Which dividend ETF ?

[papadad111]

Which dividend oriented ETF do you prefer and why? If you could only pick one or two which one(s) and why?

Eg. VIG. VYM. DVY. HDV. Or any other that's higher yield, more diversified, or lower expense and management fee ?

 

[dallas27]

Vig- it's good companies with rising divends and vanguards low expenses.

It's 19% of my portfolio.

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[dallas27]

Delete

 

[Senator]

I can trade DVY at Fidelity without any trading fees. That means I can buy one share a week, or 100 a month, no fees. If you are making regular purchases, the commissions add up.

 

[papadad111]

Thanks. Yes most brokerages now offer the highest volume ETFs at no commission. Good for DCA buys ...

 

[Senator]

What I find on most of these "high" dividend yield ETFs is that they barely beat the S&P with dividend yield, (typically less than < 1% difference), and the S&P blows them away on stock appreciation.

I have just doing my monthly purchase of IVV (S&P), which returns 2.26%.

 

[jerome len]

I buy VYM, Vanguard high dividend yield which pays well over 3%, far higher than the S&P and use the dividends each quarter to fund my retirement. I never have to sell, dividends appear to grow each year and looking back over the years, they nicely increase in value. Now, if I needed 4% to fund my retirement I might have to do it differently. But, I'm very satisfied with my plan. I have a couple other ETF dividend funds......but could live with VYM alone if I needed to.

 

[soupcxan]

I also like VYM and hold it.

 

[ziggy29]

What I find on most of these "high" dividend yield ETFs is that they barely beat the S&P with dividend yield, (typically less than < 1% difference), and the S&P blows them away on stock appreciation.

I have just doing my monthly purchase of IVV (S&P), which returns 2.26%.

The spread between "dividend" ETFs and the broad market is smaller than usual, primarily because there is no place to get decent yields anywhere, and yield-starved investors are bidding up dividend stocks to high multiples relative to their earnings growth potential.

 

[Alan]

I buy VYM, Vanguard high dividend yield which pays well over 3%, far higher than the S&P and use the dividends each quarter to fund my retirement. I never have to sell, dividends appear to grow each year and looking back over the years, they nicely increase in value. Now, if I needed 4% to fund my retirement I might have to do it differently. But, I'm very satisfied with my plan. I have a couple other ETF dividend funds......but could live with VYM alone if I needed to.

Good to hear as I have been in VYM for just over a year and have been very pleased with the dividends which I also use as an income stream to supplement my pension.

 

[dallas27]

What I find on most of these "high" dividend yield ETFs is that they barely beat the S&P with dividend yield, (typically less than < 1% difference), and the S&P blows them away on stock appreciation.

I have just doing my monthly purchase of IVV (S&P), which returns 2.26%.

Blows them away, huh? Just based on the basic rules of diversification, these funds are statistically going to track near perfectly with the larger SP500 index from which they are derived.

PerfCharts - StockCharts.com - Free Charts
(maximize time scale)

 

[papadad111]

What I find on most of these "high" dividend yield ETFs is that they barely beat the S&P with dividend yield, (typically less than < 1% difference), and the S&P blows them away on stock appreciation.

I have just doing my monthly purchase of IVV (S&P), which returns 2.26%.

I would like to take a total return look for comparisons.

The difference between 3.2 percent and 2.2 percent yield of the dividend ETF compared to sp500 is about 100 basis points but on a percentage term tosses off 50 percent MORE dividend income. That can be good or bad depending on taxes ... And on how the dividend ETF capital gain performs vs sp500.

Which is better - total return of SP500 including dividends and gain

Or

Total return of "best of breed" dividend ETF.

Then compare tax implications of both based on your specific situation to determine what is best retirement investment.

 

[Senator]

Blows them away, huh? Just based on the basic rules of diversification, these funds are statistically going to track near perfectly with the larger SP500 index from which they are derived.

PerfCharts - StockCharts.com - Free Charts
(maximize time scale)

For the most part, the S&P index does better than any dividend stock. Even on this comparison, the S&P beats VIG in the long and short run. It is closer the longer you go out.

IVV gives a 2.26% dividend vs. VIG returns 2.44%. Not much difference (.18%) in terms of a dividend, so the ETF tracks the index closer.

They all correlate close. It just depends in whether or not you want to spend or re-invest dividends. I reinvest dividends at this point in my life, if I actually needed more money, I could sell the few shares to make up the yield difference.

