Are These Really Better Than Regular Dividend Stocks?
Sometimes things are better…
Take for example my mom’s lasagna… there’s nothing better. But her sweet and sour chicken is best when it comes from Dragon Palace take out!
That’s how I feel about dividend stocks…
Dividend stocks are great. But I’ve found something I think is even better!
What could be better than dividend stocks?
How about Dividend ETFs!
Now some of you had the lightbulb go on instantly… you already understand why dividend ETFs are better than Dividend stocks.
But some of you are wondering “What the heck is an ETF?”
In a nutshell, think of an ETF like a bucket. You put in a bunch of different stocks in the bucket… then when you buy a share of the ETF (the bucket) you get a small slice of everything in the bucket.
Now many people are thinking – isn’t that what a mutual fund does.
Yes – you’re absolutely right… that is what a mutual fund does, with three big exceptions.
First, ETFs are much, much less expensive than mutual funds.
Second, ETFs trade intraday… so you can trade them real time in the markets (you buy and sell them like stocks).
Third, some ETFs trade options. Why is this important? If you want to bump up your yield using covered calls, you can do it easily with ETFs… You don’t have that option with Mutual Funds.
So, now you know why ETFs are different from mutual funds.
Why are ETFs better than regular dividend stocks?
I’ve got one word for you – DIVERSIFICATION.
When you buy a stock, you have a risk around that company. There’s always a small chance a business will go bankrupt. There’s a chance the business will run into problems and the stock will suffer.
Despite your best efforts to pick the very best companies, the markets are always changing.
To protect yourself, you diversify…. You know the saying – Don’t keep all your eggs in one basket!
And that’s something ETFs do really really well.
Depending on the Dividend ETF you choose, you can buy a piece of anywhere from 20 to 200 different companies! That means your risk is spread out, and you won’t lose your shirt if one stock goes bad.
Now I’ve identified a handful of ETFs that pay decent dividends… just look at this list
BIZD – VanEck Vectors BDC Income ETF
Current Yield – 9.2%
# of Stocks – 26
CHIM – Global X China Materials ETF
Current Yield – 5.5%
# of Stocks – 29
DVYA – iShares Asia/Pacific Dividend
Current Yield – 5.2%
# of Stocks – 30
GLDX – Global X Gold Explorers ETF
Current Yield – 5.3%
# of Stocks – 22
Get our free report: “Ultimate Guide To Dividend Investing”
The report includes 13 Dividend Stocks to Buy Today!
Download Your Dividend Guide HERE
Get Your Free Copy Today!
– WisdomTree Middle East Dividend ETF
Current Yield – 3.9%
# of Stocks – 71
PFF – iShares US Preferred Stock
Current Yield – 5.8%
# of Stocks – 279
REM – iShares Mortgage Real Estate Capped
Current Yield – 11.3%
# of Stocks – 38
SDEM – Global X SuperDividend Emerg Mkts ETF
Current Yield – 6.8%
# of Stocks – 50
VYM – Vanguard High Dividend Yield ETF
Current Yield – 3.1%
# of Stocks – 480
YMLP – VanEck Vectors High Income MLP ETF
Current Yield – 25.4%
# of Stocks – 21
Now, if you could only pick one… which would it be?
The VanEck Vectors High Income MLP paying a staggering 25% yield… or the more conservative Vanguard High Dividend Yield ETF with only a 3.1% yield but more than 480 stocks in the ETF?
Let’s cut a few of these right off the bat.
VanEck Vectors High Income MLP ETF
This is the first ETF from the list we’re going to cut. I love the idea of this ETF, it buys the high yielding MLPs and combines them into one basket. But the problem is, oil and related stocks have been crushed.
The yield has skyrocketed as the price plummeted… but now we’re starting to see the cracks in the dividend payout… two years ago the quarterly payout was $0.41 a share… last quarter it was $0.19. The payout is going the wrong direction… don’t touch this ETF till the oil markets stabilize.
One Down Nine to go.
Global X China Materials ETF
The next ETF to go is the China Materials fund sponsored by Global X Funds. Now I like the idea of this fund… you buy a basket of Chinese stocks focused on the materials sector. It’s a great way to play the rebound in China, best of all it pays a nice dividend of 5.5%.
But there’s a problem.
When I was doing my research on the ETF I noticed the size of the fund. The entire fund is $1.2 million total. That’s tiny. That’s a speck. That’s a fund that no one wants and will probably be shut down soon.
You see the cost of running these funds isn’t cheap. And the fund company can only support tiny funds like this for so long. You don’t want your money tied up in a fund that’s getting shut down.
So we have to pass. Two Down, Eight to go!
VanEck Vectors BDC Income ETF
The BDC Income ETF by VanEck is next to go. I love the idea of investing in BDCs (Business Development Corps) but this fund gets all knotted up by the fees.
Remember one advantage of the ETF is low fees. VanEck missed the memo. The fees on this fund are a staggering 9.45%. Anyone who buys this fund is an idiot. If you happen to own this fund, sell it ASAP.
Three Out, Seven to Go…
iShares Mortgage Real Estate Capped (REM)
I love mortgage REITs. The company takes money from investors and leverages it… then uses the leveraged money to buy mortgage backed securities. Sounds complicated… but it’s not.
The great thing, since they use leverage, the yield on their investment is amplified. But the leverage exposes them to risk as interest rates rise.
If managed properly these REITs capture fat gains, and spit out big dividend yields for shareholders. The ETF holds a bunch of REITS which, by law, have payouts of 90%!
But, For REM there’s a problem… The ETF holds some 38 stocks but the top 4 are about 45% of the fund… and one stock is 18%!
Talk about exposure… the point of an ETF is to diversify and be less risky… in this case, you’d be better buying the big stocks outright!
Pass on REM!
Four Down, Six to go.
Up next is…
Unfortunately, I’m out of room with this blog post. If you want to read the rest of my analysis… and find out which ETF I picked as the better than regular Dividend Stocks, Download my free report “The Ultimate Guide to Investing In Dividend Stocks”.
Not only will you get my report on the ETF that pays a Dividend, but I’ll give you some basics around the rules to dividend investing… plus a cool dozen other dividend stocks you should consider for your portfolio.
I’ll rush the report to you right away… just sign up today!