“If you look at the percentage of the portfolio’s assets that are in either wide- or narrow-moat firms it’s nearly 100%,” Johnson said. “So these are very high-quality firms, with sustainable competitive advantages that allow them to preserve and ideally grow over time, those cash flows that they are sharing with investors in the form of dividends.”
Investors who are just looking for high yields may take a look at something like the Vanguard High Dividend Yield ETF (NYSEArca: VYM), which has a 3.11% 12-month yield and a 0.10% expense ratio. VYM tries to reflect the performance of the FTSE High Dividend Yield Index, which specifically targets quality stocks with high dividend yields.
“So amongst all of the dividend strategies that we would categorize as yielders, it’s got the most moaty portfolio,” Johnson added, referring to VYM’s portfolio of stocks with high economic moats or competitive advantages.
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.