Dividend ETFs
ETFs like these track stocks with rising dividend yields, something that could be important before the fiscal cliff...

This Article Originally was Published here: http://www.wealthdaily.com/articles/dividend-etfs/3803

Some investors are always looking for a way to bring in healthy dividends from their investments. ETF Trends' Tom Lydon explains an ETF that does just that.

The SPDR S&P Dividend ETF (NYSE: SDY) comprises companies that have regularly seen their dividends rise over the past 25 years and weights individual stocks based on dividend yields.

It essentially allows investors to buy a basket of dividend stocks in a single trade.

From ETF Trends:

“The fund’s yield-weighting produces an idiosyncratic portfolio with a strong mid-cap flavor. For instance, the $3.4 billion market-cap Questar Corporation (NYSE: STR) has a greater weight than the $185 billion Procter & Gamble Company (NYSE: PG). Consequently, the fund may occasionally move out of step with its large-cap value brethren. If you’re okay with high tracking error relative to the market, this fund could be a decent core holding. For everyone else, this is a satellite holding,” Samuel Lee wrote for Morningstar in a profile of the ETF.

Of course, the SDY is not alone in weighting stocks by yield; other dividend ETFs include the iShares Dow Jones Select Dividend (NYSE: DVY), a basket of 100 stocks; Vanguard Dividend Appreciation ETF (NYSE: VIG), containing over 100 companies; and WisdomTree Total Dividend (NYSE: DTD), a basket of roughly 900.

Dividend-themed ETFs tend to be popular since they have low interest rates in the bond market.

The idea of dividend investing is built around a short-term investment notion, where investors would rather collect income today than depend on appreciation of capital later, per Lee’s account.

Besides, dividends have tended to beat non-paying companies in the long run.

SDY has a mid-cap focus. The dividend yield is 3.2 percent—not the greatest but still reasonable. Should the fiscal cliff come to pass, S&P Capital estimates that corporations will want to rely on cash for special dividends as well as for stock repurchasing before the new laws kick in.

This Article Originally was Published here: http://www.wealthdaily.com/articles/dividend-etfs/3803



Dividend ETFs originally appeared in Wealth Daily. Wealth Daily, a free daily newsletter, offers practical investment analysis and contrarian stock market advice.
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