Dividend stock exchange traded funds are gaining popularity again as market volatility push rattled investors into more stable, income-generating assets.
For instance, the SPDR S&P Dividend ETF (NYSEArca: SDY) targets the highest-yielding stocks from the S&P 1500 Composite Index that have raised their dividends for every year over the past 25 consecutive years.
Quality dividend stocks, or dividend aristocrats, let investors know that the company has prudently managed its dividend policy to consistently generate yields every year, writes Casey Murphy for Investopedia.
“Firms with a long track record of raising their dividend every year have signaled to investors that protecting and increasing their payout is a high priority,” according to Morningstar analyst Abby Woodham. “These companies have the financial strength to increase their distributions even during a market crisis like 2008, and also have the fiscal and managerial responsibility to continue to grow their dividends in the future.”
Specifically, SDY tracks a group of 97 stocks and holds $12.8 billion in net assets under management. The ETF comes with a 0.35% expense ratio and shows a 2.29% 12-month yield. [Income-Generating ETFs for a Long Retirement]
The dividend ETF has been regaining ground after the recent selling. SDY has jumped back above its 200-day moving average over the past week and has broken back above its 50-day resistance level. The ETF is up 3.4% over the past week and is up 5.6% year-to-date.