My portfolio is as simple as I can get it. I like that.

As long as you are comfortable with the ETF, and do not pay commissions on the purchase or sell, it's not much difference.

 

[dallas27]

For the most part, the S&P index does better than any dividend stock. Even on this comparison, the S&P beats VIG in the long and short run. It is closer the longer you go out.

Ya, I don't see it. In the last nine years in the graph I attached, VIG was usually outperforming. I don't claim VIG is better, only that the difference in statistically insignificant over a decade. Beta may differ slightly due to dividends. This tracks with diversification mathematics as they ultimately come from the same basket.

 

[Senator]

Ya, I don't see it.

The red line is IVV, the purple line is VIG. If you click the two flags that say "Show histogram chart", it's easier to see. Then just slide the scale to see how the boxes rise/fall during that time period.

http://stockcharts.com/freecharts/perf.php?IVV,VIG,DVY,VYM,HDV&n=1146&O=111000

 

[eta2020]

The red line is IVV, the purple line is VIG. If you click the two flags that say "Show histogram chart", it's easier to see. Then just slide the scale to see how the boxes rise/fall during that time period.

PerfCharts - StockCharts.com - Free Charts

Since inception of VIG they did performed about the same. In fact VIG was outperforming IVV till about March 2015.

BTW I would choose VIG and SCHD. Why? High quality companies do well over a long run.

 

[dallas27]

The red line is IVV, the purple line is VIG. If you click the two flags that say "Show histogram chart", it's easier to see. Then just slide the scale to see how the boxes rise/fall during that time period.

http://stockcharts.com/freecharts/perf.php?IVV,VIG,DVY,VYM,HDV&n=1146&O=111000

That link is using less than half the time frame i was. Come on, not even slightly relevant. You know better.


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[purplesky]

Which dividend oriented ETF do you prefer and why? If you could only pick one or two which one(s) and why?

Eg. VIG. VYM. DVY. HDV. Or any other that's higher yield, more diversified, or lower expense and management fee ?

I own all these ETFs in my Roth's at Fidelity and Vanguard.

Buying them commission free when the market dips is a good thing.

 

[OrcasIslandBound]

VYM, BLV, and BND are all in my portfolio as main pillars of support. While I do believe that they are a smidgen better than some of their lower paying peers, another reason to focus on dividend payers is to be able to tell the DW that we'll be able to only consume dividends and always leave the principal without touching it.

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[papadad111]

another reason to focus on dividend payers is to be able to tell the DW that we'll be able to only consume dividends and always leave the principal without touching it.

OP here.

Had Anyone done an analytic study on the *total return* of these ?

Eg. : Annual Yield less ETF management expenses plus appreciation --- Then compared the same parameters to SPY or VTI or other broad market indices over,say, the last 20 years ? What will the data reveal ?

I suspect the dividend ETF's are not beating the broad market in total return and are only "tricking us" into thinking the higher yield is better while the total return is actually equal or lower .

A comment on "not touching principle " is exactly why I bring up and ask this question.

 

[eta2020]

OP here.

Had Anyone done an analytic study on the *total return* of these ?

Eg. : Annual Yield less ETF management expenses plus appreciation --- Then compared the same parameters to SPY or VTI or other broad market indices over,say, the last 20 years ? What will the data reveal ?

I suspect the dividend ETF's are not beating the broad market in total return and are only "tricking us" into thinking the higher yield is better while the total return is actually equal or lower .

A comment on "not touching principle " is exactly why I bring up and ask this question.

They underperformed over last 5 years. (This bull market)

They outperform over long periods of time (10-20 years, I mean dividend growers not high yield payers).

 

[OrcasIslandBound]

http://etfdb.com/dividend-etf/what-you-need-to-know-about-the-10-most-popular-dividend-etfs/

Good summary of top dividend yield etfs


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[ETFs_Rule]

XLP - 2.6% less volatile during stock bear markets.
IDU - 3.72% Pays more but will be more sensitive to interest rates.

 

[papadad111]

Thanks all. Aside my core holdings of VTI,VXUS, SPY, I am going to build a long term position in VYM to replace DIA.

I'm a total return investor, generally, but think dividends may outperform total market appreciation. Also hard to argue that the tax treatment will get any better than what we have right now on dividends.