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The environment seems to favor healthy dividend stocks, and investors are rushing in ($12.6B in...

The environment seems to favor healthy dividend stocks, and investors are rushing in ($12.6B in inflows to dividend-stock ETFs this year) - but they may be a "little overrated." Beware dividend traps, an average yield that still isn't that high, and shares that will miss out on any big rally. (More ideas in Investing for Income)
Comments (16)
  • What has the "environment" ever done for me?


    All it ever does is try to kill me with hurricanes, tornadoes, and earthquakes and the occasional plague of frogs. Screw the environment!
    27 Aug 2011, 11:09 AM Reply Like
  • The environment is a left wing hoax. There is no environment.
    27 Aug 2011, 12:06 PM Reply Like
  • Skip ETFs. Go to Dow Components. You will find the yields for each component on any respectable finance website. For few minutes forget about all those ball games, Do a little research. You can easily pick a good dividend play. Better go to Dow Jones Utilities. You could easily find dividend plays. The utilities are better than Industrials. Lower beta. You don't need ETFs. You don't have to be an MBA. You don't need a high priced broker or adviser. You just have to take some time off all those ball games.
    27 Aug 2011, 12:41 PM Reply Like
  • Agreed.


    Coming to Seeking Alpha to read all these pieces of advice from the experts in the financial industry should convince anyone that the emperor has no clothes, and that the suspicion in many persons' minds that the financial industry is there just to fleece you is more than justified. It is not rocket science. Just go put your money is good big companies, or if you are risk averse, in utilities, and you will definitely do no worse than what these guys suggest.
    27 Aug 2011, 02:01 PM Reply Like
  • Agree, spend a few weeks here and it will be quite easy to come up with a good portfolio of dividend growth stocks.


    Clay King recently finished up a multi-article primer series that is a great starting point.
    27 Aug 2011, 06:19 PM Reply Like
  • On the contrary, many equity and convertible ETF's are offering outsize yields and great capital-appreciation opportunities for two reasons: 1) their holdings have been sold down in the recent swoon and 2) many are selling at sizable discounts to their own NAV's, so it's like getting their portfolios "on sale."


    Contrary to popular belief, sometimes issues with the highest yields can offer excellent price-appreciation opportunities because the high yields are an indicator of underpricing, not excessive risk.
    27 Aug 2011, 01:26 PM Reply Like
  • Tack,


    As usual very insightful but missing one crucial component: your recommendations.


    27 Aug 2011, 02:46 PM Reply Like
  • CW:


    Just for you :-)


    More information available at, but here are some I find worth consideration:


    27 Aug 2011, 03:09 PM Reply Like
  • Tack,


    You are the best ;)


    Thank you.
    27 Aug 2011, 05:50 PM Reply Like
  • Tack, I did a Quick Test on your 12 ETFs, buying all as of the 12/31/2008 close. (Yes that was a very good time to buy them!). Without factoring dividends the lucky buyer would have beaten the US market by better than 12% plus dividends which will take me longer to calculate, but a rough estimated would be more than 10% on investment. Shorter term tests were not so impressive. Conclusion is that like everything timing is very important. Thanks for the tip.
    27 Aug 2011, 06:15 PM Reply Like
  • Hoo:


    In the short term, they're down, like everything else. In fact, many are down more than market because one of the facets of ETF's is that they generally are thinly traded and lack adequate liquidity to handle a surge in selling pressure without a disproportionate movement in price. ETF's become decidedly volatile when the market goes off the edge, so when one smells impending panic, it's usually a good time to jettison or hedge ETF's.


    However, it's that very characteristic which makes them exceedingly attractive in post-panic periods because in many cases their own prices have receded more than the prices of the portfolios they hold, i.e., they're selling at steeper-than-usual discounts to NAV. Buyers at these depressed moments stand to gain, not only the market performance of the underlying portfolios, but the gradual added return of the ETF price, as it moves relatively back towards its NAV.
    27 Aug 2011, 06:24 PM Reply Like
  • I've been following Tack's comments recently and seems a small portion of my 401k has been following a similar strat without even realizing it.


    Seems like high-yielding stocks would fit well into a retirement account because of the tax advantage minimizes the impact of those high payouts. Going to expand this strat because I have seen the moves these beaten down high yielders can pull off over time, plus as been stated, you get high payouts while you wait.


    Nice work Tack


    I think Dan Plettner follows a similar strat with CEF's, though not focused so much on the high-yield aspect:

    27 Aug 2011, 06:44 PM Reply Like
  • AAPL on that date or for that matter AMZN, or PCLN, or ISRG or all of them bought on that date would have done slightly better.
    27 Aug 2011, 07:56 PM Reply Like
  • Why is the investment public still ignorant regarding dividends? Back in the 80s the ability for companies to buyback stock was greatly enhanced. Hence, since the 90s companies repurchase a ton more stock, therefore dividend yields will only be roughly half what they would've been in the past.


    My Net Payout Yield Model buys very few companies without yields surpassing 10%. How is that a low yield? Or even average?
    27 Aug 2011, 04:39 PM Reply Like
  • Brokers and financial advisors don't make any money if their clients just sit and hold a basket of dividend stocks forever. That's why they don't talk about them.
    27 Aug 2011, 07:13 PM Reply Like
  • This isn't just a short term "environment" that favors dividend stocks and ETFs. The retirement of the baby boomers and their desire for portfolio income will favor dividend stocks over non-dividend stocks, and that's a long term phenomenon.
    28 Aug 2011, 03:02 AM Reply Like
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