A Venerable Dividend ETF for Conservative Investors

The iShares Core High Dividend ETF (NYSEArca: HDV), which allocates nearly 21% of its weight to consumer staples stocks, could be an ideal dividend exchange traded fund for conservative income investors to consider in 2018.

HDV follows the Morningstar Dividend Yield Focus Index. In 2014, HDV became a member of the iShares core suite of ETFs and its addition to the iShares core suite came a dramatic fee reduction that took the ETF’s annual expense ratio to 0.12% from 0.4%.

HDV “is a fund that focuses on companies that display two quality characteristics – they have at least some degree of an economic moat and are far from in financial distress,” reports ETF Daily News. “These factors are quantified using Morningstar’s Economic Moat rating and Distance to Default score. Companies that meet these screening criteria and then ranking by their dividend yield. The 75 highest yielding companies qualify for the fund. This strategy ends up producing a portfolio of mature, cash-rich companies with above average dividend yields.”

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.