Updated to include the PowerShares High Yield Dividend Achiever Portfolio
NEW YORK (TheStreet) -- Doing the required research to determine which dividend-yielding stocks should be in your portfolio is a daunting task. Consider investing in dividend exchange traded funds instead.
Investors, roiled by record volatility, have looked high and low for big dividends. Given that the Federal Reserve plans to keep interest rates at close to zero for at least another three years, dividend investing probably will gain in popularity.
Investing in individual stocks is risky. It's easy to make the mistake of buying a stock with an accidental dividend yield -- those that have inflated dividend yields because of a steep drop in the stock price. An example is Frontier Communications (FTR). With a 15% yield, it is the highest-yielding stock in the Dow Jones Industrial Average and S&P 500 Index combined.A safer way to grab higher yields is through mutual funds or ETFs that focus on dividend stocks. Comparing the two, mutual funds have a history of chronic underperformance versus benchmarks, whereas ETFs tend to be successful in mimicking benchmark indices. Other benefits to investing in ETFs over a mutual fund include lower costs and taxes, ease of trading and higher liquidity. A total of 18% of new inflows into ETFs, or about $450 million, have been put into those that offer dividends, according to Eric Pollackov, managing director of ETF Capital Markets at Charles Schwab. Ten of the top 20 ETFs are income-generating ETFs. ETFs mimic the performance of an index, and, while they're passively managed, the underlying index usually is put together based on specific criteria. In the case of dividend ETFs, indices could be based on stocks that have a long history of dividend increases or those with a specific payout ratio, for example.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV