Investors Eye ETFs for Dividend Income

Passive investors seeking a regular income stream should be aware that some ETFs do not ensure the constituent companies pay sustainable dividends

Karen Kwok 23 March, 2017 | 2:55PM

It does not matter if you favour active or passive fund strategies – for Morningstar readers, income remains the top priority when choosing components for your portfolio. But analysts are warning investors to look for sustainable yields when picking out funds.

Data from Morningstar found that Vanguard FTSE All-World High Dividend Yield ETF (VHYL) and iShares UK Dividend ETF (IUKD) were among the top 10 most popular ETFs among Morningstar.co.uk readers in February. However, Morningstar analysts warned that these funds do not provide sustainable income over the long term. Vanguard FTSE All-World High Dividend Yield ETF came fourth on the top hits list in February while iShares UK Dividend ETF came ninth.

Unsustainable Dividends

Both Vanguard FTSE All-World High Dividend Yield ETF and iShares UK Dividend ETF are not suitable for investors seeking regular income, Morningstar passive analysts warned, awarding the iShares UK Dividend ETF a Negative rating while the Vanguard FTSE All-World High Dividend Yield ETF has a Neutral Rating.

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About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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