My previous article - Dividend Investing With ETFs - Finding The Right Balance - discussed the advantages and disadvantages of using ETFs for dividend investing strategies.
In addition, I promised to reveal some stocks with amazing dividend yields.
Some of the work has been done for us by a very insightful fellow named “The Sun”. I’m not kidding: that’s his full name, or at least his pen name. When I read his recent article in I was blown away, and my regard for dividend ETFs reached new heights.
Briefly, here is what “The Sun” did. He chose 12 dividend-paying ETFs, including the now familiar iShares Dow Jones Select Dividend Index ETF (Ticker: DVY) and the PowerShares High Yield Dividend Achievers ETF (Ticker: PEY), and listed the top 10 holdings of each. The 12 ETFs are given below:
DOMESTIC DIVIDEND ETFs:
|
ETF Name
|
Ticker
|
Yield %
|
YTD Return %
|
|
iShares Dow Jones Select
Dividend Index
|
DVY
|
4.29
|
- 6.01
|
|
PowerShares High Yield
Dividend Achievers
|
PEY
|
5.48
|
- 6.66
|
|
PowerShares Dividend
Achievers
|
PFM
|
2.12
|
- 2.79
|
|
First Trust Value Line
Dividend Index
|
FVD
|
3.13
|
- 2.15
|
|
WisdomTree Large Cap
Dividend
|
DLN
|
3.35
|
- 4.88
|
|
WisdomTree Mid Cap
Dividend
|
DON
|
3.70
|
- 2.79
|
|
WisdomTree Small Cap
Dividend
|
DES
|
4.04
|
- 0.77
|
|
WisdomTree Dividend Top
100
|
DTN
|
4.08
|
- 4.56
|
|
WisdomTree Total Dividend
|
DTD
|
3.25
|
- 4.73
|
|
SPDR S&P Dividend
|
SDY
|
4.00
|
- 2.37
|
|
Vanguard High Dividend
Yield Index
|
VIG
|
1.72
|
- 2.44
|
|
Vanguard High Dividend
Yield Index
|
VYM
|
3.10
|
- 4.40%
| Data as of
03-31-2008
The Sun broke down the top ten holdings for all 12 ETFs. Ultimately what you see is 120 stocks from the 12 ETFs – the best that the 12 ETFs can offer. Now you know a lot. You know the major composition of each ETF; you know the sectors represented and their individual rating and you know the frequency of appearance of the most common ETFs.
The 10 most used dividend stocks:
|
Stock
|
Ticker
|
|
Altria Group
|
MO
|
|
Bank Of
America
|
BAC
|
|
Pfizer
|
PFE
|
|
Verizon
|
VZ
|
|
Citigroup
|
C
|
|
AT&T
|
T
|
|
Chevron
|
CVX
|
|
General Electric
|
GE
|
|
JP Morgan Chase
|
JPM
|
|
Exxon Mobil
|
XOM
|
Vanguard High Dividend Yield Index ETF (Ticker: VYM) and PowerShares Dividend Achievers (Ticker: PFM) have 8 stocks in common and they both look like Wisdom Tree Total Dividend ETF (Ticker: DTD). You can use this information to avoid a lot of overlap in your portfolio.
More exciting is that you can use these “deconstructed” stock elements to build portfolios that have unique characteristics. Simply pick and choose from the large basket of 120 stocks and you get the following.
1. Ten highest dividend yields.
2. Ten highest dividend paying stocks.
Here, for example, are the 10 highest yield stocks regardless of the ETF.
Keep in mind, that what looks too good to be true ... just might be too good to be true. Many financial stocks got hit hard, thus their yield as percentage of the stock price has increased dramatically and at time unrealistically to be sustained.
|
Stock
|
Ticker
|
Yield %
|
|
MCG Capital
|
MCGC
|
21.51
|
|
Thornburg Mortgage
|
TMA
|
76.90
|
|
Vector Group
|
VGR
|
9.23
|
|
Allied Capital
|
ALD
|
13.11
|
|
American Capital Strategy
|
ACAS
|
11.10
|
|
Lexington Corp. Prop. Trust
|
LXP
|
9.79
|
|
American Fin. Realty Trust
|
AFR
|
6.79
|
|
Istar Financial
|
SFI
|
24.58
|
|
Southern Copper
|
PCU
|
5.54
|
|
Corus Bankshars
|
CORS
|
10.01
| Data as of
03-31-2008
Of course you can also sort out groups of stocks that are only Dividend Achievers, or low yield stocks, all financial or no financial stocks, inexpensive stocks, those with reinvestment programs, and those companies whose stocks have reduced or missed dividend payments.
We see that ETFs can provide the repository of groups of successful dividend stocks. They also give us the needed diversity to lower risk and provide entry into many associated stocks. The best dividend ETFs are those that umbrella long- term dividend stocks which represent companies that produce needed products. And, we favor those that have stocks which show international involvement. Exchange Traded Funds are safer than individual stocks, but they expose their immaturity during wild swings in the market.
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