2020 is already proving to be a volatile year for markets as geopolitical risks are keeping investors from diving head first into the stock market with events like the U.S.-Iran conflict and the forthcoming 2020 presidential election up ahead. When the market waters get murky and volatility strikes, it can help to play defense with dividend exchange-traded funds (ETFs).

Dividend strategies can help mute the impact of volatility by giving investors a steady income stream in the event the markets do get bumpy as a result of unforeseen news events.

“Dividend strategies have increasingly become top of mind for investors that want to participate in the up market that continues but they want to be prepared for the volatility that feels like is around the corner,” said Todd Rosenbluth, head of ETF & mutual fund research at CFRA.

One such fund to utilize is 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.

Dividend Growth, Track Record Options

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.

Reasons for using DGRW:

  • Gain access to the current investment landscape of U.S. large cap dividend growing companies by applying quality and growth screens
  • Use as a complement to high yielding dividend strategies or as a replacement for large cap quality strategies

That growth aspect is paramount to DGRW’s focus—ensuring that dividends are able to increase in the long-term, broad picture.

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.

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