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.
“Combine all of this with HDV’s 3.72% SEC yield and, in the environment we face ahead, HDV may be a winning choice for the dividend-producing portion of your portfolio,” according to a Seeking Alpha analysis of HDV.
HDV follows the Morningstar Dividend Yield Focus Index and the ETF’s other double-digit sector allocations are healthcare and utilities. In 2014, HDV became a member of the iShares core suite of ETFs and its addition to the iShares core suite came a dramatic fee reduction that took the ETF’s annual expense ratio to 0.12% from 0.4%.
This year’s retrenchment in Treasury yields has encouraged investors to reconsider some high yield dividend ETFs, including some with either substantial staples or utilities exposure or both. [Core Dividends With This ETF]
iShares Core High Dividend ETF
