Dividend Updates

Top Dividend Stocks for September 2025: Beginner’s Guide

September 24, 2025 by Kevin

man in suit pulling out a business card that says "investor"

Everyone seems to be looking for a steady stream of income these days. You work hard for your money, and you want your money to start working for you. Finding solid, reliable dividend stocks for September 2025 can feel like a major task, but it is one of the most powerful ways to build wealth over time.

The idea is simple: you own a piece of a company, and they share a portion of their profits with you. This approach is about building a foundation for your financial future. Maybe you are saving for retirement, a down payment on a house, or you just want some extra cash flow.

Whatever your goal, identifying the right dividend stocks is a big step. We are going to look at a few companies that might fit the bill. Each one has its own story and potential.

What Makes a Great Dividend Stock?

Before looking at specific company names, it is important to know what to look for. Many people fixate on a high dividend yield. But a super high yield can sometimes be a red flag, signaling that the market thinks the company is in trouble and might cut its dividend.

Instead, a combination of factors is a better approach. A reasonable yield is a good start, but dividend growth is more interesting. A company that consistently increases its payout year after year shows that its business is healthy and expanding.

You also need to look at the payout ratio. This tells you what percentage of profits a company is paying out as dividends. If a company is paying out 100% of its earnings, it has no room left for growth or to weather a storm, making it a riskier component of your personal finance strategy.

A lower, sustainable payout ratio is almost always a better sign for long-term dividend income. These principles separate a sound investment from a speculative one. It’s how you can build a portfolio that generates returns without taking on unnecessary risk.

Top Dividend Stocks for September 2025: A Closer Look

I have been digging into a few companies with interesting dividend stories. Each one comes from a different sector and offers a different kind of opportunity. These are not random picks; they are backed by solid analysis and have a history worth talking about.

BlackRock (BLK)

You have probably heard of BlackRock, as they are the world’s largest asset manager. They manage a mind-boggling amount of money for people and institutions. This massive scale gives them a serious competitive advantage that you can learn more about in a Forbes profile on the company.

For dividend investors, BlackRock has been a steady performer. Over the last five years, it has hiked its dividend by an average of 9.1% each year. That is some really solid growth that rivals many popular stocks.

However, if you look at the stock today, the yield is only about 1.8%. You might be thinking that is a bit low. It is well below the company’s five-year average yield of 2.6%.

The main reason for this is that the stock price has gone up so much that it has pushed the yield down. So while the dividend payments have been growing, the share price has grown even faster. This is a good problem to have for long-term holders.

Analysts at Morningstar project that the dividend will keep climbing steadily. They see the annual dividend growing from around $20.84 to over $25 per share by 2029. This growth is supported by a very healthy payout ratio, expected to stay between 35% and 45% of earnings.

With BlackRock, you get a world-class company with a growing dividend. The stock might not look like a screaming bargain right now, trading close to what analysts think it’s worth. But it is a powerful name to keep on your watchlist for anyone focused on dividend growth.

Essential Utilities (WTRG)

Have you heard of Dividend Aristocrats? These are companies in the S&P 500 that have increased their dividends for at least 25 straight years. They are known for their reliability, much like established energy firms such as Duke Energy or Exxon Mobil.

Essential Utilities is a special case because it has that 25-year-plus track record, but it is not technically in the S&P 500 index. This holding company provides water and natural gas services. People need these services no matter what the economy is doing, which makes for a very stable business model.

Its dividend history is nothing short of incredible. For the past 32 years, Essential has increased its dividend by at least 5% every single year. They are not just making tiny token increases to keep the streak alive; they are giving shareholders meaningful raises year after year.

Right now, the stock yields about 3.5%, which is a pretty nice income stream. Over the past five years, the dividend has grown at an annualized rate of about 6.9%. The company’s CEO, Christopher Franklin, recently reaffirmed his commitment to this dividend growth.

He aims to keep the payout ratio in a comfortable 60% to 65% range, which shows they are planning for the future. The best part? Analysts currently see the stock as undervalued. It is trading at about a 10% discount to its estimated fair value.

Finding a high-quality, stable company with a decades-long history of dividend growth at a good price is a rare opportunity. You can check its latest dividend declarations on its investor relations page.

