Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to load some dividend payers into your portfolio, the First Trust Value Line Dividend ETF (FVD +0.10%) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. The ETF recently yielded 2.6%, and it excludes companies that haven't earned one of Value Line's top two safety ratings.
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF's expense ratio -- its annual fee -- is 0.70%
This ETF has performed rather well, topping the S&P 500 over the past three and five years. 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.
Why dividends?
More than a handful of dividend-paying companies had strong performances over the past year. Yielding 3.8% recently, Eli Lilly (LLY 1.06%) gained 40% over the past year. The company received FDA approval a few months ago for its radioactive agent Amyvid, used to help detect Alzheimer's. It is also offering up to $150 million to venture-capital firms, thereby investing in start-ups -- with the right to buy some promising compounds. It got some less good news recently, though, when an Alzheimer's treatment failed a trial, though the stock rose, anyway. And like most big pharma companies, it faces patent expiration challenges.
ConocoPhillips (COP +0.87%) advanced 17% and yields 4.6%. The company has been adjusting its focus, shedding some assets, and looking into promising new arenas, such as fracking opportunities in China. Some worry about the sustainability of its dividend, though its payout ratio is rather reasonable. The company has been buying back a lot of stock -- more than $3 billion worth in the past few months. It carries a lot of debt, but has been gradually paying that down. In recent news, ConocoPhillips is partnering with some other oil giants on a massive pipeline project to transport liquefied natural gas through Alaska en route to Asia.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. France-based oil company Total SA (TOT +0.00%), for example, gained 5%, despite being plagued by troubles in Europe, and also operating in some unstable areas, such as Iraq. It has been expanding its operations, though, exploring in locations such as off the coast of East Africa for natural gas, and investing in liquefied natural gas in Australia. It has invested significantly in renewable energies, as well. Total's CEO made news recently when he expressed concerns about drilling in the Arctic because of potential environmental damage. The stock recently yielded 5%.
Waste Management (WM +0.41%), meanwhile, advanced about 1%. Its business is rather assured, as garbage and recycling appear to be here to stay. Some fret about rising costs and falling prices for recycled commodities, while others worry about the company focusing more on growth-by-acquisition rather than organic growth. For those with faith in the company, though, it offers a dividend yield of 4.4%, and has embraced innovation, too, producing energy from some of its garbage. Not all is rosy, though: net income and cash levels have fallen in recent years, while debt has grown. To cut costs, the company has been reducing its number of offices, and laying off several hundred employees, as well.
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.
