Dividend ETFs

[Brat]

I have been watching Viktoriya Media on YouTube. Recently she posted a couple discussions on dividend ETFs. Given the huge increase in the S&P I want to shift to those investment vehicles. She strongly recommended SCHD, then JEPI, DIVO and JEPQ. JEPI and JEPQ pay dividends monthly, JEPI was up slightly Wednesday.

In her most recent posting she warned of capital loss with some dividend ETFs.

Comments Members....

 

[audreyh1]

I have held SCHD for a long time, but it’s a small position for me. It would have been a good core equity position. I use Total Market Index instead.

 

[braumeister]

I also think SCHD is an excellent core holding, assuming that dividend paying stocks meet your needs.

 

[Kings over Queens]

I just added 2 dividend efts to my watch list for a pending rebalance, and SCHD is on the list, as is SPYD. I don't recall seeing JEPI, DIVO or JEPQ in my research.

 

[Flieger]

I have about 20 different Div etfs to generate monthly income. I use about 45% of my portfolio for those. 30% is growth, the remaining 25% short term.

Flieger

 

[Brat]

The comment was that SCHD screened for strong long paying dividend corporations, those at least risk in a downturn.

 

[tutan]

Unlike SCHD, DIVO, JEPI, JEQI, SPYI, QQQI, in addition to holding stocks and capturing their dividends, also use call options to generate income and limit volatility somewhat. DIVO writes call options on certain underlying stocks as opposed to options on the S&P500 index or the NASDAQ-100 index. SPYI and QQQI also use a call spread strategy to generate income and limit risk. JEPI and JEPQ limit 20% of their assets for call options. SPYI, started 8/30/2022, has the shortest history. According to Portfolio Visualizer from Sept, 2022, SCHD has the higher risk (max drawdown + standard deviation) but also the lowest return in the same short period:

Performance Summary​

Portfolio performance statistics

Metric	SPYI	JEPI	DIVO	SCHD
Start Balance	$10,000	$10,000	$10,000	$10,000
End Balance	$13,457	$12,839	$12,997	$12,704
Annualized Return (CAGR)	14.69%	12.22%	12.86%	11.68%
Standard Deviation	11.09%	10.14%	12.68%	15.49%
Best Year	18.13%	12.59%	15.09%	14.32%
Worst Year	-1.94%	3.84%	5.59%	4.57%
Maximum Drawdown	-7.77%	-6.35%	-6.88%	-10.62%

 

[MarieIG]

Here's a discussion by a professor (who has long recommended SCHD) about JEPI and JEPQ. He discusses pros, cons and performance. I actually saw this about two days ago so went to look for it.

I own SCHD in my taxable, and SCHD and JEPI in my Roth and have them set to re-invest the dividends. I have been looking at JEPQ although it's a bit pricey at the moment. I am up on both, but total returns have been more impressive on VTI over the past year.

 

[mrfeh]

Dividend ETFs or Funds in Retirement - Bogleheads.org

Why don’t Bogleheads recommend dividend ETFs? - Bogleheads.org

 

[Flieger]

Dividend ETFs or Funds in Retirement - Bogleheads.org

Why don’t Bogleheads recommend dividend ETFs? - Bogleheads.org

Yes, a lot of what they say is true if your focus is growth. In the accumulation years, definitely stay in growth products. In the "spending" years, taking a part of the stash and looking for income from a Div/Income section of your portfolio can't hurt I don't think. JMHO

Flieger

 

[mrfeh]

Yes, a lot of what they say is true if your focus is growth. In the accumulation years, definitely stay in growth products. In the "spending" years, taking a part of the stash and looking for income from a Div/Income section of your portfolio can't hurt I don't think. JMHO

Flieger

Total return is total return, whether in accumulation or spending years.

 

[Flieger]

Total return is total return, whether in accumulation or spending years.

Yes. While some decide once they have enough to "Leave the market" (see other thread), others may decide to move to an income portfolio of ETF's providing Div returns.

I mentioned earlier that I have about 45-50% of my total portfolio in Div funds generating now more than my required monthly needs. The average beta of those funds is about 0.7, so I consider it a "safer" (not saying safe) portfolio. I backtested the funds through the 2008 and 2020 periods and choose funds that did not drop Div's while performing better than the market drop. Obviously with that beta, it performed worse with market upturns but I'm ok with that to get the income, and that's why I don't have my entire portfolio invested this way. The growth part of portfolio is what I hope will keep up with or beat inflation. Just the way I chose to approach this "problem" and sleep at night. YMMV

I am not trying to have a discussion on total return or Div return. Just stating that income can come from a multitude of sources (Income portfolio of Div's, MYGA's, TIPS Ladders, etc).

Flieger

 

[ERD50]

I have been watching Viktoriya Media on YouTube. Recently she posted a couple discussions on dividend ETFs. Given the huge increase in the S&P I want to shift to those investment vehicles. She strongly recommended SCHD, ....

I don't get the connection? SCHD more/less tracks SPY with some lag. And, it isn't significantly less volatile.

https://testfol.io/?s=hVgP7BVBPYo <<< 2011 ~ 2024

It really doesn't handle dips any better either. Here's two years, 2019~2021, and you'll see that SCHD dips lower than SPY:

https://testfol.io/?s=8LIOIgqdi5C

I just don't see the attraction.

