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3 Dividend ETFs Losing Momentum

High-yield bonds, preferred stock, MLPs, convertible bonds and dividend stocks have tended to move with the general "risk-on, risk-off" trade. If stocks were heading higher, you'd see moderate capital appreciation in these vehicles, and when stocks headed lower, you would see moderate depreciation.

With the 10-year yield catapulting from 2.4% to 3.0% in a month's time, however, the spread between yield-oriented ETFs like iShares Preferred (PFF) or SPDR Dividend (SDY) and Intermediate Bond ETFs have narrowed. Consequently, investors recalibrate the risk associated with higher-yielding assets.

Large Company, Small Company

With the exception of most real estate data, the U.S. economy has shown definitive signs of improvement. It follows that investors are choosing small- and mid-sized company ETFs that hold corporations which primarily serve the American public.

Most small- and mid-sized ETFs have already hit fresh 52-week highs. Meanwhile, large corporations derive a huge chunk of revenue and profits from overseas operations. At present, the weakening of the euro and the slow growth of the EU economic region act as tailwinds to Large-Cap ETFs. The overwhelming majority of Dividend ETFs focus on long-standing, "been-around-forever," large corporations.

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Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.
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