Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you're looking for some strong dividend payers to add to your portfolio, the Vanguard Dividend Appreciation ETF
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.13%. (Vanguard is known for low fees.)
This ETF has performed reasonably well, beating the world market over the past five years, though lagging it so far this year. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 14%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Plenty of big dividend payers had strong performances over the past year. Emerson Electric
Gas and surface coating specialist Praxair, yielding around 2.1%, has a lot of debt and recently issued $500 million more, admittedly at a low coupon rate of 2.2%. On the plus side, its revenue and earnings have been growing at a double-digit clip over the past year or so. In a recent conference call, management mentioned that currency exchange rates were hurting results. Management is also waiting for the European and Brazilian markets to turn around.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Caterpillar
Caterpillar, meanwhile, seems quite strong, with revenue and earnings averaging 19% and 59% growth rates, respectively, over the past three years. With a yield near 2.4%, it has been a volatile stock lately, but its prospects are solid -- as the global economy improves, there will be more infrastructure and construction work requiring its machines. Already, its last quarter featured revenue up 21%.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If Caterpillar intrigues you, check out our new premium research report on it, which details the opportunities and risks facing the company.