Tuesday, December 16, 2008

5 Dividend ETFs for Diversification

If there is one thing I have to admit as a dividend investor is that it can take a lot of time to track my stock holdings. With each dividend stock I own I must consistently monitor company performance to watch for signs of real bad management - and as I do not need to tell you there has been a lot of it lately. Citigroup (sold) and Bank of America (sold) are two examples of the risks of holding individual securities. So what it you do not have the time (or desire) to track individual stocks, but still want to invest using a dividend based strategy? Dividend ETFs and funds can help.

Dividend ETFs and funds are just like other index funds and ETFs in that they track a specific index and try to mimic that index as closely as humanly possible. They provide both diversification and risk management all in one package. As dividend investors, there are a few choices to choose from. Here are 5 of them that may be worth a look:

1. iShares Dow Jones Select Dividend (DVY)

The iShares Dow Jones Select Dividend Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Dividend Index. The Dow Jones U.S. Select Dividend Index, measures 100 of the leading U.S. dividend-paying companies.

2. PowerShares Dividend Achievers Portfolio (PFM)

he PowerShares Dividend Achievers Portfolio (Fund) seeks to replicate, before fees and expenses, the Broad Dividend Achievers Index, which is designed to identify a diversified group of dividend paying companies. These companies have increased their annual dividend for ten or more consecutive fiscal years.

3. WisdomTree International LargeCap Dividend Fund (DOL)

The WisdomTree International LargeCap Dividend Index is a fundamentally weighted index that measures the performance of the large-capitalization segment of the dividend-paying market in the industrialized world outside the U.S. and Canada. The Index is comprised of the 300 largest companies ranked by market capitalization from the WisdomTree DEFA Index. Companies are weighted in the Index based on annual cash dividends paid.

4. Vanguard Dividend Appreciation ETF (VIG)

Vanguard Dividend Appreciation ETF seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that have a record of increasing dividends over time.

5. First Trust Value Line Dividend Index Fund (FVD)

The index begins with the universe of stocks that Value Line gives a SafetyTM Ranking of #1 or #2 using the Value Line Safety Ranking System. All registered investment companies, limited partnerships and foreign securities not listed in the U.S. are removed from this universe. From those stocks, Value Line selects those companies with a higher than average dividend yield, as compared to the indicated dividend yield of the Standard & Poor's 500 Composite Stock Price Index. Value Line then eliminates those companies with an equity market capitalization of less than $1 billion.

That should give most investors a good starting point. As with all ETFs, there are also dividend ETFs focused on small-caps, mid-caps, regionally specific or pretty much whatever area of the market you would like to focus on. However, my suggestion for most investors is to keep it simple and stick with a solid asset allocation and build your portfolio from there.

This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.

1 comment:

  1. I will add another ETF to this list:
    S&P Dividend Aristocrats High-Yield (SDY)

    ReplyDelete

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