Company (Ticker)	Current Yield (Approx.)	5-Year Dividend Growth	Morningstar Rating
BlackRock (BLK)	1.8%	9.1%	3-Star (Fairly Valued)
Essential Utilities (WTRG)	3.5%	6.9%	4-Star (Undervalued)
Roche (RHHBY)	3.5%	2.5%	5-Star (Significantly Undervalued)

Roche (RHHBY)

Let’s look at something a little different. Roche is a massive Swiss company that is a leader in both pharmaceuticals and diagnostics. It is a giant in the global healthcare space, which, like utilities, tends to be very resilient, and holds its own against competitors like UnitedHealth Group.

Now, investing in a foreign company like Roche has a few quirks. Because it’s an ADR (American Depositary Receipt), the dividend is paid once a year in the spring. The original payout is in Swiss francs, so the amount you get in U.S. dollars can change with currency exchange rates.

There are also some tax considerations, so it’s a good idea to talk with a tax professional about this one. Looking at the past, Roche’s dividend growth has been pretty slow, at only 2.5% per year over the last five years. But that might be about to change.

Analysts believe the company is ready to start boosting those payments much faster. They expect Roche to start giving out high-single-digit dividend increases each year. The company seems committed to a payout ratio of about 50%, leaving plenty of cash to reinvest in its powerful research and development engine.

The company provides a great overview of its business on its corporate website. The most compelling part of Roche’s story right now is its valuation. The stock is currently trading at a huge discount, roughly 25% below its fair value estimate.

This makes it a five-star stock in Morningstar’s system. Buying a world-class healthcare leader when it’s on sale and expecting its dividend growth to accelerate could be a powerful combination for long-term investors. It offers a different kind of opportunity than a consumer staples giant like Kraft Heinz.

Exploring Different Types of Dividend Payers

Beyond traditional corporations, other types of companies offer attractive dividend income opportunities. Business Development Companies (BDCs) and Real Estate Investment Trusts (REITs) are two popular examples. These structures often provide higher yields but come with their own set of characteristics.

BDCs invest in small and mid-sized private companies. Some well-known names in this space include Main Street Capital Corp (MAIN) and Prospect Capital Corp. Blue Owl Capital Corp is another major player that focuses on direct lending.

These companies can provide substantial dividend income because they are required to distribute at least 90% of their taxable income to shareholders. Other BDCs focus on specific sectors, like Horizon Technology Finance Corp, which provides capital to technology and life science companies. Their unique focus can offer diversification within your dividend portfolio.

REITs, on the other hand, own or finance income-producing real estate. You might be familiar with Realty Income, famous for its monthly dividend, or STAG Industrial, which focuses on industrial properties. Like BDCs, REITs must pay out most of their income, making them a favorite for those seeking steady fixed income.

Mortgage REITs (mREITs), such as AGNC Investment Corp, are a different flavor. They invest in mortgages and mortgage-backed securities rather than physical properties. While they can offer very high yields, their business model is more sensitive to interest rate changes.

Beyond the Ticker: Building Your Dividend Strategy

Finding a few good stock ideas is a great first step, but it is only one piece of the puzzle. The real magic happens when you build a strategy around those investments. What does that mean for you?

First, diversification is your best friend. Don’t put all your investments in one company or even one sector like basic materials or communication services. Spreading your investments across different companies, such as adding a reliable name like Waste Management to the mix, helps protect you if one of them hits a rough patch.

Think about reinvesting your dividends. Most brokers let you set up a DRIP, or a Dividend Reinvestment Plan. This automatically uses your dividend payments to buy more shares of the stock.

Over time, this creates a compounding effect that can seriously accelerate your portfolio’s growth. For those who prefer a more hands-off approach, a dividend-focused mutual fund or an ETF can provide instant diversification. The iShares Core High Dividend ETF is one such fund whose ETF shares represent a broad basket of dividend-paying stocks.

Finally, set some realistic expectations. Dividend investing is not a get-rich-quick scheme; it’s a patient, long-term game. The goal is to build a reliable and growing stream of income over many years, not to hit a home run overnight on the stock exchange.

Conclusion

Finding great dividend stocks for September 2025 is about looking for quality companies with a commitment to their shareholders. A business like BlackRock offers world-class scale and impressive dividend growth, even if its current yield is modest. A company like Essential Utilities gives you incredible stability and a track record of dividend raises that is tough to beat.

