Dividend investing is important in order to help you make the income you need from your portfolio. But there are different dividend strategies that people in different situations should consider.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at these two dividend strategies. With one strategy, which the Vanguard High Dividend Yield ETF (NYSEMKT:VYM) and similar dividend ETFs use, the key consideration is picking stocks that have the highest dividend yield from the universe of stocks you're interested in owning. That strategy has the benefit of maximizing your income right now and is therefore useful for those who are living off their portfolio income currently. Yet the alternative involves investing for dividend growth, with Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) and other ETFs focusing not on current yield but on consistent track records of annual increases in dividend payments. This second strategy has the benefit of helping your income grow over time, making it suitable for those who don't need to maximize current income but want to provide for ongoing boosts in their dividend income in the future.
Dan Caplinger owns shares of Vanguard Dividend Appreciation ETF. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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