Sponsored by:

3 ‘Quality’ Dividend ETFs to Buy Today

Forget headline yield - over the long term, quality dividend holdings will deliver the best risk-adjusted returns

    View All  
3 ‘Quality’ Dividend ETFs to Buy Today

Dividend exchange-traded funds are a great way for investors to get their income fix. After all, ETFs allow you to hold a bundle of stocks, so you’re piling diversification on top of holding big, stable blue chips.

Money Cash 150x150 3 Quality Dividend ETFs to Buy TodayWhile there are varying flavors of dividend ETFs — from international dividend payers to those that focus on growing their income streams — one of the best groups is a set of smart-beta products that trend toward so-called “quality” dividends.

The problem with many dividend ETFs — like the $13 billion iShares Select Dividend ETF (DVY) — is that their underlying indices are often based on just one attribute. A fund might focus on high yield, or being a member of a particular dividend club. The problem is, by really honing in on one metric to design a portfolio, ETFs can let in some real undesirables.

For example, rural telecommunications company Frontier Communications (FTR) and its juicy 6.1% yield often makes its way into dividend ETFs that promise a high payout. The problem is that FTR has been struggling with its cash flows as consumers decide to eschew having a land-line phone. The firm has cut its dividend before, but because it is a “high-yielding” stock, it’s a holding in many dividend ETFs.

Smart-beta dividend ETFs and fund hope to circumvent these issues by betting on a total package of positive dividend attributes. They take bread ‘n’ butter indices such as the S&P 500 and apply various screens — for profitability, cash flow, dividend growth, payment histories and more — to create portfolios. That’s where the concept of “quality” dividends take hold.

And there is plenty of academic evidence that suggests that quality earnings and dividends — not merely high yields — consistently delivers better risk-adjusted returns than the overall market, especially over the longer haul.

That said, here are three of the best quality dividends ETFs for investors to consider:

Next Page


Article printed from InvestorPlace Media, http://investorplace.com/2014/08/quality-dividend-etfs-qual-qdf-qdxu/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.