And then there is Roche, a global healthcare leader that appears to be on sale and ready to ramp up its shareholder payouts. We also saw how other structures, like Main Street Capital Corp or Realty Income, offer different ways to generate passive income. Each one tells a different story, and one of them might be the right fit for your portfolio.

Remember to do your own homework and build a plan that works for you. Building a source of dividend income is a marathon, not a sprint. A well-thought-out strategy can pave the way toward your financial goals.

Maximize Your Earnings with Smart Dividend Reinvesting

August 5, 2025 by Kevin

neon arrow pointing up with cash in the background

You’ve seen them show up in your account. A small deposit of a few dollars here and a few there from the stocks or funds you own. Have you ever wondered what happens next with that dividend money? That small choice, often just a checkbox you clicked when opening your account, is the key to a powerful wealth-building strategy called dividend reinvesting.

You may not have given it a second thought since you started investing. But what if that simple decision could dramatically change your financial future? This powerful technique is about turning your small dividend payments into a much larger portfolio over time, forming a critical part of your long-term financial planning.

You’ll learn what this strategy is, when you should use it, and when it might be better to just take the cash. We will also look at the important tax details you absolutely need to know. This is your guide to making a smarter choice about your dividends and taking control of your investments.

What Is Dividend Reinvesting Anyway?
The Big Question: Should You Reinvest Your Dividends?
- When Reinvesting Makes Perfect Sense
- When Taking the Cash Is the Smarter Move
Understanding Dividend Reinvesting and Your Taxes
How to Set Up Your Dividend Reinvestment Plan (DRIP)
A Look at the Bigger Picture
Conclusion

What Is Dividend Reinvesting Anyway?

So, what exactly happens when you reinvest a dividend? It’s a simple concept. Instead of that dividend payment sitting in your brokerage account as cash, your brokerage automatically uses it to buy more shares of the same stock or fund that paid it.

This process of automated investing is incredibly efficient. Because the purchase amount is based on the dividend payment, you often end up buying fractional shares. This means you can own a piece of a share, allowing every single cent of your dividend to go to work for you.

Imagine you own 100 shares of a company. That company pays you a $1 per share dividend, so you get $100 in cash dividends. If one share costs $50, dividend reinvesting uses that $100 to buy two additional shares for you automatically. Now you own 102 shares.

This little process is the magic of compounding in action. The next time a dividend is paid, you’ll get a payment based on 102 shares, not just 100. This bigger dividend then buys even more shares, and the cycle continues, growing your investment faster and faster over time by reinvesting dividends.

The Big Question: Should You Reinvest Your Dividends?

This is where your personal goals come into play. There isn’t one right answer for everyone. The choice to use a dividend reinvestment plan really depends on where you are in your life and what you want your money to do for you.

When Reinvesting Makes Perfect Sense

Are you investing for goals that are years or even decades away? If so, you should seriously consider reinvesting your dividends. This is the simplest way to put your portfolio’s growth on autopilot and a cornerstone of many long-term retirement plans.

If you look at the stock market’s long-term history, the numbers are compelling. Historically, the S&P 500 has returned around 10% per year on average. According to data from Hartford Funds, a huge chunk of that total return came directly from reinvested dividends. Without them, your growth would be much slower.

For anyone building a nest egg in a personal choice retirement account or saving for another long-term goal, an automatic dividend reinvestment is your best friend. It helps you accumulate more shares when you’re not touching the money. This lets your investment snowball into something much bigger down the road, without active management on various trading platforms.

When Taking the Cash Is the Smarter Move

But this strategy isn’t for everybody. There are very good reasons to choose to receive your dividends as cash instead. The most common one is if you are in or nearing retirement and need to generate income.

Many retirees use the income generated from their portfolios to help cover their living expenses. That steady stream of dividend cash can be a reliable part of a retirement paycheck, more flexible than some fixed income products. If you need that income to pay bills, you wouldn’t want it automatically put back into the market.

Another case is if you own a large position in a single stock. If you let dividends from that one company continuously buy more of its own shares, your portfolio could become too concentrated. This adds a lot of risk; taking the cash lets you diversify by investing it elsewhere or putting it into a high-yield savings account.

Finally, some people just prefer simplicity or have other financial goals. You might use that cash to pay down a high-interest credit card, fund a small business, or build up an emergency fund in a money market account. Tracking reinvested dividends can be complicated, so taking the cash can make your life much simpler.

