Consequently, Shawn Hackett, president, Hackett Financial Advisors, suggests that investors should look at companies with a solid record for paying dividends and the company should issue dividends on a regular basis. Hackett also warns that investors shouldn’t chase after high yielding assets.
“That’s the No. 1 red flag,” Hackett said. “People are chasing yield in this environment like I’ve never seen. We’ve seen some extremely high yields surface.”
Additionally, dividend stocks are still stocks, and investors should monitor the investments as they can lose their principal. Equities are typically more volatile than bonds.
Instead of meticulously picking out dividend stocks on your own, investors can look at ETFs with a diversified basket of dividend-paying stocks. The largest dividend ETFs include:
- Vanguard Dividend Appreciation ETF (NYSEArca: VIG): 2.37% 12-month yield
- Vanguard High Dividend Yield (NYSEArca: VYM): 3.23% 12-month yield
- iShares Dow Jones Select Dividend Index (NYSEArca: DVY): 3.70% 12-month yield
- SPDR S&P Dividend ETF (NYSEArca: SDY): 3.28% 12-month yield
- Schwab U.S. Dividend Equity ETF (NYSEArca: SCHD): 2.86% 12-month yield
- WisdomTree LargeCap Dividend Fund (NYSEArca: DLN): 2.98% 12-month yield
For more information on dividends, visit our dividend ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own DVY.