While the Fed maintains its quantitative easing program and rock-bottom benchmark rates, investors will want dividend exchange traded fund plays. But how will you react when the easy money dries up?
Investors who want dividends for the current income will likely hold onto their dividend plays and shift over to low-volatility debt once rates begin to outpace dividends, writes John Prestbo for MarketWatch. [Ten ETFs with the Highest Dividend Yields]
However, total-return stock investors can also utilize dividend-paying stocks as these companies typically outperform non-payers over an extended period. [Nine New Dividend ETFs With Staying Power]
Since no two ETFs are created equal, an income-oriented or total-return investor can find a selection of ETFs with varying dividends and performances, including:
- Vanguard Dividend Appreciation ETF (VIG) : 2.08% yield; up 3.1% over the past three months
- iShares Select Dividend ETF (DVY) : 3.19% yield; up 2.7% over the past three months
- SPDR S&P Dividend ETF (SDY) : 2.48% yield; up 1.7% over the past three months
- Vanguard High Dividend Yield Index Fund (VYM) : 2.88% yield; up 1.5% over the past three months
- iShares High Dividend ETF (HDV) : 3.17% yield; up 0.6% over the past three months
- Schwab U.S. Dividend Equity (SCHD) : 2.64% yield; up 1.8% over the past three months
- WisdomTree Dividend ex-Financials Fund (DTN) : 3.43% yield; up 1.7% over the past three months
Typically, ETFs with higher yields do not have the best performance. Some argue that companies with higher dividends don’t reinvest the money themselves and won’t generate significant growth.
Looking at the list of ETFs, DTN, DVY and HDV provide the best yields, and all three weight component holdings based on yield or dividend payouts. On the other hand, the three funds show weaker performances, compared to the other ETFs.
The best performing dividend ETFs, SDY, SCHD and VIG, emphasize quality stocks that have consistently paid dividends over a consecutive period.
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own DVY.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.