Understanding Dividend Reinvesting and Your Taxes

Taxes are where things can get a little tricky with a dividend reinvestment plan. How this strategy impacts your tax bill depends entirely on the type of account you are using. The rules are very different for retirement accounts versus standard brokerage accounts.

Taxable vs. Tax-Deferred Accounts

In a tax-deferred account, like a 401(k), traditional IRA, or other workplace retirement plans, things are easy. Your dividends can be reinvested automatically, and you won’t owe any taxes on them year after year. Everything inside the account grows without immediate tax consequences until you start taking money out in retirement.

A taxable brokerage account is a different story. Here’s a critical point that trips up many new investors: you must pay taxes on your dividends in the year you receive them, even if you use a reinvestment plan. The IRS views that dividend as income, regardless of whether you took it as cash or used it to buy more shares.

These dividend payments and any capital gains distributions from funds are reported to you and the IRS on Form 1099-DIV each year. It’s your responsibility to report this income on your tax return. This applies even if the dividend was just a few dollars.

The Headache of Cost Basis in a Taxable Account

This is where the paperwork comes in. In a taxable account, you have to track something called your cost basis. Your cost basis is essentially the total amount you paid for all your investment products, including any commissions or fees.

Every time a dividend is reinvested, it’s like you’re making a new small purchase of that stock or fund. The amount of that investing dividend gets added to your total cost basis. This creates many small purchases, or tax lots, over time, each with its own purchase date and price.

The good news is that most modern brokerage platforms, such as those offered by Charles Schwab, do a good job of tracking this for you. Their trading services usually provide detailed reports of all transactions, including these small reinvestments. When you eventually sell your shares, this cost basis is used to calculate your capital gains or losses for tax purposes, so its accuracy is important.

Are All Dividends Taxed the Same?

To make it more interesting, not all dividends are taxed at the same rate. They can fall into one of two buckets: qualified or non-qualified. The difference can have a big impact on how much tax you owe and is an important part of financial planning.

Qualified dividends get preferential treatment. They are taxed at the lower long-term capital gains tax rates, which for most people is 15%. To get this lower rate, you must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.

If you don’t meet that holding period, the dividend is considered non-qualified. These are taxed at your ordinary income tax rate, which is the same rate you pay on your salary from a job. This is almost always a higher rate, so the difference can be significant, impacting your overall financial health just as much as choices about life insurance or car insurance.

How to Set Up Your Dividend Reinvestment Plan (DRIP)

So how do you actually turn this on? Most brokers refer to this as a DRIP, which stands for Dividend Reinvestment Plan. Setting it up is usually very straightforward on modern trading platforms.

Often, it’s a simple setting within your brokerage account’s online portal. You might find it in your account preferences or profile settings after you log in. On many sites, you can use the chat search field to type “dividend reinvestment” and find instructions quickly.

When you locate the settings for an individual stock, you’ll often see a checkbox label next to the words “Reinvest Dividends.” Simply checking that box will enroll that specific holding in the plan. Many brokers, like Charles Schwab, offer a platforms overview that can guide you through setting this up for your entire account or for individual securities.

The process is the same whether you’re dealing with individual stocks or mutual funds and ETFs. A “dividend” from a bond fund is technically investment income from the bond’s coupons. However, when it’s paid out from the fund, it’s treated just like a stock dividend for reinvestment and tax purposes.

Some featured offerings, like the Schwab Starter Kit™ or Schwab Investing Themes™, may have automated investing features built-in. This makes the process even easier for new investors. Once enabled, the DRIP automatically reinvests dividends, ensuring efficient and timely order execution without any further action from you.

Take the Next Step

Use our free dividend calculator to see how reinvesting your dividends in your specific portfolio can impact long term wealth building.

A Look at the Bigger Picture

The decision on dividend reinvesting should not be made once and then forgotten. Your financial goals and life situation will change over time. What made sense for you as a 25-year-old might not be the right choice for you as a 65-year-old in a choice retirement plan.

It’s a good habit to review your dividend elections at least once a year as part of a larger financial checkup. Ask yourself if your current choice still aligns with your long-term plan. This annual review could also include looking at your mortgage rates, your savings accounts, and even your business accounts if you’re a small business owner.

Making a conscious choice is what matters. Don’t just let the default setting dictate your financial strategy. Be proactive and make sure your dividends are working for you in the best way possible, whether that means reinvesting for growth or using various cash solutions for income.

