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Use This Dividend ETF To Provide Reliable Income No Matter Market Conditions

By Investing.com (Tezcan Gecgil/Investing.com )ETFsApr 19, 2022 16:45
au.investing.com/analysis/use-this-dividend-etf-to-provide-reliable-income-no-matter-market-conditions-200505497
Use This Dividend ETF To Provide Reliable Income No Matter Market Conditions
By Investing.com (Tezcan Gecgil/Investing.com )   |  Apr 19, 2022 16:45
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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 research 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 said in the 1920s:

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

Examples of Dividend Stocks

InvestingPro provides a variety of lists of dividend-paying stocks that have increased their payouts in recent years (examples here and here). 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).

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.

iShares Select Dividend ETF

  • 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.

DVY Weekly Chart
DVY Weekly Chart

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.

Use This Dividend ETF To Provide Reliable Income No Matter Market Conditions
 

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Use This Dividend ETF To Provide Reliable Income No Matter Market Conditions

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