When the stock market stumbles, some amateur investors decide
it's time to chase big yields.
Yet, a look at three exchange traded funds in the
stock market today
shows why focusing on yield alone is the wrong thing to do.
Keep in mind that a stock's yield is often supersized because
no one would buy the stock if it had to compete on its
In some cases, a fierce sell-off has ballooned the yield.
Problems that create a sell-off sometimes lead to a cut or
Vanguard Dividend Appreciation ETF (
) has a quality approach to dividends. The fund tracks the
performance of the Nasdaq U.S. Dividend Achievers Select
How does a stock gain Achiever status? It must lift its
dividend every year for at least 10 years and must meet volume
As of March, the two biggest holdings in the Vanguard ETF
) andProcter & Gamble (
The annualized dividend yield is 2.2%, which isn't big enough
for the big-yield set.
SPDR S&P Dividend (
) is also quality focused. It tries to match the S&P High
Yield Dividend Aristocrats Index.
An Aristocrat has raised its dividend every year for at least
The top holdings arePitney Bowes (
) andAT&T (T). The yield is 2.8%.
Now it's time to think big.
Global XSuperDividend (SDIV) offers a whopping dividend yield
The top holding isBGC Partners (BGCP), a $5 stock with an 8.7%
SuperDividend's giant yield, however, is only part of the
Since its launch in mid-June 2011, SuperDividend's price has
fallen 6%. Meanwhile, the Vanguard and SPDR dividend funds are up
20% and 24% in the same period.
That's how big becomes little in the market, and little