If you feel overwhelmed, many brokerages offer Schwab personal advice solutions or similar services. These can help you align your investing strategy with your broader financial life. Your personal choice is what drives your success.

Conclusion

In the end, dividend reinvesting is a powerful engine for building wealth over the long haul. A DRIP automatically reinvests cash dividends, putting the principle of compounding to work for you. It can turn small, regular payouts into significant growth without you lifting a finger.

But remember, it is not a strategy that fits every investor in every situation. If you need income now from your investment products or are worried about concentrating too much money in one investment, taking the cash might be the wiser move. Your choice about your dividend reinvestment plan should be a thoughtful one, based on your own financial goals and tax circumstances.

Take a look at your account settings today and make an active decision. Whether you use advanced thinkorswim® trading platforms or a simple mobile app, the option is there. Are you going to let your dividends build a bigger future, or do you need them to help you live for today?

Understanding ETF Overlap: A Guide for New Investors

July 28, 2025 by Kevin

duplicates of woman overlapping each other

You put your money into a few different ETFs, feeling pretty smart about it. You picked a tech one, an S&P 500 one, and maybe even a total stock market fund. You think you’ve spread your risk out nicely, right?

But what if I told you that under the hood, you might own Apple stock three separate times? This is the sneaky problem of ETF overlap. You could be less diversified and taking on more risk than you realize, and it’s a common tripwire for so many investors.

You aren’t alone in facing potential fund overlap, a challenge that extends to mutual funds as well. Many people build a portfolio of funds thinking they are diversifying, but they are actually concentrating their risk. This guide will help you understand, identify, and fix this common issue.

What Exactly is ETF Overlap?

Think of an Exchange-Traded Fund, or ETF, as a basket holding dozens or even hundreds of individual stocks. It is a simple way to own a slice of many companies at once. You get instant diversification without having to buy each stock one by one.

ETF overlap happens when two or more ETFs you own hold the same stocks. A little bit of overlap is perfectly normal. After all, big companies like Microsoft and Amazon are in lots of different indexes, so you’ll find them in many different funds etfs.

But when that overlap gets big, it starts to cause problems you might not see coming. It’s like ordering a pepperoni pizza and a “meat lover’s” pizza. You think you are getting variety, but you end up with a double dose of pepperoni you weren’t expecting.

Why You Should Care About Hidden Overlap

You might be thinking, “So what if I own Apple twice? It is a great company.” While that may be true, significant overlap can quietly mess with your investment plan. It creates blind spots in your portfolio that can hurt your long-term growth.

This is about more than just owning the same stock multiple times. It is about how that duplication affects your overall financial picture. Understanding this is a huge step in becoming a more confident investor and making informed decisions.

The Illusion of Diversification

The main reason we buy ETFs is for diversification. We are spreading risk across many stocks and sectors so if one area tanks, our whole portfolio doesn’t go down with it. It’s the classic advice: don’t put all your eggs in one basket.

But with high ETF overlap, you are doing just that. You just have your eggs spread across different-looking baskets that are all being carried in the same cart. This creates a risk portfolio that is more fragile than it appears, especially during periods of market volatility.

If your tech-heavy overlapping ETFs all plummet, your portfolio will take a much bigger hit than you anticipated because you were secretly concentrated in that one area. You lose the safety net that a properly diversified portfolio is supposed to give you. A 2018 Morningstar analysis found that many investors believe they are more diversified than they actually are, a false sense of security that is one of the biggest dangers of unchecked overlap.

Unintended Sector Bets

Let’s say you own both VOO, which tracks the S&P 500, and QQQ, which tracks the tech-heavy Nasdaq-100 index. You feel good because you have exposure to the broad market and the exciting tech sector. But look closer.

The S&P 500 is already heavily weighted with giant tech companies like Microsoft Corporation, Apple, and NVIDIA Corporation. So by holding both funds, you are not just adding tech, you are doubling down on it. Your portfolio might be more than 40% invested in technology, even if that wasn’t your plan, with heavy exposure to companies like Microsoft, Meta, and Tesla.

This isn’t necessarily bad if you are intentionally bullish on tech. The problem is when it’s unintentional. You’ve made a huge bet on one sector of the economy, including stocks like Eli Lilly and Costco Wholesale Corporation, without even realizing it.

