The DIVCON dividend health rating system tries to forecast and rank companies’ ability to increase or decrease dividends in the next 12 months by evaluating each firm based on expected dividend growth, free cash flow, earnings per share growth, recent dividend actions, buybacks and repurchases, Bloomberg fundamentals and Altman z-scores. Ereads Each company is scored into one of five categories, with DIVCON 5 representing the healthiest and DIVCON 1 showing the weakness.

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Ervin pointed out that there are only 50 large-cap stocks in LEAD’s portfolio, so investors are not getting potentially limited returns due to overdiversification, but still get the benefit of investing in an ETF.

LEAD remains relatively unknown among dividend investors as the ETF holds a little over $22 million in assets under management. However, potential investors should not be deterred.

“Oftentimes investors become too focused on AUM and price and forget performance,” Ervin added. “LEAD might only have $22 mil in AUM, but it’s more liquid than other dividend funds and can execute a trade easily. Also, it’s performance is significantly better.”

For more information on dividend-paying stocks, visit our dividend ETFs category.

Correction: DIVCON scoring methodology.