 

[ERD50]

... In the "spending" years, taking a part of the stash and looking for income from a Div/Income section of your portfolio can't hurt I don't think. JMHO

Flieger

Sure it can. SCHD lags SPY. Money is money. Less of it is not good. Historically, an investment in SCHD (a common one for 'dividend investors') lags SPY.

.... I am not trying to have a discussion on total return or Div return. ...

Flieger

And there should be no discussion, because money is fungible. Total return is arithmetic that reflects how much money you have, and that is all that matters. Dividends are just a subset. 2 + 2 = 4; 0 + 4 = 4; and 1+ 3 = 4. If the '4' represents my income, the 4 is all that matters, not the split.

And when you factor in taxes (if applicable), dividend income will be taxed more than LTCG income (same tax rates, but divs are 100% taxed at that rate, only the gains from a sale are taxed, so LTCG provides more money in your pocket for the same initial income).

 

[Flieger]

Yes, I have heard your "money is fungible" argument ad nauseam. People have differing opinions and decisions on how to approach retirement income. Accept it and move on.

Flieger

 

[mrfeh]

Yes, I have heard your "money is fungible" argument ad nauseam. People have differing opinions and decisions on how to approach retirement income. Accept it and move on.

Flieger

The OP may not have heard it, and has asked for opinions.

 

[Flieger]

The OP may not have heard it, and has asked for opinions.

It doesn't take much looking around at posts here to see that statement....

Flieger

 

[RetiredHappy]

For "safer" equity positions, I have VTV (value stock) instead of SCHD. It pays decent dividends and conservative growth. I have about 12% in my taxable account and my spouse has 20% in his IRA.

 

[Exchme]

High dividend products are less diversified, they tend to concentrate in a few sectors, so you are taking a sector risk that you could have diversified away with a total market fund.

Even if you ignored that risk and even if they had the same total return as a broad index, it would still be worse to have a high dividend fund. All of the dividends are taxed vs. selling what you need of an index fund, where part of what you receive in cash is your basis, so not taxed.

Note also that once SS and RMDs start, you may no longer need to spend the dividends. But the high dividend holding is still churning out tax liability every year and if you've held it for a while, you can't even sell it without tax problems because it may have gains.

My recommendation would be to avoid Youtubers that guide you into such things.

 

[Flieger]

Even if you ignored that risk and even if they had the same total return as a broad index, it would still be worse to have a high dividend fund. All of the dividends are taxed vs. selling what you need of an index fund, where part of what you receive in cash is your basis, so not taxed.

All distributions from a tax deferred account are taxed as normal income, thereby negating their part of the argument (assuming working within that type of account).

Also, with all of the ETF's out there (both growth and Div) with a little research one can diversify across many sectors decreasing sector risk.

Flieger

 

[target2019]

Yes, I have heard your "money is fungible" argument ad nauseam. People have differing opinions and decisions on how to approach retirement income. Accept it and move on.

Flieger

Ditto.

 

[surprising]

Also take a look at closed end funds which offer great dividend focused stock or bond funds with higher yield. The higher yields are due to the funds ability to use leverage and also taking advantage of periods when the fund price is at a discount to NAV. My basic living expenses are covered by a basket of CEFs and dividend stocks paying an average 10% yield on cost.

 

[target2019]

I have been watching Viktoriya Media on YouTube. Recently she posted a couple discussions on dividend ETFs. Given the huge increase in the S&P I want to shift to those investment vehicles. She strongly recommended SCHD, then JEPI, DIVO and JEPQ. JEPI and JEPQ pay dividends monthly, JEPI was up slightly Wednesday.

In her most recent posting she warned of capital loss with some dividend ETFs.

Comments Members....

I'm not familiar with the youtuber, but we use SCHD to generate some income from taxable.. We also use it to possible invest the proceeds if/when we sell inherited stocks.

The difference among all of the dividend ETF's is the sector allocation and benchmark. So I consider these as situational investments, not ok with some bodies, but enjoyed by others.

It is true that any ETF you invest in may result in capital losses. But that can largely be avoided by buying during recessions and steep sell-offs.

But you won't generate the highest returns with quaint, old-fashioned SCHD. For maximum growth go with SCHG.

It's very important to understand all consequences when you purchase investments in your different accounts (taxable, tax-delayed, tax-free).

 

[Dash man]

I have SCHD, DGRO, JEPQ, SPYI and JAAA for dividend ETFs along with some individual stocks. We also mix in SPLG, SCHA, SCHB for some growth, along with some individual stocks. SCHD is my largest holding in my portfolio.
A portfolio heavy in dividends pays even when the market is in a prolonged downturn, when you don’t want to sell your shares. I don’t want to be forced to sell shares when I need the cash during a market crash. Sure, long term growth outperforms dividend investing. At 68 my long term is getting shorter. Bonds and cash often won’t beat inflation, while dividends typically do.

 

[Flieger]

Here is my forecasted Div income going forward 12 mos.

Flieger