Paying Fees for the Same Stocks

Every ETF comes with an annual fee called an expense ratio. It’s a small percentage of your investment that goes to the fund manager. These fees might seem tiny, but they add up over decades of investing.

If you own the same group of stocks through three different ETFs, you are paying three separate management fees for the exact same investment exposure. It’s like paying for three gym memberships just to use the same treadmill. Why would you do that?

Reducing these duplicate fees, even if they’re small, can add thousands of dollars to your retirement nest egg over time. It is one of the easiest wins you can get as an investor. Comparing fees and holdings is a cornerstone of smarter investing.

Common Examples of ETF Overlap

Sometimes seeing is believing. Let’s look at some very popular ETFs that many people own. This is where the idea of overlap gets very real, very fast, and you can see how you might be over-exposed to a single company or sector.

The S&P 500 Crowd: VOO vs. IVV vs. SPY

These three ETFs are some of the biggest in the world. They all have the same goal: to track the performance of the S&P 500 index. If you own more than one of these, your overlap is almost total.

Ticker	ETF Name	Top Holding	Overlap % with VOO
VOO	Vanguard S&P 500 ETF	Microsoft Corporation	100%
IVV	iShares Core S&P 500 ETF	Microsoft Corporation	~100%
SPY	SPDR S&P 500 ETF Trust	Microsoft	~100%

There’s really no good reason to own more than one of these. They hold the same 500 stocks in virtually the same proportions. The only practical difference between them is their expense ratio and legal structure as an ETF trust, so you can just pick one (usually the one with the lowest fee) and move on.

Tech-Heavy Titans: QQQ vs. VGT

Here’s a more subtle, but still important, example. Many people buy QQQ for its focus on the innovative companies in the Nasdaq and VGT for pure-play technology exposure. But there’s a huge crossover.

Ticker	ETF Name	Overlap Percentage	Top 3 Overlapping Stocks
QQQ	Invesco QQQ Trust (Nasdaq-100)	~45%	Microsoft, Apple, NVIDIA
VGT	Vanguard Information Technology ETF	~45%	Microsoft, Apple, NVIDIA

The Invesco QQQ, often found under the full name Invesco QQQ Trust, has significant overlap with VGT. With a nearly 45% overlap, holding both means a massive concentration in big-name tech, including Meta Platforms and Alphabet.

If your goal is to add more specific tech exposure that the QQQ Trust might miss, you have to be very careful. You might just be buying more of what you already own, including Meta Platforms and Apple.

Total Market vs. S&P 500: VTI vs. VOO

This is probably the most common overlap new investors create. VTI gives you the entire US total stock market, including small and mid-sized companies. VOO gives you the 500 largest US companies, including giants like Berkshire Hathaway.

They sound different, right? The catch is that the US stock market is dominated by those 500 large companies. They make up over 80% of the total stock market’s value.

As a result, the overlap between VTI and VOO is surprisingly high. This also includes top stocks like NVIDIA, Microsoft, and those from the costco wholesale business.

Ticker	ETF Name	Overlap Percentage	Key Difference
VTI	Vanguard Total Stock Market ETF	~85%	VTI includes thousands of small/mid-cap stocks
VOO	Vanguard S&P 500 ETF	~85%	VTI includes thousands of small/mid-cap stocks

Holding both isn’t necessarily a mistake, as VTI gives you a bit more diversification into smaller companies. But it’s not efficient. You could achieve the same exposure more simply by just owning VTI, since it already contains all the stocks in VOO, from Berkshire to Nvidia.

How to Find Your ETF Overlap in 3 Simple Steps

Okay, enough theory. How do you actually check your own portfolio for this stuff? It’s easier than you think.

You don’t need a complicated spreadsheet or financial advisor to do it. You can get a clear picture in just a few minutes using free online investing tools. This simple check-up can give you incredible clarity about what you truly own.

Step 1: List Your ETFs

First, just get organized. Open a notebook or a blank document and write down the ticker symbols for every ETF and mutual fund you own in your investment accounts. This includes your 401(k), IRA, and any taxable brokerage accounts.

Don’t forget about any complex funds you own. For example, if you own a “Target Date 2060 Fund,” look up its holdings because you might be surprised to find it’s just a mix of other stock and bond ETFs.

