The most talked about Growth x Dividend ETFs on the Internet
When you want to set it and forget it and not micro-manage all your positions.
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Investors,
Today I’ll get into the popular “growth x dividend” cross-over ETF... What are the benefits of allocating a portion of your portfolio to these income-generating investments? With the help of these funds, investors can purchase a multitude of dividend stocks in a single dividend ETF that contains a variety of holdings, rather than over-allocate capital into single positions then watching them frantically as they move up and down. Compared to managing individual dividend equities, these ETFs are simple and convenient investments, so instead of analyzing and researching numerous equities to have in your portfolio, you can simply pick the greatest dividend ETF that meets you needs.
These funds, particularly growth-oriented stocks, are typically less erratic than broad market indices and generate a consistent stream of income for investors. Additionally, and for the sake of any long-term investors sanity, they usually have less beta and volatility than single stock names.
I’ve scoured dividend-specific and other ETF-investing forums to see which tickers were being talked about the most and I’ve compiled a full list of the funds…
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Continuing with the letter… the downside to growth x dividend ETFs is that investors have a lack of control over the selection of securities, just like with other ETFs or mutual funds. Typically, the dividend yield paid out by these funds is based on the average of all the underlying stock holdings and the fund's total average yield will decrease if any holdings in the portfolio cut dividend payments. It also comes with price risk where a drop in stock prices as a result of market conditions could be greater than dividend yields and result in a loss for the fund.
Without further ado, here is the list, ordered by dividend yield, and in descending order. Highlighted in RED are ETFs that have underperformed vs SPY year-to-date.
Dividend stocks and ETFs usually have the stereotype of being a more stable investment compared to singular names… but are they actually more “safe”. Here are a few things I can take in when looking at this list of names:
ETFs where the holdings are large-cap and mega-cap dividend stocks have outperformed the markets, while more volatile small cap dividend stocks and higher yield ones have been a bit more volatile. This is an obvious case throughout the bear market where mega-cap and big-tech have been the last generals to fall.
Following up from the point above, the out-performance of many names on this list also comes with a caveat, and that they will most likely under-perform in a big bull run.
Similar to the market, small-cap and growth have been hammered while mega-caps have been resilient. The opposite may also be true when growth names show more opportunity to the upside than mega-caps do. It’s all about cycles.
Some names on this list offer a very reasonable yield with the protection of owning an ETF and not single-named stocks. It also gives you exposure to the equities market while having the capability to generate income similar to a bond.
At the end of the day, anything to do with ETFs or dividends isn’t meant to be exciting, but allocating a portion of your portfolio to a “Growth x Dividend” fund might eliminate some of your downside risk and give you protection against a bear market. However, all this comes at the opportunity cost of reducing gains in a big bull run, so choose an ETF that may be right for your investing strategy.
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Am I reading the chart right if I say that SCHD is basically breaking even for the year because the dividend has offset the -7% YTD for the year?