2 Dividend ETFs To Buy For Growth And Income

Includes: DVY, VIG
by: Jordan Flannery


ETFs are very popular to retail and professional investors alike, as they provide diversification within a given subset of the market. This helps investors mitigate the risks of investing in single companies. Many investors choose dividend ETFs because of the income stream that they provide to investors. A Fiscal Cliff deal that adds clarity on dividend taxation for fiscal 2013 should help dividend stocks, provided that rates do not change significantly. The ETFs listed in this article are all dividend ETFs with yields of at least 2.25%, total net assets of at least $5.9 Billion and expense ratios of no more than .4%. These ETFs help investors diversify their portfolios while providing a current income stream and with exposure to equity appreciation. These are high quality ETFs that should provide safe upside potential to investors over the long term.

iShares Dow Jones Select Dividend Index Fund (DVY)

Total Net Assets: $10.6 Billion

30-Day SEC Yield: 3.57%

Expense Ratio: .4%

Top 5 Holdings: (as of 12/20/2012)

Company % of Total Portfolio
Lorillard (NYSE:LO) 3.36
Lockheed Martin (NYSE:LMT) 2.89
PPG Industries (NYSE:PPG) 2.21
Chevron (NYSE:CVX) 2.07
Kimberly-Clark (NYSE:KMB) 2.04

The iShares Dow Jones Select Dividend Index Fund is very popular with investors, as it provides broad exposure to dividend paying companies, with a small expense ratio. The fund is comprised of 101 US dividend paying stocks. It is made up of companies in a few major sectors such as Utilities, Consumer Goods and Industrials. The Utilities sector represents slightly less than one third of the assets of the fund. The ETF is up by more than 10% over the past year. This is a choice fund for many investors, as its stable stream of income is derived from a diverse set of equities across different industries and parts of the economy.

Vanguard Dividend Appreciation ETF (VIG)

Total Net Assets: $12 Billion

30-Day SEC Yield: 2.25%

Expense Ratio: .13%

Top 5 Holdings: (as of 9/30/2012)

Company % of Total Portfolio
Wal-Mart (NYSE:WMT) 4.6
Coca-Cola (NYSE:KO) 4.2
International Business Machines (NYSE:IBM) 4.1
Chevron 4.1
PepsiCo (NYSE:PEP) 4.0

The Vanguard Dividend Appreciation ETF is popular with investors, as it provides a current income stream, combined with a potential growth of dividend payments over time. The Vanguard Group, which oversees this ETF has a reputation for offering funds with consistent, low expense ratios. This fund is no exception, as it offers the ETF to investors for low rate of .13% per annum. This passively managed fund is comprised of 134 equities with a history of increasing dividend payments to shareholders year after year. The ETF is up more than 12% over the past year. Since the fund is made up of a large amount of stocks, investors are less exposed to any fluctuations of a specific security. This diversification can help investors earn more stable returns over time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.