Step 2: Use an ETF Overlap Checker

Now for the magic. There are free tools online, like ETFRC.com’s Fund Overlap tool, built for exactly this purpose. Many investors and some professionals from the ETF insider community use these to compare ETFs and analyze holdings.

One of the most popular is an overlap tool from the ETF Research Center. You just type in the ticker symbols from your list, for example, your total stock fund and your holding of SPY.

Enter two or more tickers into the comparison tool and hit the button. It will instantly analyze the holdings of each ETF. It then spits out a detailed report showing you exactly where the overlap is.

Step 3: Analyze the Results

The overlap tools will give you two key pieces of information. The first is a simple percentage from the ETF comparison. It will say something like, “These two funds have a 35% overlap by weight.” This number tells you what percentage of your portfolio is duplicated.

A low number, say under 15%, is generally not a huge concern. But if you see numbers like 40%, 60%, or even higher, it’s time to pay attention. This analysis helps you identify overlapping funds and make better investment decisions.

The tool will also show you a list of the exact stocks that overlap and the weighting of each one. This helps you see if your portfolio is too dependent on just a few big names. This is where you can spot your unintended bets on certain stocks or sectors.

So You Have Overlap. Now What?

Finding overlap in your portfolio isn’t a reason to panic. It is actually a great opportunity. It means you have spotted a weakness, and now you have the power to fix it and make your portfolio stronger.

The changes you make don’t have to be dramatic. Often, a few simple tweaks can drastically improve your diversification, reduce your fees, and better align your portfolio with your actual financial goals. The goal is to be deliberate when you manage etf holdings.

Decide Your Goal

Before you start buying or selling, ask yourself what you want to achieve. Is your main goal to simplify your portfolio? Are you focused on cutting down on investment fees? Or is your primary objective to reduce risk through true diversification across different asset classes?

Your answer will guide your next steps. For someone wanting simplicity, consolidation is the answer. For someone seeking real diversification, adding complementary assets is the way to go.

Consolidate Your Portfolio

The easiest fix is for redundant funds. If you own VOO, IVV, and SPY, you really only need one. Check their expense ratios—which you can find on sites like Morningstar—and consolidate into the cheapest one.

The same logic applies if you own an S&P 500 fund and a “large-cap growth” fund with 70% overlap. You could sell one and just stick with the fund that best represents your core strategy.

This simplifies your holdings and cuts down on redundant fees. Taking this action is a key part of building a stronger financial future.

Find Complementary ETFs

This is where you can really improve your portfolio’s resilience. Instead of buying another ETF that’s similar to what you have, look for funds that are intentionally different. These are funds with low overlap with your core holdings.

If your portfolio is built around an S&P 500 fund like VOO, consider adding ETFs that give you exposure to other areas. This is how you can effectively build a portfolio that can weather different economic conditions. Exploring these areas is a critical step.

Consider these complementary asset classes:

International Stock: Your US-focused fund misses out on growth from the rest of the world. Adding a broad international stock fund (ex: VEA, IEFA) gives you exposure to developed economies in Europe and Asia.
Emerging Markets: These are higher-risk but higher-growth potential economies. An emerging markets ETF (ex: VWO, IEMG) adds companies from countries like China, India, and Brazil.
Real Estate: Investing in a real estate ETF (ex: VNQ) provides exposure to physical properties and can offer returns that do not move in lockstep with the stock market.
Bond ETF: Bonds are crucial for stability. A broad bond ETF (ex: BND, AGG) can cushion your portfolio during stock market downturns. You might also consider a short-term bond fund for lower volatility.
Inflation-Protected Securities: These government bonds (ex: TIP) are designed to protect your purchasing power when inflation rises, offering another layer of diversification.
Alternative Funds: For more advanced investors, looking into areas like a money market fund for cash holdings or a specific income fund can further tailor a portfolio.

Adding these can give you genuine diversification. When one part of the market is down, another part might be up, smoothing out your returns over the long run.

A Quick Note on Taxes

One important point to remember. If you are investing in a taxable brokerage account (not an IRA or 401(k)), selling an ETF that has gone up in value can trigger a tax bill. This is known as a capital gains tax.

Before you sell off a large position to fix an overlap issue, it is smart to understand the potential tax consequences. It may impact your decision on how to proceed.

Sometimes it’s better to simply stop adding new money to the overlapping fund and direct future investments elsewhere. It might not fix the problem overnight, but it avoids a surprise tax hit.

