iShares Select Dividend ETF (DVY) — DVY has outperformed the market since the mid-January lows. Shares soared 22.5% from their Jan. 20 low under $70 to an all-time high just below $85 last week.
Since then, DVY has pulled back 1.6%, and I think further market weakness could provide the opportunity to pick up this outstanding performer at a discount.
DVY attempts to track the performance of the Dow Jones U.S. Select Dividend Index, which is made up of U.S. stocks that offer relatively high dividend yields. DVY throws off an annual distribution yield of more than 3%.
Morningstar gives DVY a five-star rating, while S&P Capital IQ considers the fund to be low-risk and offer above-average returns.
The high-quality portfolio of stocks that comprise DVY will more than likely outperform the major indices over time. The top 10 holdings in DVY are Lockheed Martin Corporation (LMT), CME Group Inc (CME), Chevron Corporation (CVX), Philip Morris International Inc. (PM), ONEOK, Inc. (OKE), McDonald’s Corporation (MCD), NextEra Energy Inc (NEE), Kimberly Clark Corp (KMB), Entergy Corporation (ETR) and Occidental Petroleum Corporation (OXY).
Turning to the chart, we can see DVY ran to new highs this month following a break from a right triangle. But Monday’s 0.8% decline, which is likely due in part to profit-taking, along with a continued market pullback, could provide the opportunity to buy DVY at the midpoint of the consolidation zone that occurred from March to late May. The 50-day moving average, which currently sits just above $82, is also near the middle of the consolidation zone.
The MACD internal indicator is turning down, and that is another indication that the fund has begun a minor decline. Therefore, investors should place a good ’til canceled (GTC) order to buy DVY at $82.50 as a long-term holding for capital gains and yield.