Diversify Your Dividends: ETF Alternatives for Hot Stock Picks

We also offer picks for shipping and small-cap stocks

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All good things must come to an end. Last week, The Dow Jones Industrial Average‘s six-week winning streak was derailed, while the S&P 500 also declined.

Technical indicators suggest the S&P 500 is having a hard time staying above the 1700 level, which indicates there could be more trouble ahead.

Of course, that could make it the perfect time to bundle hot stock to weather the storm. With that in mind, here are exchange-traded fund alternatives for last week’s stock recommendations:

Weight Watchers International

Weight Watchers International’s (WTW) recent 19% post-earnings slide had Tom Taulli examining the pros and cons of owning its stock. Because of its strong brand and very cheap valuation, Taulli believes the company maintains a strong long-term buy. If you think he could be right but want to protect yourself, an ETF might be the way to go.

Good news: WTW is the fifth-largest holding in the Market Vectors Wide Moat ETF (MOAT), which seeks to replicate the performance of the Morningstar Wide Moat Focus Index — a collection of 20 equal-weighted stocks that are attractively priced and possess a sustainable competitive advantage.

WTW is the sole consumer discretionary stock in the portfolio and, at a reasonable expense ratio of 0.49%, you’re buying an excellent group of companies.

Dividend Stocks

The Dividend Growth Investor discussed the art of dividend investing last week as well. While there are all sorts of financial metrics one can use to evaluate dividend stocks, success or failure usually comes down to experience — the reason I’m always reminding novice investors the only way to learn is by making mistakes.

Still, one of the best ways to achieve success with dividend investing is to find companies whose dividends and earnings are steadily increasing. While the Dividend Growth Investor mentions a few good possibilities, there is a perfect ETF alternative.

The Vanguard Dividend Appreciation ETF (VIG) is a group of 146 stocks have a record of growing their dividends year-over-year. Of the five stocks mentioned by the Dividend Growth Investor, only one is held by VIG. Not to worry … there are a lot of good companies in the top 10 holdings and beyond.

Since its inception in April 2006, the fund’s annual total return has been slightly better than the S&P 500. No wonder Morningstar gives it five stars. And on its fees alone — annual expense ratio of only 0.10% — it’s a winner.

Shipping Stocks

It’s been years since shipping stocks were in their glory. Bloomberg suggests that private equity investors like Wilber Ross are buying into the shipping industry to take advantage of low prices. Since 2008, the 145 shipping companies that are part of U.S. indexes have lost 60% of their value.

Tim Melvin believes the overcapacity that has plagued the industry is slowly being worked off, though. Two companies on Melvin’s radar: Tsakos Energy Navigation (TNP) and International Shipholding (ISH). Both trade far below tangible book value.


Article printed from InvestorPlace Media, http://investorplace.com/2013/08/diversify-your-dividends-etf-alternatives-for-hot-stock-picks/.

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