Just because the stock market is roaring doesn’t mean investors should solely switch to risk-on, due diligence off. Right now, there could be too much exuberance with the latest record highs in the major indexes, and millionaires are looking to dividend-paying options and ETFs that pay dividends could be a million dollar move for all investors–big or small.
Per a CNBC report, “millionaires were cautious and possibly worried about a repeat of the plunge in the fourth quarter of 2018. Now 76% of these wealthy investors grade the U.S. economy highly, and there has been a 16% increase in investors who expect the market to rise by as much as 5% this quarter, according to an E-Trade Financial quarterly survey provided exclusively to CNBC.”
“Investors are more open to risk taking at this point,” said Mike Loewengart, vice president of investment strategy at E-Trade. “If the environment is encouraging and conducive to additional gains, they want to be part of it.”
However, that doesn’t mean investors should allocate capital to the riskiest of the bunch. Millionaires with a track record of investing experience understand the importance of choosing value-oriented equities that pay dividends.
“Millionaires are more experienced and recognize dividend payers will be more fundamentally sound stocks. We see investors wanting to participate in the market after the considerable gains we’ve had, and they want to do it in the fundamentally strong franchise names,” Loewengart said.
Dividend ETF Options
ETF investors can do that same with funds like the Invesco Dow Jones Industrial Average Dividend ETF (NYSEArca: DJD). DJD seeks to track the investment results of the Dow Jones Industrial Average Yield Weighted. The underlying index is designed to provide exposure to dividend-paying equity securities of companies included in the Dow Jones Industrial Average™, which is a price-weighted index of 30 U.S. companies that meet certain size, listing and liquidity requirements.
When playing the dividend ETF game, it’s necessary to not just look at funds that offer the highest dividends, but also those that look to sustaining growth like the WisdomTree U.S. Quality Dividend Growth Fund (NasdaqGM: DGRW). DGRW seeks to track the price and yield performance of the WisdomTree U.S. Quality Dividend Growth Index. The index is a fundamentally weighted index that consists of dividend-paying U.S. common stocks with growth characteristics.
Another option is the ProShares S&P 500 Aristocrats ETF (CBOE: NOBL), should be an area of emphasis for income investors. NOBL tracks the S&P 500 Dividend Aristocrats Index, targets the cream of the crop, only selecting components that have increased their dividends for at least 25 consecutive years. Consequently, investors are left with a portfolio of high-quality, sustainable dividend payers.
For more market trends, visit ETF Trends.