“We also like a quality-tilted dividend strategy during any market cycle,” Woodham added. “You don’t want to reach for yield and end up buying risky companies paying an unsustainable dividend.”
About 50% of VIG and Vanguard High Dividend Yield Index Fund (NYSEArca: VYM), for instance, falls under what Morningstar calls”wide-moat” companies – wide moat refers to companies with a sustainable competitive advantage that helps them stay on top in their respective sectors. Additionally, wide- and no-moat companies cut dividends less frequently and tend to be less volatile. [Dividend ETFs to Guard Against Volatile Markets]
SCHD is also heavily loaded up on quality stocks, with over 60% of its holdings in wide-moat companies.
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SCHD.