Though equity markets have certainly picked up the pace over the last several years, the near-zero interest rate environment has still proven to be an obstacle for investors. Many have found it challenging to secure meaningful yields from asset classes that were once at the core of income strategies, forcing investors to look to alternative sources for current income. That movement has taken yield-hungry investors in a number of directions, including the ultra-popular dividend strategy [see 101 High Yielding ETFs For Every Dividend Investor].
There are several ways investors can screen for dividend-paying equities, one of which is a consistency-focused strategy. Companies that have consistently made distribution payments, the “dividend achievers”, are embraced for their relatively high yields and stable returns. There are a number of “dividend achiever” ETFs available to investors, though a look under the hood of these funds reveals several factors investors should certainly consider.
In general, funds that value consistency over yield are invested in companies that are considered some of the safest firms in the world and tend to be in more stable industries as well. The obvious trade-off, however, is that these products typically offer lower yields. Though there are a number of funds that solely focus on consistent dividend-payers, there are ETFs that are more “hybrid” products, which invest in companies that have increased dividends every year for a certain number of consecutive years. The result has generated a nice balance between consistency and yield, as well as attractive returns over the years [see Monthly Dividend ETFdb Portfolio].
The chart below highlights six “dividend achiever” ETFs, revealing the differences between dividend yield, performance and portfolio sizes:
- Morningstar Dividend Leaders Index Fund (FDL, B)
- High Yield Dividend Achievers (PEY, B)
- Dividend Achievers (PFM, B)
- International Dividend Achievers (PID, B+)
- SPDR S&P Dividend ETF (SDY, B+)
- Dividend Appreciation ETF (VIG, A)
Though all six of the “dividend achiever” ETFs have performed well in recent years, First Trust’s FDL comes out on top in terms of performance metrics, and also holds the second-highest dividend yield. PEY, which is comprised of roughly 50 securities, has the highest dividend yield of the bunch, coming in at an attractive 3.62%. As such, those looking to dive into the dividend achievers space should certainly take a look at all of the options to find an appropriate balance between performance and yield.
Disclosure: No positions at time of writing.