Use This Dividend ETF To Provide Reliable Income No Matter Market Conditions
Investing.com | Apr 19, 2022 16:45
For many investors, dividend-paying stocks are an attractive option to generate a safe, passive income stream regardless of market conditions. However, as macroeconomic uncertainties upend global financial markets, such plays become even more compelling.
A dividend represents the distribution of a company’s earnings to its shareholders. A dividend yield is a percentage that indicates the annual value of dividends paid relative to the stock’s current price.
Recent suggests that between 1960 and 2021, the median dividend yield for the S&P 500 Index stood at 2.90%.
Seasoned investors realize that dividends help accumulate wealth over the long term. As American business tycoon and philanthropist John Rockefeller in the 1920s:
h2 Examples of Dividend Stocks /h2“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
InvestingPro provides a variety of lists of dividend-paying stocks that have increased their payouts in recent years (examples ). Many of these names could be appropriate for long-term portfolios.
Among large-capitalization (cap) shares are tech titans Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT); fintech giants Visa (NYSE:V) and Mastercard (NYSE:MA); Bank of America (NYSE:BAC); and biopharma name AbbVie (NYSE:ABBV), which is also a dividend aristocrat.
For those looking for undervalued dividend stocks, the relevant InvestingPro filtering highlights recreational vehicles manufacturer Thor Industries (NYSE:THO); investment bank Evercore (NYSE:EVR); leading computer hardware and imaging name HP (NYSE:HPQ); semiconductor company Skyworks Solutions (NASDAQ:SWKS); Citigroup (NYSE:C); and home and security products company Fortune Brands Home & Security (NYSE:FBHS).
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Wall Street is typically ready to pay a premium for shares of high-growth dividend companies. Several stocks to research further would be the global biopharma heavyweight Pfizer (NYSE:PFE); midstream energy services provider ONEOK (NYSE:OKE); lumber and treated wood products producer UFP Industries (NASDAQ:UFPI); personal transportation solutions name Lithia Motors (NYSE:LAD); chipmaker NVIDIA (NASDAQ:NVDA); and logistics services business Matson (NYSE:MATX).
Finally, investors who take into account analyst price targets might want to look at several dividend stocks that could see a significant upside from current price levels. Examples include the homebuilder DR Horton (NYSE:DHI); Ireland-based generic over-the-counter (OTC) drugs provider Perrigo Company (NYSE:PRGO); Brunswick (NYSE:BC), a prominent name in the recreational vehicle (RV) sector; and a several tech names, such as Qualcomm (NASDAQ:QCOM), NVIDIA, and Switzerland-based Logitech International (NASDAQ:LOGI).
Understandably, picking stocks that best serve individual portfolio objectives requires serious due diligence. Retail investors might also consider investing in an exchange-traded fund (ETF) that provides broader exposure to dividend-paying stocks. Today’s article introduces such a fund.
h2 iShares Select Dividend ETF/h2- Current Price: $129.21
- 52-week range: $111.53-$130.03
- Dividend yield: 2.91%
- Expense ratio: 0.38% per year
The iShares Select Dividend ETF (NASDAQ:DVY) offers access to roughly 100 US companies with a history of paying dividends for at least five years. These stocks are selected based on dividend yields from a broad market cap universe.
The ETF, which started trading in November 2003, tracks the Dow Jones Select Dividend Index returns. The top 10 names account for around a fifth of $22.3 billion in net assets.
In terms of sectoral allocations, we find utilities (27.2%), financials (20.5%), consumer staples (10.3%), materials (8.3%), and energy (8%), among others.
Leading holdings include Altria (NYSE:MO); ONEOK; independent refiner Valero Energy (NYSE:VLO); International Business Machines (NYSE:IBM); and Philip Morris International (NYSE:PM).
DVY has returned 9.6% over the past 12 months and 5.3% since January. It hit a 52-week high on Mar. 30. The fund currently trades at 13 times trailing earnings and 2.05 times book value. We like the diversity of the fund and suggest that income-seekers do further due diligence.
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