Over the long-term, high-quality dividend-paying stock exchange traded funds could produce outperforming results. That trend is already at play this year, highlighted by the iShares Core High Dividend ETF (NYSEArca: HDV).
Investors can also look to diversify with stable, dividend-paying stock ETFs in uncertain times. There are a number of broad ETFs that target stocks with a history of consistently raising dividends as a way to generate more attractive returns and to gain exposure to more quality names.
HDV, which tracks high-quality U.S. companies that have been screened for financial health and relatively high dividends, is off just 2.5% year-to-date, a loss that is just a third of the loss delivered by the S&P 500.
Investors enjoy getting paid to wait. Through exchange traded funds, anyone may gain access to quality stocks with strong fundamentals and attractive yields. Dividends are a nice perk when investing, but investors should not go overboard and chase after high yields as generous dividends may often signal weak share price tied to negative views.
On the other hand, investors may comb through various financial data to assess a company’s health and its ability to pay steady yields. However, the process is tedious and time consuming.
HDV devotes more than 23% of its weight to consumer staples stocks, a favorable trait in a volatile market environment. However, the ETF also allocates more than 20% of its weight to energy stocks with Dow components Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), the two largest U.S. oil companies, commanding the bulk of HDV’s energy exposure.