Passive Income ETF Ideas for 2011

by: Intelligent Speculator

It’s nothing new to say how much we are fans of passive income and the lifestyle that comes with it. There are many different ways to do so but one of them remains having a portfolio that pays steady and growing dividends. There are many different ways to get it done but one of them that we have discussed is buying a diversified ETF portfolio. It is not the best solution for everyone but if you want to have a very diversified passive income portfolio and do not have the time to research individual stocks, ETFs can be a great way to do get it done.

I would personally think of two main category of ETFs that could attract interest for such a portfolio; fixed income ETFs and dividend ETFs. The dividend ETFs are an obvious one and there is increasing choice to choose from.

These ETFs usually have fairly strict criteria and they make it possible to purchase a large number of ETF stocks without paying high fees. As many of you know, dividend growth is as important as any other criteria when selecting dividend stocks. For that reason, my number one pick would be VIG, a Vanguard ETF that invests in companies that are shown to increase their dividends.

It is not a big surprise to see some of their most important holdings which have been discussed in the past:

  1. McDonald’s (NYSE:MCD)
  2. Coca-Cola (NYSE:KO)
  3. Exxon Mobile (NYSE:XOM)
  5. Pepsi-Cola (NYSE:PEP) (part of my 2011 stock picks)

Here are the top 10 Dividend ETFs by market cap:

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
DVY iShares Dow Jones Select Dividend Index Fund $6,015,609,000.00 $49.86 18.12 0.4 3.42
SDY SPDR S&P Dividend ETF $5,021,458,000.00 $51.98 16.74 0.35 3.35
VIG Vanguard Dividend Appreciation ETF $4,582,451,000.00 $52.63 14.89 0.38 1.99
VYM Vanguard High Dividend Yield ETF $1,046,431,000.00 $42.22 14.22 0.25 2.58
DGS WisdomTree Emerging Markets SmallCap Dividend Fund $942,850,000.00 $54.50 29.29 0.63 2.37
DLN WisdomTree LargeCap Dividend Fund $555,505,000.00 $46.10 14.87 0.28 2.69
DLS WisdomTree International SmallCap Dividend Fund $471,107,000.00 $51.77 18.48 0.58 2.85
PID PowerShares International Dividend Achievers Portfolio $468,930,000.00 $15.40 13.32 0.57 2.75
DWX SPDR S&P International Dividend ETF $352,874,300.00 $56.00 6.79 0.46 4.21
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The other category is fixed income ETFs. They represent one of the greatest benefits of ETFs. Just a few years ago, buying bonds was a very expensive proposition for investors because of the fact that they are so illiquid. Thanks to ETFs, investors have been able to easily get exposure to the bond market. However, I am not very optimistic about the prospects of bonds, especially corporate bonds right now. Because of that, my personal bet would be a broader choice, BND, which represents the total bond market.

Ticker Name Market Cap Price Return YTD Fees Dividend Yield
TIP iShares Barclays TIPS Bond Fund $19,407,360,000.00 $107.52 5.41 0.2 2.5
LQD iShares iBoxx Investment Grade Corporate Bond Fund $13,121,240,000.00 $108.44 9.05 0.15 4.87
AGG iShares Barclays Aggregate Bond Fund $11,241,220,000.00 $105.75 5.94 0.2 3.49
BND Vanguard Total Bond Market ETF $9,054,456,000.00 $80.27 5.84 0.11 3.48
HYG iShares iBoxx $ High Yield Corporate Bond Fund $7,376,693,000.00 $90.29 11.69 0.5 8.25
CSJ iShares Barclays 1-3 Year Credit Bond Fund $7,226,604,000.00 $104.28 2.64 0.2 2.48
JNK SPDR Barclays Capital High Yield Bond ETF $6,338,662,000.00 $39.71 14.00 0.4 9.35
PFF iShares S&P US Preferred Stock Index Fund $6,120,700,000.00 $38.80 13.37 0.48 7.33
BSV Vanguard Short-Term Bond ETF $5,640,246,000.00 $80.46 3.70 0.12 2.23
TBT ProShares UltraShort 20+ Year Treasury $5,347,650,000.00 $37.04 (24.14) 0.95


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Disclosure: No positions on these ETFs