Long-term investors should focus most of their efforts on finding good companies to buy and hold for the long term. However, it makes sense to have at least a portion of your money dedicated to more opportunistic investments.
Invesco High Yield Equity Dividend Achievers ETF (PEY 0.44%) lets you do that without having to put in much work. Here's why you might want to buy this portfolio of often overlooked dividend stocks.
What is the Invesco High Yield Equity Dividend Achievers ETF?
This Invesco investment vehicle is an index-tracking exchange-traded fund (ETF) that tracks the Nasdaq US Dividend Achievers 50 Index, which is comprised of stocks from the Nasdaq US Broad Dividend Achievers Index. Luckily this isn't all that complicated.
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The Nasdaq US Broad Dividend Achievers Index selects all of the dividend-paying stocks that have at least 10 years' worth of annual dividend increases. Real estate investment trusts and limited partnerships are excluded because of their unique corporate structures. The Nasdaq US Dividend Achievers 50 Index simply selects the 50 stocks from that universe with the highest dividend yields.
That, however, isn't the end of the story. The Nasdaq US Dividend Achievers 50 Index weights its holdings by yield, not market cap, which is more common. This means the highest-yielding stocks have the greatest impact on performance, not the largest companies. It also means that the index will generally be tilted toward stocks that are out of favor on Wall Street.
While that can increase risk, the index rebalances on a quarterly basis, which helps to reduce risk to some degree. The portfolio is completely revamped annually, as well, ensuring that the methodology of buying high-yield and out-of-favor stocks is always on target.
What do investors get from all of this?
The Invesco High Yield Equity Dividend Achievers ETF tends to own a large group of utility and financial stocks. That makes total sense since these sectors tend to have higher yields than the broader market. These sectors are kind of boring, and many investors overlook them, so this focus can be a good thing for your overall portfolio as it may help increase your diversification.
However, the rest of Invesco High Yield Equity Dividend Achievers ETF is a bit more eclectic. It tends to include companies that are struggling for some reason or are in turnaround situations.
These are the types of companies that many investors will actively avoid, even though there can be good investment opportunities if you have the time, temperament, and energy to buy them. This ETF lets you get some exposure to these investment approaches without having to do all of the work.
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In other words, Invesco High Yield Equity Dividend Achievers ETF can offer a unique complement to an otherwise diversified portfolio, adding investments that you may be overlooking. This isn't a bet-the-house kind of ETF -- it should be used in moderation. But it can help to round out your portfolio and add a hefty new income stream, given its lofty 4.6% dividend yield backed by a monthly dividen.
If you take the time to get to know this ETF, there's a good chance you'll find it an attractive option for rounding out your investment portfolio.
