iShares Dow Jones Select Dividend Index
If you are looking for more exposure to mid-and-small caps, you should take a look at the iShares Dow Jones Select Dividend Index (DVY). The portfolio is based on the Dow Jones U.S. Select Dividend Index, which takes the top 100 yielding stocks based on the following criteria:
- The current year dividend-per-share ratio — which is the dividend per share divided by the earnings per share — must be 60% or less
- The minimum three-month average trading volume should be at least 100,000 shares per day.
Basically, this means that a stock needs to not only pay dividends for at least five consecutive years — but the earnings must be enough to pay for them. In other words, this should reduce the likelihood of dividend cuts.
DVY contains some household names like McDonald’s (MCD) and Chevron (CVX). But the average market cap of the portfolio is $12.7 billion, with 18% in small caps and 33% in mid-caps. Some include Bank of Hawaii (BOH), Watsco (WSO) and Pinnacle West Capital (PNW).
The strategy has worked out quite well. DVY’s dividend yield is 3.4% and the three-year average total return is an impressive 18.56%.