The slight pullback in the stock market is creating the chance for income focused investors to get back into dividend-paying equities at a reasonable cost. Dividend exchange traded funds are back in focus as some yield-producing investments have pulled back to their 50 day-moving-averages.
“Proactive income investors that have reduced equity exposure over the last several months or even investors that missed the 2013 rally should be diligently planning their next moves,” David Fabian wrote for MarketWatch.
Of course, whether the recent market weakness turns into something worse is still up in the air.
Fabian recommends a second look at REITs, preferred stock, common stocks, global equities, MLPs and dividend-paying equities.
For example, the iShares Select Dividend ETF (NYSEArca: DVY) recently pulled back to its 50 day-moving-average. A correction from the high down to the 200 day-moving-average would mean a large 12% pullback. Investors could watch positions for an entry point at this time.
Fabian also recommends keeping an eye on the iShares High Dividend ETF (NYSEArca: HDV), First Trust NASDAQ Technology Dividend ETF (NYSEArca: TDIV), and the iShares MSCI US Minimum Volatility Index (NYSEArca: USMV) to gain broad-based equity exposure with dividend payouts. [A Closer Look at WisdomTree’s Dividend ETFs]
“Many dividend products have overweight concentrations in the utilities and telecom sectors. That’s fine as long as these two sectors are performing well, which has been the case for most of the past five years. After all, risk is easily tolerated when it doesn’t manifest itself. However, sector concentration risk often goes unnoticed until things turn bad,” Ron Rowland wrote in a recent report.