Over the long-term, high-quality dividend-paying stock exchange traded funds could produce outperforming results. The PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEArca: PEY) is one ETF that can position investors for years of consistent, dependable dividends.
“PEY follows the Nasdaq U.S. Dividend Achievers Index, which selects companies based on a combination of dividend growth and yield. This ETF holds 50 companies with over 42% of the fund’s combined weight allocated to the utilities and energy sectors,” according to InvestorPlace.
Dividend growers provide an aspect of quality and growth since these firms have a long track record of raising dividends.
Related: Best of Both Worlds With This Dividend ETF
Stocks with steady dividend yields reassure investors of a company’s strong financial health. Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return. Over the past 40 years, companies that boost payouts have proven to be less volatile than their counterparts that cut, suspended or did not initiate or raise dividends.
“In looking at some of the ETF’s top holdings it’s no surprise to find big telecom names like Verizon (NYSE:VZ) and AT&T (NYSE:T), as well as tobacco plays like Altria Group (NYSE:MO) and smaller tobacco companies like Vector Group (NYSE:VGR). Sector-wise, utility stocks make up 20% of the overall ETF holdings, followed by financial services at 17%, and consumer-defensive stocks like Procter & Gamble (NYSE:PG), Kellogg (NYSE:K)and General Mills (NYSE:GIS), with that group making up 16% of the ETF’s overall holdings,” according to ETF Daily News.
[related_stories]Dividend growth as a means of trumping inflation could and arguably should serve to highlight the advantages of the ETFs that focus on dividend growth stocks. That group is comprised of well-established ETFs that emphasize dividend increase streaks as well as a new breed of funds that look for sectors chock full of stocks that have the potential to be future sources of dividend growth.
SEE MORE: Low U.S. Interest Rates Boost International Dividend ETFs
“This market environment’s current yield-buying frenzy focus comes as Treasury bond yields have fallen to record lows. When the obsession with yield will end is anyone’s guess. Perhaps the Federal Reserve actually raising interest rates will be the remedy to offset set what appears more and more to be a yield-chasing bubble which has resulted in record-highs in terms of valuation,” adds ETF Daily News.
For more news and strategy on the Dividend ETF market, visit our Dividends category.
PowerShares High Yield Equity Dividend Achievers Portfolio
