Now that the Fed has hiked interest rates, the bond markets have apparently been put to bed and equity markets are running high risk of volatility, investors have to look for something which normally remains steady in economic peaks and troughs. This bright spot in equity investing appears to be dividends at the current level.
In the end, “dividends may not be the only path for an individual investor’s success, but if there’s a better one,” that is yet to be found, per Josh Peters – the author of The Ultimate Dividend Playbook. In fact, dividend stocks outdid non-dividend paying stocks over the last 85 years, per the source (read: Dividend ETFs Explained: What Investors Need to Know).
Normally stable, mature and profitable companies consistently raise dividends or go for high payouts. These companies are generally apt for value investing. Since volatility is expected to pull the string ahead, what could be the best option than dividend investing for capital appreciation and to earn smart yields which are likely to beat the benchmark U.S. Treasury yields.
Notably, companies, that raise dividends regularly, appear steadier than those which offer higher yields. In a market crash, these dividend aristocrats stand out and even navigate through volatility. Below, we highlight seven dividend ETFs which have made a killing since inception and even performed steadily in the last three months amid lift-off bets.
Vanguard Dividend Appreciation ETF (VIG)
VIG follows the Dividend Achievers Select Index, which is composed of common stocks of high quality companies that have a record of increasing dividends for at least 10 years. The $19.2-billion fund is currently home to 179 securities. The ETF is heavy on Industrials (22.4%) and Consumer Goods (21.6%). With an expense ratio of 0.10%, this is one of the cheapest funds in this space. The fund yields 2.34% annually and was up 9.1% in the last three months (as of December 16, 2015) (read: 3 Dirt Cheap High Dividend ETFs to Watch).
iShares Select Dividend ETF (DVY)
This $13.2-billion ETF considers companies that have provided relatively high dividend yields on a consistent basis over time. The 99-stock fund is heavy on utilities (33%) followed by consumer staples (12.35%), financials (12.1%), consumer discretionary (11.2%) and energy (10.1%). The fund yields 3.40% and charges 39 bps in fees. The fund has a Zacks ETF Rank #3 with a Medium risk and added 2.9% in the last three months.
Vanguard High Dividend Yield ETF (VYM)
This large cap centric fund provides exposure to the high yielding U.S. dividend stocks by tracking the FTSE High Dividend Yield Index. The $11.3 billion-ETF is one of the largest and most popular choices in the dividend ETF space. Expense ratio comes in at 10 bps (read: 3 Excellent Dividend ETFs for Growth and Income).
Holding 435 securities, the product does not put more than 4.7% share in each stock. In terms of sectors, the fund is widely spread out with consumer goods, technology, financials, industrials, health care and oil & gas taking double-digit exposure each in the basket. The Zacks Rank #3 ETF’s yield is 3.20%. VYM was up 5.5% in the last three months.
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