Exchange Traded Funds (ETFs)

This Fund Provides Consistent Income

The exchange-traded fund iShares Select Dividend ETF (DVY) focuses on holding equities with a history of consistent income instead of equities with potential future dividend increases.

All DVY’s holdings have at least a 5-year record of paying dividends. DVY invests its $17.5 billion in total assets in roughly 100 stocks based on dividend yield from a broad market-cap universe.

Unlike many other funds that weigh their holdings according to market cap, DVY weighs its holdings by dividend per share. This results in a skew toward smaller firms that pay consistent dividends.

With its high asset base and great liquidity of $46.15 million in daily trading volume, DVY is one of the most accessible funds on the market for reliable dividend income. Around 30% of the fund’s portfolio is in utilities, which is one of the sectors with the highest yields, although utilities also tend to be rate sensitive and relatively slow-growing.

Year to date, DVY has returned 7.64%, versus the S&P 500’s 11.91%. While the fund’s gain may not seem impressive, it is worth noting that by holding only dividend payers with a consistent track record, DVY sacrifices some of its gains in a bull market but lowers its risk in a bear market. DVY’s strategy has garnered it a 14.2% return during the last five years while the S&P 500 returned 13.6%.

DVY has an expense ratio of 0.39%. The distribution yield is 3.17%. This is a fund that is suitable for passive long-term investors who want to reduce the risk of their portfolio.

The fund’s top five holdings are Lockheed Martin (LMT), 4.16%; CME Group (CME), 3.16%; McDonald’s (MCD), 2.32%; Chevron (CVX), 2.29%; and NextEra Energy (NEE), 2.27%.

For those seeking consistent dividend income for the long term, I encourage you to look at iShares Select Dividend ETF (DVY).

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.