Top reasons to invest in the high-dividend ETFs
Exchange-traded funds or ETFs are publicly traded funds that track indexes like the S&P 500. The high-dividend ETFs are great for individuals who are in search of a stable and consistent source of income. If handled properly, a high-yield dividend ETF can deliver consistently. Accordingly, here are some reasons why you need to invest in the high-dividend ETFs, along with some basic facts about these funds you need to know before you start investing in them.
What are the benefits of the high-dividend ETFs?
- The ETFs give you the option to invest in hundreds or even thousands of different stocks at the same time, thereby, allowing you to build a diversified investment portfolio.
- The ETFs allow you to invest in any kind of asset that you want, including stocks, foreign exchange, bonds, commodities, etc. Thereby, they give you more options when choosing the investment asset that meets your needs and goals.
- The high-dividend ETFs are relatively inexpensive with lower expense ratios and heavy discounts on trading prices when compared to other forms of investments like mutual funds.
- The ETFs allow you to trade whenever the market is open in stark contrast to other investment options like mutual funds, which allow you to trade only once during the day when the market is about to close.
- The ETFs allow you to respond quickly to market-moving news.
- The ETFs have many tax advantages when compared to other investment options like mutual funds.
What are some landmines I need to be aware of when investing in the ETFs?
Some of the precaution to take when investing in the ETFs include:
- Be wary of dividend ETFs that do not balance quality with yield.
- Lookout for dividend ETFs that do not provide a sustainable dividend payment option.
- Cautiously invest in dividend stocks that are rate-sensitive.
What are some tips for investing in the ETFs?
Some tips to follow when investing in the ETFs are:
- Look for the ETFs that do not focus on yields alone but provide options for positive dividend growth in the long run.
- Go global by investing in the international ETFs to benefit from the same global trends that have been favoring the ETFs in the international markets.
How do I choose the right dividend for my needs?
- Choose high-yield dividend ETFs that offer you the option to view the investment market from a broad angle and provide you exposure to a diverse range of dividend stocks from different sectors.
- Take the time to do research and weed out the ETFs that incur higher costs. Typically, this would mean staying away from the ETFs that require you to pay more than the expenses that you already pay in a year.
- Choose between your goals of seeking long-term growth via dividends and receiving maximum income for current investments. An important point to be noted is that some high-yielding dividends paying higher yields now may pay reduced dividends later on. In contrast, a company the offers lower yields now may very well provide long-term growth, along with increased yields later on.
- Find out deals that help you reduce your commission costs. This would be helpful if you intend to invest in the market on a regular basis (monthly or quarterly). Commissions, no matter how small, can create a dent in your pocket and take away a huge amount of money kept for investments.
What are some of the top dividend stock ETFs I can invest in?
Here are some of the best ETFs in the market that offer high yields and long-term growth options:
- iShares Select Dividend (NASDAQ: DVY)– Current Dividend Yield of 3.5% and an expense ratio of 0.39%
- Vanguard High Dividend Yield (NYSEMKT: VYM)– Current dividend yield of 3.1% and an expense ratio of 0.08%
- Schwab U.S. Dividend Equity (NYSEMKT: SCHD)– Current dividend yield of 3% and an expense ratio of 0.07%
- SPDR S&P Dividend (NYSEMKT: SDY)– Current dividend yield of 2.4% and an expense ratio of 0.35%
- Vanguard Dividend Appreciation (NYSEMKT: VIG)– Current dividend yield of 2% and an expense ratio of 0.08%.
- VanEck Vectors High–Yield Municipal Index (HYD)- Current dividend yield of 4.03% and an expense ratio of 0.35%
- Wisdom Tree Emerging Markets High Dividend Funds (DEM)– Current dividend yield of 3.81% and an expense ratio of 0.63%
- SPDR Bloomberg Barclays High Yield Bond (JNK)– Current dividend yield of 4.95% and an expense ratio of 0.40%.
- SPDR Dow Jones International Real Estate (RWX)– Current dividend yield of 2.95% and an expense ratio of 0.59%
- Power shares KBW High Dividend Yield Financial Portfolio (KBWD)– Current dividend yield of 8.82% and an expense ratio of 2.99%