A Guide to Investing in Dividend ETFs
Last updated
Last updated
When it comes to building a stable and resilient investment portfolio, dividend ETFs emerge as a compelling choice for many investors. These ETFs strategically target companies with a proven track record of consistent dividend payments and sustainable growth. By investing in dividend-paying stocks, investors gain access to a source of steady income, offering more stability compared to growth-oriented investments.
* TTM : Trailing Twelve Months
One of the key metrics to assess the attractiveness of dividend ETFs is the dividend yield, which represents the annual dividend income relative to the share price. Unlike growth stocks, where returns are predominantly driven by capital appreciation, dividend ETFs generate returns through a combination of dividend income and potential capital appreciation. This unique characteristic makes dividend ETFs an attractive option for investors seeking both income and long-term growth potential.
An interesting phenomenon observed in dividend ETFs is the inverse relationship between dividend yield and share price. As share prices fluctuate due to market conditions and external factors, dividend yields may vary inversely. This presents a strategic opportunity for investors to capitalize on market fluctuations by investing in dividend ETFs when dividend yields are relatively high compared to historical trends. By doing so, investors not only benefit from higher dividend yields but also position themselves to capture potential capital appreciation when share prices revert to the mean over the long term.
*If you look at the historical dividend yield trend chart provided by , you can see that in most cases the dividend yield is inversely related to the share price.
But there's something else we need to look at first: a dividend ETF's historical dividend payout. The logic above only applies to dividend ETFs that have a history of increasing their dividends by the same amount or more. So there you have it, a good investment methodology. Buying a stable dividend ETF that pays a consistent dividend while its dividend yield is higher than it has been in the past is a great way to get both dividend yield and the time value of money.
Of course, this won't give you a huge return, as dividend stocks are not necessarily market-dominating companies that you can keep investing in and grow at a tremendous rate, but they do have a high degree of earnings stability and a high degree of downside resistance in their share prices, making them a very stable investment alternative. At the very least, we can try to generate a dividend yield + alpha, which is a stable long-term compounded return.
ETF Portfolio offers an alert service based on dividend yield. All you have to do is select a dividend ETF and sign up for a trigger when a certain dividend yield is touched. It's as simple as that. Our system will do the work for you and alert you when that price is touched.
We strongly recommend that you take advantage of this system.
Setting up alerts with ETF Portfolio is quick and straightforward. Follow these steps to get started:
Select a Dividend ETF: Explore the Dividend ETFs screen and identify ETFs with a stable dividend payout history.
Review Historical Dividend Yields: Delve into the Dividend Details page to analyze the historical dividend yield chart and assess the range of dividend yields.
Set Up Alerts: Click the Alert button on the ETF details page and customize your alert settings. Specify the desired dividend yield level at which you wish to be alerted.
Stay Informed: Once alerts are set, ETF Portfolio will notify you when the specified dividend yield conditions are met, enabling you to make informed investment decisions with confidence.
Now you can set up price change alerts for multiple ETFs in a few simple steps. Over the long term, we believe that making principled investments over and over again is the most fundamental way to increase your returns.
