Dividend Dividend Dividend

Many investors like dividend investing. Most of us will go the through of dividend investing to get passive income or cashflow. Most will pick Dividend Stocks after their own analysis.

What are Dividend Stocks?

Dividend stocks are companies that pay out a portion of their profits to shareholders as a form of distribution. These payments can come in the form of cash, stocks or both.

Dividend stocks pay out dividends based on how much money they make, so they can be good investments if you’re looking for steady returns and don’t mind waiting for them.

However, by picking individual stock, like other investment, there is always the risk of capital loss, or in the worst case where the companies go bankrupt. Thus, another better alternative for those who don’t like to pick individual stock, you can go for Dividend ETF.

What are Dividend ETFs?

ETFs (exchange-traded funds) are mutual funds that trade like stocks on an exchange. They’re designed to track an index like the S&P 500 or Dow Jones Industrial Average by buying all the securities included in those indexes. They hold all these stocks in proportion to their weighting within the index they’re trying to replicate, so they tend to match its performance very closely over time.

Dividend ETFs are a great way to earn passive income. They’re easy to buy, and many of them pay monthly dividends. Some characteristics of Dividend ETFs.

• Dividend ETFs invest in companies that pay dividends. When you own shares in a dividend ETF, you get paid when the fund makes money from its investments. The income from these investments is called “dividends.”
• In some cases, the dividends paid out by an individual stock can be reinvested back into the company for more shares. This is called “re-investment.” Dividend ETFs usually allow re-investment of your dividends so that you can buy more shares at lower prices.
• Dividend ETFs are one of the best ways to invest in the stock market. They’re great for long-term investors who want to earn regular income from their portfolio.
• Dividend ETFs are a great way to add passive income to your portfolio. They’re also one of the best ways to create a “set it and forget it” investment strategy.
• Dividend ETFs are similar in nature to index funds, but they’re specifically designed to track the performance of dividend-paying stocks. These funds can help investors achieve a passive income stream without having to rely on individual stocks or mutual funds.

How to pick Dividend ETFs?

The good news is that there are plenty of options when it comes to dividend ETFs. The bad news is that not all dividend ETFs are created equal. If you’re looking to invest in dividend ETFs, please take note of the following:

What kind of dividends do they pay?

The most important factor when selecting a dividend ETF is what kind of dividends it pays out. Some pay quarterly dividends while others pay monthly or even daily distributions. It’s also important to find out how much interest each type will pay and how many shares are required before receiving payments from the fund itself.

Diversification

The first thing you need to consider is diversification. Dividends come from companies within an industry, so it’s important to spread your money around so that if one company has problems, the others can make up for it. For example, if one airline goes bankrupt, all of its investors will suffer from their lack of income until another airline buys them out or starts offering flights where they were previously operating.

Fees

Another factor to consider is fees — specifically management fees and commissions. The management fee is what the company charges each year to manage your money and pay its employees’ salaries. Commissions are extra fees charged by brokers when selling or buying shares; this is usually less than $10 per trade but can add up over time if you’re making dozens of trades every month

4 Dividend ETFs that can let you sleep well even in the scary bear market

Let’s go to the main gist of this article – 4 Dividend ETFs that can let you sleep well even in the scary bear market.

Vanguard FTSE All-World UCITS ETF (USD) – VWRD

Characteristics of this ETF (Source):

• Fund Manager: Vanguard
• Listed: London
• Number of Stocks Held: 3754
• Methodology:
  • The Fund employs a passive management – or indexing – investment approach, through physical acquisition of securities, and seeks to track the performance of the performance of the FTSE All-World Index (the “Index”).
  • The Index is comprised of large and mid-sized company stocks in developed and emerging markets.
  • The Fund attempts to: 1. Track the performance of the Index by investing in a representative sample of Index constituent securities. 2. Remain fully invested except in extraordinary market, political or similar conditions.
• Expense Ratio: 0.22%
• Distribution Frequency: Quarterly
• Distribution Yield: 2.2%
• Remarks by Careyourpresent: This ETFs hold thousands of stocks over the world which will let you sleep well at night. Typically, people will hold this is a world ETF under the popular index investing methodology. You will get both growth and yield (but low yield) at the same time. However, one key disadvantage is this that although this ETF is termed as “All World Index” but this fund actually is tilted towards the western economics which you can see from the chart above.

