Dividends provide an additional source of income and returns in an equity portfolio, but investors should still know the type of exposure dividend exchange traded fund investments provide.
While high yield dividend ETFs generate attractive yields, the dividends may not be sustainable or the stocks could be more susceptible to market volatility. On the other hand, investors can take a look at stable “Dividend Achievers” that have a regularly increased dividends over the past.
For instance, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG), the largest dividend ETF with $13.8 billion in assets, tries to reflect the performance of the Dividend Achievers Select Index, which tracks stocks that have raised their dividend in each of the last 10 years. Consequently, the fund has a heavy tilt toward mega-caps at 40.2% and large-caps 43.5%. VIG has a 2.24% 12-month yield.
=VIG also has a greater weighting toward consumer staples 26.5%, industrials 25.5% and consumer discretionary 12.2%. Meanwhile, the ETF also has a lower allocation in financials 6.3% and utilities 1.6%.