Conventional investing wisdom these days is to go with dividend paying stocks. The logic is that even if the market moves sideways, you’ll get paid to wait.
However, SmartMoney’s Roya Wolverson cautions that investors should tread carefully among the three dozen dividend ETFs due to their heavy concentration in the troubled financial sector.
In the article Beware the Dividend ETF, Wolverson notes that, although banks and insurance companies have historically paid some of the highest dividends, they have recently been cutting back.
Wolverson recommends looking for ETFs that re-evaluate the portfolio often and for funds that are not overly exposed to financials.
The First Trust Value Line Dividend Index Fund (FVD) re-evaluates monthly and has a 17% exposure to financials. The Vanguard Dividend Appreciation Fund (VIG) has only 8% of portfolio holdings in financials.