With benchmark Treasury yields remaining stubbornly low, investors can still find attractive income-generating options through dividend stock exchange traded funds.
However, not all dividend ETFs are created equal, so an investor will have to consider the various strategies and how the options best fit into his or her portfolio. For instance, some include stable behemoths, whereas others track high-growth stocks, writes Charles Sizemore, chief investment officer of Sizemore Capital Management, for Forbes.
For starters, the iShares Select Dividend ETF (NYSEArca: DVY) provides exposure to a quality mix of U.S. company stocks with a dividend kicker. The ETF includes the top 100 highest yield stocks with a positive dividend-per-shares growth rate, a payout ratio of 60% or less and at least a five-year record of dividend payments. Consequently, the fund includes a heavy tilt toward utilities and defensive consumer staples. DVY has a 3.10% 12-month yield. [A Simple, but Effective Dividend ETF]
Sizemore, though, warns that DVY may not outperform the S&P 500 during normal bullish conditions, but the dividend fund can hold its own during a market turn. Year-to-date, the ETF is up 8.2%, compared to the S&P 500’s 9.2% gain. [Use Income Generating ETFs in a Low Growth Economy]
The Vanguard Dividend Appreciation ETF (NYSEArca: VIG) has acted as a go-to dividend ETF for those seeking exposure to high-quality stocks with steady income growth. The ETF tracks stocks that have raised their dividends for at least 10 consecutive years, which requires discipline and a management team that believes more of it will be coming. VIG has a 1.98% 12-month yield.
The PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEArca: PEY) takes a smaller slice of the dividend achievers universe, tracking only the 50 highest yielding stocks from the underlying index that VIG uses. PEY shows a 3.4% 12-month yield.
For an even greater take on quality, the SPDR S&P Dividend ETF (NYSEArca: SDY) targets 50 highest-yielding stocks that have raised their dividends for every year over the past 25 consecutive years. However, the screen does leave investors with a portfolio of older, slower-growing companies. SDY has a 2.26% 12-month yield.
The relatively new AdvisorShares Athena High Dividend ETF (NYSEArca: DIVI), which was launched on July 29, takes an interesting approach to dividend stocks, selecting all manner of yield generating equities that have already been vetted by active mutual fund managers. DIVI acts like a dividend play of popular hedge fund picks. [An Active Guru ETF with a Dividend Focus]
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.