This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Single Best ETF Strategy for Second Half of the Year

NEW YORK (TheStreet) -- To me, it's all about income -- either current or future -- and the single best exchange-traded fund for this purpose is the State Street S&P Dividend ETF (SDY).

It's a well-diversified portfolio of high-quality dividend paying stocks, many of whom raise their dividends consistently. Among the top holdings are PepsiCo  (PEP), Coca Cola  (KO), AT&T  (T), Chevron  (CVX) and many other household names.

If markets continue to rise without any meaningful correction (over 5% e.g.), the underlying stocks should do well.

In the event of a pullback or even a prolonged period of underperformance, the dividends will soften the impact of the correction and will keep building for a future income stream.

Now, of course, I'm not suggesting you put all your eggs in one basket, as it were. So before any new or increase allocations to SDY, you should have already prepared your portfolio by trimming bond funds to the minimum. As I've pointed out before, whether interest rates rise or not, bonds are not holding their value as a whole.

>>Apple's Almost Back: A Chart You Should See

>>Why JPMorgan Is Undervalued on Long-Term Earnings Growth Estimates

Second, you may have positions in individual stocks that you feel are performers for the long haul, despite any dip which might occur tied to a pullback, correction or other. I'm not saying dump them, by any means, but check them again mid-year now that earnings seasons has pulled the curtain back. Make sure your assumptions about the fundamentals of those stocks still hold.

Furthermore, you may have investments in ETFs that have served you well. Now is the time to make sure that the bulk of their holdings are held in stocks whose fundamentals you can identify.

Characteristics to Seek Out

You want a combination of the following characteristics, but certainly all should be present in the single stocks you hold and the major holdings of ETFs in which you are invested:

  • Strong balance sheets. I think Apple (AAPL) exhibits this characteristic very well.
  • Visible and predictable earnings. One that I feel has proven itself in this particular regard is Verizon Communications (VZ).
  • Above-category growth stocks. As Cognizant Tech Solutions (CTSH), demonstrates, it's not always the best-known names that are in the lead of their sectors.
  • Consistent and rising dividends. For me, Royal Dutch Shell (RDS.B) is a classic example.

As a side note, our company holds Royal Dutch Shell in our "Dividend Busters Program." Part of the secret to identifying these high-quality, low-volatility, solid dividend paying stocks is to enlarge your sphere to include international stocks that meet these criteria and are available in the U.S. as ADRs.

Other internationally based companies that have exhibited respectable if not outstanding performance and are all held in our fund include Total (TOT), GlaxoSmithKline (GSK) and Sanofi (SNY).

When choosing ETFs, certainly any that holds a majority portion in these or similar stocks will provide you the balance of international exposure along with easy liquidity and solid performance.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
SDY $79.49 0.09%
AAPL $129.94 -0.36%
FB $79.37 -1.30%
GOOG $563.00 1.40%
TSLA $204.15 -1.50%

Markets

DOW 18,188.70 -25.72 -0.14%
S&P 500 2,111.04 +0.30 0.01%
NASDAQ 4,981.3840 -6.5060 -0.13%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs