A Solid Yield Play With a Dividend ETF

The recent uptick in volatility for growth stocks, namely technology and Internet names, could encourage investors to consider more conservative fare. That theme could benefit exchange traded funds such as the First Trust Morningstar Dividend Leaders Index Fund (NYSEArca: FDL).

FDL tracks the Morningstar Dividend Leaders Index. That index “captures the performance of 100 highest yielding stocks that have a consistent record of dividend payment and have the ability to sustain their dividend payments,” according to Morningstar.

The $1.76 billion FDL, which holds nearly 100 stocks, has a trailing 12-month dividend yield of 3%. That is well above the comparable yield on the S&P 500 or 10-year U.S. Treasuries.

“Strategy-wise, this is a great fund for investors seeking a strong dividend yield. It also requires investors to understand that the holdings can shift substantially over time. If I were investing in FDL, this is something I’d keep in mind and would want to be comfortable with. All things considered, if this fund were to drop its expense ratio materially, this would easily go on my top dividend ETF list. Until then, it is ideal as a source of dividend ideas,” according to a Seeking Alpha analysis of FDL.