Intel and Walgreens Boots Alliance is a company that operates a chain of drugstores and pharmacies. Some of the prominent dividend stocks have reduced or halted their dividend payouts this year. Investors should be cautious not to assume that dividends are always secure, as they may unexpectedly face a negative surprise in the future.
Regrettably, it is impossible to predict with certainty when a company will cut or suspend its dividends. Nevertheless, dividend investors can safeguard their investments by opting for investment funds that are traded on stock exchanges ETFs can offer increased protection by diversifying your investment across multiple assets, reducing the risk associated with relying on a single investment.
Three exchange-traded funds (ETFs) that offer reliable diversification and the potential for generating consistent income over an extended period of time are ProShares S&P 500 Dividend Aristocrats ETF is an exchange-traded fund that focuses on companies within the S&P 500 index that have a history of consistently increasing their dividend payments over time. ( NOBL 0.89% ) , The iShares Select Dividend ETF is a type of investment fund. ( DVY 0.73% ) , and Shares of the Vanguard Dividend Appreciation Index Fund ETF ( VIG 1.32% ) .
The ProShares S&P 500 Dividend Aristocrats® ETF is a type of investment fund.
The ProShares fund generates a return of approximately 2.1%, slightly surpassing the expected yield from other options. S&P 500 The fund’s attraction lies in its emphasis on dividend growth stocks, which are companies that have consistently increased their dividend payments for a minimum of 25 years. Despite having an average yield of 1.3%, this feature makes it stand out.
Focusing on this particular market segment is highly beneficial. In order for a company to consistently raise its dividend payouts, it must possess solid financial fundamentals and some promising growth opportunities. However, this approach is not completely foolproof, as evidenced by Walgreens, which was also a dividend growth stock. The key factor here is the fund’s diversification, as no single stock holds more than 2% of the fund’s total value. This means that in the event of a sudden dividend reduction or halt, it will not heavily impact your investment.
The ETF holds investments in 66 companies, including well-known names such as McDonald’s , Colgate-Palmolive is a multinational consumer goods company. , and Johnson & Johnson is the name of a company. The fund is well diversified across various sectors, with the majority of the allocation focused on consumer staples (24%) and industrials (23%).
The ProShares S&P 500 Dividend Aristocrats ETF has a relatively moderate expense ratio of 0.35%, which is considered reasonable. While there are cheaper options available, this ETF offers quarterly rebalancing and emphasizes top dividend-paying stocks, making it potentially worthwhile to pay a slightly higher cost for exposure to high-quality assets. stocks that pay dividends on the market.
iShares Select Dividend Exchange-Traded Fund
The iShares Select Dividend ETF offers investors a higher yield of 3.5% by focusing on high-yielding stocks rather than those with dividend growth. It selects U.S. stocks that have a history of paying dividends for at least five years, with less strict criteria compared to dividend growth stocks.
The fund consists of approximately 100 investments, with a significant focus on utility and financial stocks, accounting for around 55% of the total holdings. Additionally, consumer staples contribute 11% to the fund.
The top three stocks in the fund are Altria , AT&T , and Philip Morris Having a few of the leading stocks in the tobacco sector might seem unsettling, given the uncertain future growth potential. Yet, these three stocks combined make up just over 7% of the fund’s overall weight.
Even though this fund carries a slightly higher level of risk due to its concentration on stocks with higher yields, its wide range of investments can still make it an attractive choice for dividend investors looking for substantial returns. The iShares fund has a 0.38% expense ratio, similar to that of the ProShares ETF.
Shares of the Vanguard Dividend Appreciation Index Fund ETF
Completing this lineup is the Vanguard Dividend Appreciation Index Fund. Although it offers the lowest yield of 1.8% among the options listed, it also boasts the smallest expense ratio at 0.06%.
What sets this fund apart is its extensive portfolio of over 300 holdings, making it the largest and most varied fund available. The fund primarily invests in stocks that regularly raise their dividend payments. It closely follows the performance of these stocks. Index of companies in the US that have consistently increased their dividends , involving stocks that have raised their dividend payouts for a minimum of 10 consecutive years.
The ETF is diversified, but it slightly leans more towards tech stocks The fund’s largest holdings consist of technology stocks, making up 25% of the total portfolio, followed by financial stocks at 20%, and healthcare stocks accounting for approximately 16% of the fund’s total value. Apple , Microsoft and Broadcom Make up slightly less than 13% of the fund’s assets.
Investors who prioritize well-known companies over higher returns might find the Vanguard fund appealing, as it specializes in large-cap stocks and could be the top choice for those aiming to minimize their overall risk.
