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Dividend ETFs: Don't Bank On Stable Dividends

Published Fri, 21 Sep 2018 14:29:29 -0400 on Seeking Alpha

Many dividend-seeking investors will have the objective of building a portfolio of companies that provide a stable and growing dividend stream. We explore whether dividend-seeking exchange-traded funds ("ETFs") can provide a simple solution for investors that don't have the time to analyze companies and build their own portfolios.
We have written previously about the various strategies followed by dividend-focused ETFs and how that influenced their performance; we now extend that analysis with a focus on the stability of the dividend streams and the ability of the ETFs to maintain their dividends during tough economic times such as the financial crisis of 2008-2009. Our universe covered U.S. dividend-seeking ETFs in existence for at least 10 years and with a current minimum size of $800 million.

A word on ETF dividend payments ETFs pay dividends from the income that they receive from the companies held in their portfolios. In addition, many ETFs also generate income from interest on cash balances and from securities lending. This may be small in relation to the dividend income and is normally indicated as non-qualified income when paid out as a dividend to ETF unitholders. We count both these type of payments as dividend payments received in the hands of the ETF unitholders.
ETFs also from time to time pay out short- and long-term capital gains generated from their investing and trading activities. We don't consider this as normal or sustainable... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
VANGUARD HIGH DIVIDEND YIELD ETF 84.10   0.0 0.00 0.00 3.18
VANGUARD DIVIDEND APPRECIATION ETF 105.73   0.0 0.00 0.00 1.88

VANGUARD HIGH DIVIDEND YIELD ETF - VYM
VANGUARD HIGH DIVIDEND YIELD ETF - VYM  


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