Suggestions on Dividend Paying ETFs?

[camberiu]

Right now I am shopping for a Dividend paying ETF to add to my Roth IRA. After some research I've becamo overwhelmed with the amount of options, so I would like to ask here if anyone has suggestions based on their past experience. Thanks in advance.

 

[Nords]

Right now I am shopping for a Dividend paying ETF to add to my Roth IRA. After some research I've becamo overwhelmed with the amount of options, so I would like to ask here if anyone has suggestions based on their past experience. Thanks in advance.

You're probably surrounded by a pack of people throwing hot money at an overvalued asset class, but we've been happy with the iShares DOW Select Dividend ETF (DVY) and the Powershares International Dividend Achievers ETF (PID).

One thing to look at is how much of the dividend comes from REITs and financials. Both are considered to be overvalued, particularly REITs, and due for a correction. Some ETFs exclude REITs or other sectors altogether, others "chase yield".

Of course a reversion to the mean would tend to raise your dividend rate, but some investors have a tough time looking at a 20% unrealized loss and thinking "Yeah, but those great dividends keep goin' up!"

 

[ForeignExchange]

Right now I am shopping for a Dividend paying ETF to add to my Roth IRA. After some research I've becamo overwhelmed with the amount of options, so I would like to ask here if anyone has suggestions based on their past experience. Thanks in advance.

I can't tell you what to buy, but only what I own. Originally I bought DVY and PEY, when they first came out. After SDY was released I thought the allocation looked better than PEY, and also it had a cheaper MER. I sold PEY, and replaced it with SDY. For international I own DTH and PID. I'll be taking a look at the new WisdomTree emerging markets ETF's when they're released as well.

All the above in Canadian (RRSP) tax shelters.

Also, I was buying individual dividend equities long before any of these ETF's came out, so it's nothing new for me. Most of these stocks were outside the tax shelters. My wife asked me to sell them in 1999, so that we could buy our first house. I wasn't keen on the idea, since house prices in our area had been stagnant for ten years, but I gave in. The value of the house has increased every year since. Paid off the small mortgage in two years. Totally debt free ever since.

 

[LOL!]

Do not overlook the relatively mundane SPY, MDY, etc. They pay dividends, but are reasonably tax efficient, so I would not use them in a Roth.

To my knowledge, there is no asset class called "dividend payers", so I would be looking to put tax-inefficient asset classes in my Roth. These might be REITs, fixed income, small cap and international. So any REIT etf might be good ... there are several to choose from.

Anyways, may I suggest to find the asset class to narrow the ETF choices, then look at the dividend yields?

 

[soupcxan]

LOL - couldn't you approximate a "dividend payers" asset class by looking at large-cap value funds?

Camberiu - I like dividend focused funds (I own VEIPX because it is not as over-weighted in financials like DVY and PEY, but still has a sizeable portion) but why hold them in your Roth? Given the favorable tax status of qualified dividends, just keep them in a taxable account...save the Roth for REITs, small cap, and taxable bonds.

 

[LOL!]

LOL - couldn't you approximate a "dividend payers" asset class by looking at large-cap value funds?

No, I don't think so. Just looking at etfconnect.com there are large cap, mid cap, & small cap dividend etfs for the domestic, international, europe and japan geographic regions. Admittedly, a fund that has a dividend yield of 0.5% probably should not have "dividend" in its name.