Vanguard FTSE All-World High Dividend Yield UCITS ETF (USD) – VHYD

Characteristics of this ETF (Source):

• Fund Manager: Vanguard
• Listed: London
• Number of Stocks Held: 1804
• Methodology:
  • The Fund employs a passive management – or indexing – investment approach, through physical acquisition of securities, and seeks to track the performance of the FTSE All-World High Dividend Yield Index (the “Index”).
  • The Index is comprised of large and mid-sized company stocks, excluding real estate trusts, in developed and emerging markets that pay dividends that are generally higher than average.
  • The Fund attempts to: 1. Track the performance of the Index by investing in a representative sample of Index constituent securities. 2. Remain fully invested except in extraordinary market, political or similar conditions.
• Expense Ratio: 0.29%
• Distribution Frequency: Quarterly
• Distribution Yield: 4.1%
• Remarks by Careyourpresent: This ETFs hold thousands of stocks over the world which will let you sleep well at night (lesser than VWRD but still holds lot of shares). You will get some growth but with lesser yield at the same time as this ETFs hold stocks with higher yields. However, one key disadvantage is this that although this ETF is termed as “All World Index” but this fund actually is also tilted towards the western economics which you can see from the chart above.

iShares MSCI World Quality Dividend ESG UCITS ETF (USD) – WQDV

Characteristics of this ETF (Source):

• Fund Manager: Blackrock
• Listed: London
• Number of Stocks Held: 164
• Methodology:
  • The Fund aims to achieve a return on your investment, through a combination of capital growth and income, which reflects the return of the MSCI World High Dividend Yield ESG Reduced Carbon Target Select Index.
  • On 1st June 2022, the benchmark changed from MSCI World High Dividend Yield Index to MSCI World High Dividend Yield ESG Reduced Carbon Target Select Index. The change will be reflected in the benchmark data.
• Expense Ratio: 0.38%
• Distribution Frequency: Semi-Annual
• Distribution Yield: 2.9%
• Remarks by Careyourpresent: This ETFs used to hold thousands of stocks over the world which will let you sleep well at night. However, as of 1 Jun 2022, the benchmark index has changed and now it only hold 164 stocks. I used to like this ETF very much, but this has become much lower on my list due to lower diversification and lower yield.

iShares Core MSCI EM IMI UCITS ETF (USD) – EIMU

Characteristics of this ETF (Source):

• Fund Manager: Blackrock
• Listed: London
• Number of Stocks Held: 3126
• Methodology:
  • Exposure to over 2,800 large-, mid- and small-cap emerging markets companies
  • Entire market exposure means not missing out on potential growth surprises from often overlooked smaller companies
  • Use at the core of a portfolio to seek long-term growth
• Expense Ratio: 0.18%
• Distribution Frequency: Semi-Annual
• Distribution Yield: 3.12%
• Remarks by Careyourpresent: This ETFs hold 3126 stocks from the emerging markets companies. For those who are keen on emerging markets can consider this. You will get some growth but some yield at the same time. One key risk is the delisting/removal of some of the stock’s holdings in the emerging markets by iShares due to political issues.

Dividend Index Investing

For the above 4 ETFs that I have shared, they are also commonly used by investors in SG markets as part of their index investing. However, do note that for most index investors, usually they would buy the non-distributing version (VWRA, IWDA, EIMU, ISAC etc) so that they would not need to reinvest the dividends since the ETFs do it automatically for them.

For dividend Index investors who want low expense ratio, diversification, lesser withholding tax (10% for LON ETFs) as compared to buy US ETFs directly, peace of mind with some growth and yields, the above are ideal choices for them.

Of course, there are many are dividend ETFs which are good too (such as ASDV, VDC, VAS, NOBL etc which are in my watchlist). Perhaps I will share them in another article in future.

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