ETF Investors: Don't Chase the Highest Yielding Stocks

Investors seeking equity-income opportunities often look at a fund’s current yield in isolation. But not all dividend strategies are created equal

Monika Dutt 30 September, 2016 | 8:43AM
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It’s no surprise that dividend ETFs have gained popularity during the past few years. In the current landscape of rock-bottom interest rates, coupled with an increasing number of retiring baby boomers, many income-seeking investors have looked to dividend ETFs to compensate for the low yields bonds offer.

Simply buying the highest-yielding stocks bears considerable risk

These strategies remain the most popular segment of the smart beta ETF market. At the end of August 2016 there were 48 dividend-oriented ETFs domiciled in Europe, collectively amounting to £14.5 billion in assets.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
SPDR® S&P US Dividend Aristocrats ETFDis68.02 USD0.31
Vanguard FTSE AllWld HiDivYld ETF $Dis63.37 USD0.20
Xtrackers Euro Stoxx Quality Div ETF 1D GBP1,764.87 GBP0.40Rating

About Author

Monika Dutt  is a Passive Strategies Research Analyst for Morningstar Europe