Dividend stocks and ETFs remain important parts of a well-balanced, income-generating portfolio. Companies that have consistently increased dividends tend to be high in quality and show a strong potential for growth. These dividend growers have been able to withstand periods of market duress, exhibiting smaller drawdowns as investors sold off riskier assets, while still delivering strong returns on the upside, to generate improved risk-adjusted returns over the long haul.
Some new ETFs offer income investors compelling avenues to dividends, including the recently launched J.P. Morgan U.S. Dividend ETF (NYSEArca: JDIV). JDIV, which debuted in November, is already one of the least expensive U.S. dividend ETFs with an annual fee of just 0.12%, or $12 on a $10,000 investment.
JDIV is designed to provide equity exposure with emphasis on dividend income. JDIV tries to reflect the performance of the J.P. Morgan U.S. Dividend Index, which is comprised of U.S. securities included in the Russell 1000 Index and uses a rules-based risk allocation and stock selection process to deliver high dividend yield while maintaining diversification risk across sectors and securities.
“Since dividend yield is an element in JDIV’s weighting scheme, it is not surprising that the ETF allocates over 30% of its combined weight to the utilities and consumer staples sectors,” according to Investopedia. “Those are two of the highest-yielding groups in the U.S. However, JDIV offers some cyclical exposure as well as highlighted by a combined weight of 27.5% to financial services and consumer discretionary stocks. Those two sectors have been among the biggest contributors to S&P 500 dividend growth over the past several years.”