In this era of ultra low interest rates, income is hard to find almost everywhere. Money markets yield next to nothing, treasury bonds and bills are about the same, and corporate dividends were drastically slashed when profits dropped.
Now as corporate profits are starting to improve, dividend opportunities are rebounding as well, and dividend producing Exchange Traded Funds are one option for investors to consider.
Dividend ETFs give you opportunity to gain exposure to dividend paying stocks and at the same time eliminate single stock exposure because you’re buying a basket of stocks. Plus the ETF providers have the resources to pick the best candidates and so do the research for you and can save you money, time and costly mistakes.
If you’re interested in ETFs that pay dividends here are some for your consideration:
One of my favorites comes from the iShares family and is the iShares Dow Jones Select Dividend Index (DVY) It has more than $3 Billion in assets under management, charges a .40% management fee and returned 10.99% in 2009. The ETFs main holdings are:
Lorillard Inc., Entergy Corp., Centurytel Inc, Mercury General, Chevron, McDonalds, Kimberly Clark, PPG
DVY generated a dividend yield of 4.2% for 2009.
Other good candidates are PowerShares High Yield Dividend Achievers (PEY) which yields 4.7% and focuses on financial sector stocks. For investors who are afraid of the financial sector because of its recent near death experience, Wisdom Tree offers a dividend paying ETF called the Wisdom Tree Dividend ex-Financial ETF (DTN) that returns 3.9% and includes in its major holdings companies like:
Qwest Communications, Century Tel, Altria Group, Reynolds American, Centerpoint Energy, AT&T, Duke Energy
Wisdom Tree Dividend ex-Financial focuses its holdings primarily in Utilities, Consumer Staples and Consumer Discretionary and 100% of its holdings are in United States Corporations.
Other ETFs to consider are Vanguard Dividend Appreciation (VIG), Claymore Dividend Rotation (IRO) and Wisdom Tree Small Cap Dividend Fund (DES) each of which takes a slightly different angle in search of quality dividend production.
For example, Wisdom Tree Small Cap Dividend Fund includes in its holdings companies like Potlatch Corporation, Black Rock Kelso Capital Corporation and United Bank Shares while Claymore Dividend Rotation focuses primarily on large utilities and financials.
So in today’s tough environment where growth has been tough to find and interest income options have wilted, dividend paying ETFs offer another option for investors looking for ways to try to maximize current income and total return.
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