Plenty of dividend exchange traded funds are delivering for investors this year. Dividend growers provide an aspect of quality and growth since these firms have a long track record of raising dividends. Companies that have consistently raised dividends also exhibit stable balance sheets and consistent earnings growth.
Over the long-term, high-quality dividend-paying stock exchange traded funds could produce outperforming results. The iShares Core High Dividend ETF (NYSEArca: HDV) is one ETF that can position investors for years of consistent, dependable dividends.
SEE MORE: Watching High Dividend ETFs
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%.
[related_stories]U.S. dividend stocks have outperformed the S&P 500 over the past year as ultra-low bond yields and the ongoing low-rate environment pushed investors toward alternative income sources.
While high-yield dividend stocks have outperformed within the category, BlackRock analysis shows that high-dividend payers are vulnerable to higher rates. In comparison, dividend growers tend to perform well when the Federal Reserve gradually raises rates.
Related: Quality Dividend ETFs with Sustainable Yields
HDV’s “energy allocation is nearly three times that of the S&P 500 and, perhaps more concerning, the aforementioned ExxonMobil and Chevron alone account for more than 15% of the portfolio. The sector could be an enticing value play but it’s also still in recovery mode. Oil prices remain volatile and could be forced downward again if the supply/demand balance isn’t restored. I appreciate an overweight in energy right now but I’d prefer it be pared down and diversified among a few more large cap names,” according to a Seeking Alpha analysis of the ETF.
Dividend stocks and related exchange traded funds have been a popular play this year as value investments returned to style. While some may be apprehensive of the category after the recent run up, dividend stocks are only still trading near their historical averages.
HDV “has been and continues to be a solid choice for income seeking investors. While the fund is a high quality holding as is, rotating into some cheaper equity positions and diversifying the portfolio could help keep much of the fund’s risk/return profile and dividend yield intact while adding a more defensive posturing that could shield shareholders from some downside risk,” adds Seeking Alpha.
For more news and strategy on the Dividend ETF market, visit our Dividends category.
iShares Core High Dividend ETF
