Tags: Morningstar | ETFs | dividend | stocks

Morningstar: ETFs ‘Excellent’ for Investing in Dividend Stocks

By    |   Monday, 09 July 2012 09:10 AM

Looking to invest in dividend stocks? If so, you might consider doing it through exchange-traded funds (ETFs).

“Whether you prefer stocks with high payouts or stocks with growth potential, the fund structure is an excellent way to invest in dividend-paying stocks because of its potential for low-cost diversification,” Morningstar analyst Michael Rawson writes on Morningstar.com.

Many investors are turning to dividend stocks as a source of income now that interest rates are near record lows. Many blue chip stocks are available with yields over 3 percent.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Dividend stocks also offer the opportunity for capital gains, of course.

“There are funds available that focus on higher-payout stocks as well as funds that focus on dividend growth,” Rawson says.

A heated argument has arisen among investors over whether to seek stocks with high dividends or ones with lower dividends but a strong growth path.

“There are pros and cons to both approaches,” Rawson writes..

When it comes to choosing ETFs, investors hoping for growth can look at the Vanguard Dividend Appreciation ETF (Ticker: VIG), he says.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

And those looking for lofty current dividend yields can look at Vanguard High Dividend Yield Index ETF (VYM), Rawson writes.

Many analysts are beginning to call for a drop in stock prices. Dividend shares can be quite beneficial in such an environment, providing you with some income to offset capital losses and often sliding less in value than other stocks.

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Monday, 09 July 2012 09:10 AM
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