The Devil Is in the Details
I've been writing quite a bit about dividend ETFs over the last several months, and for good reason. Interest in dividend-paying stocks seems may have reached an all-time high as investors look toward equities to fulfill a function that was once carried out by bonds: delivering a meaningful current return. Innovation in the ETF industry has coordinated nicely with this movement, as the exchange-traded structure has emerged as a perfect tool for implementing low-cost and low-maintenance strategies that focus on dividends.
There is, no doubt, a lot of interest in dividend ETFs -- about four dozen are offered, with tens of billions in combined assets. There is also a lot of confusion about exactly what these products are designed to accomplish. A lot of investors have unrealistic expectations about ETFs with the word "dividend" in the name: They expect to get a meaty distribution yield that is materially higher than broad-based indices such as the S&P 500. But, in a lot of cases, so-called dividend ETFs are constructed to focus on the most consistent dividend payers -- a group that doesn't necessarily include companies with attractive yields....506 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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