Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to load up your portfolio with some dividend-paying stocks, the iShares High Dividend Equity ETF (HDV 1.78%) 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 basics
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.40 %. It recently yielded 3.2%.
This ETF is too young to have a sufficient track record to assess. But it's the future that counts more than the past, and 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 28 %, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
Why dividends?
The power of dividend investing is often underappreciated. They can be powerful portfolio supporters, providing income even during market downturns.
Plenty of dividend payers had strong performances over the past year. Tobacco powerhouses Altria (MO 2.81%) and Philip Morris International (PM 3.87%) gained 25% and 31%, respectively, over the past year, and recently yielded 5.4% and 3.9%. They both benefit from customers literally addicted to their wares, but they also face increasingly restrictive legislation and rising taxes in many locations. Those factors are strong in the U.S., where the population of smokers is shrinking as well. Philip Morris International has it easier abroad, as many nations feature far fewer restrictions, but those are growing, too. In its last quarter, Philip Morris reported a 6% drop in income because of shrinking volume despite higher prices.
CenturyLink (CTL 3.67%), recently yielding 7.4%, advanced 19% over the past year. America's third-largest telecom company has been streamlining itself and investing in some big acquisitions. It bought Qwest and SAVVIS last year, with the latter bringing in cloud-computing exposure. Bears worry about the company's heavy debt and not-so-promising landline business, but revenue has been growing briskly, and at an accelerated pace. Management has explained that investments to convert from copper to fiber-based connectivity are expected to pay off in the long run.
Duke Energy (DUK 1.67%) rose 11% and recently yielded 4.7%. Its earnings have been growing at a good clip in recent years, but revenue has been growing rather slowly. The company's investments in renewable energy are promising -- it recently unveiled plans to build a massive solar farm in North Carolina, and it has partnered on wind farms in Kansas. Meanwhile, a Florida nuclear plant needs $3 billion or so in repairs, so the company is deciding whether to do the repairs or close the plant.
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.
Learn about The Only Investments You'll Ever Need. And if you're looking for some great investments beyond ETFs, consider The Least Dangerous Stocks in the Dow.
