tax Rates]

In the current low yield environment, with benchmark 10-year Treasuries hovering back around 1.6%, the search for income has led to a boom in what some advisors are referring to as “next generation” dividend ETFs that follow new customized benchmark indices. [Dividend ETFs Under the Microscope]

“Although they hold some promise over past versions, the newer dividend ETFs are increasingly moving into the realm of actively managed mutual funds with more sophisticated indexes and screening processes,” William Greiner, chief investment officer at Mariner Wealth Advisors, said in the article.

“We’re not advising our clients to jump into these new dividend ETFs until they’ve built up more of a track record,” Greiner added. “We’re fine sticking with older-generation funds.”

According to Morningstar data, older or “first generation” dividend ETFs have returned an average 11.6% in the 12-month period ended last week, whereas the next generation funds were up 7.7% over the same period. In comparison, the S&P 500 has gained 16.7%. [High Dividend Sectors, ETFs Are Not ‘in a Bubble’]

Showing Page 1 of 2