Conclusion

Building a solid investment portfolio is like building a strong house. You need a solid foundation and a structure that can stand up to storms. Hidden ETF overlap can be like a crack in that foundation, silently weakening your entire financial structure without you even knowing it.

Taking a few minutes to check your portfolio for this issue is one of the most powerful moves you can make as an investor. It turns you from a passive participant into an active and informed captain of your own financial ship. Using an ETF comparison tool helps you take control.

By understanding and managing ETF overlap, you make sure that your investments are truly working for you. You will align your portfolio with your goals, reduce unnecessary risk, and continue building the future you want. Making these informed investment decisions is what successful long-term investing is all about.

Adding Utility Stocks to a Dividend Portfolio: Why?

July 7, 2025 by Kevin

Are you staring at your dividend portfolio, wondering what comes next? You have a few dividend stocks, maybe an ETF, but you feel like something is missing. That feeling is common because you want stability and a reliable income stream, which can feel hard to find during market turbulence.

So, the idea of adding utility stocks to a dividend portfolio probably feels like the next logical step. You’ve probably heard about them as these slow, boring investments, but boring can be beautiful for investors seeking dependable income. Let’s look at why adding utilities stocks to a dividend portfolio could be a smart move for your personal finance journey and provide an income stream you can actually depend on.

What Exactly Are Utility Stocks?
Why You Should Consider Adding Utility Stocks to a Dividend Portfolio
Finding the Best Utility Stocks for Your Portfolio
The Future of Utilities: New Growth Catalysts
Spotlight on Utility Stocks
Potential Downsides to Watch For
How to Start Adding Utility Stocks to Your Portfolio
Conclusion

What Exactly Are Utility Stocks?

You use their services every single day without a second thought. You flip a switch and the lights come on thanks to a regulated electric company. You turn the faucet for clean water or adjust the thermostat for heat from natural gas.

A utility stock represents a share of ownership in companies providing these essential services. These are things people and businesses need to function, no matter what the economy is doing. This necessity creates consistent demand for their services and stable revenue streams.

This stability is partly due to their business model, which often operates as a regulated monopoly. They are typically the sole provider in a specific area, and government agencies regulate the prices they charge. This structure is built around massive energy infrastructure that is difficult and inefficient to duplicate.

Why You Should Consider Adding Utility Stocks to a Dividend Portfolio

You might be thinking, “Okay, they’re stable, but why are they so good for dividends?” The answer is found directly in their predictable business model. Their financial stability is the direct reason they make fantastic dividend payers for any long-term investor.

Building a strong portfolio isn’t about chasing rapid growth or finding the next hot tech company. It’s about building a foundation of reliable income. These stocks are the bedrock many experienced investors use to anchor their portfolios, providing a buffer against the volatile broader market.

The Allure of Consistent Dividends

Let’s talk about the main attraction: the dividend payouts. Because utility companies have such steady and predictable cash flows, they often have significant net income left over after covering operational costs. They don’t need to pour every last cent back into massive, speculative expansion projects.

They often return that extra cash to shareholders as dividends. Many companies in the utility sector have an incredible track record of paying an annual dividend for consecutive years without interruption. Some, known as dividend aristocrats, have increased their payouts for over 25 straight years, demonstrating remarkable dividend growth.

This creates a dependable income stream you can use to pay bills or reinvest to buy stock in other companies. That predictable payment into your brokerage account is a core principle of dividend investing. It’s about creating financial freedom one payment at a time.

A Shelter in Stormy Markets

The stock market can be a rollercoaster, with periods of intense market volatility. During these times, investors often flock to what they call “defensive” stocks. The utility sector is a classic defensive play.

Think about it. During a recession, you might cancel a vacation or eat out less. But you are definitely not going to turn off your electricity or stop using water. Their essential services mean utility companies tend to perform much better than other market sectors when the economy gets rocky.

While their stock prices might still dip, they usually fall less than the overall market. This resilience can offer peace of mind and help protect your capital. This stability is why many investors seeking a safe haven choose to allocate a portion of their funds to this sector.

Natural Inflation Hedge

Inflation is a major concern for savers and investors, as it quietly erodes the value of your money. You need your investments to keep up, or you are effectively losing purchasing power. Utility stocks have a built-in mechanism to combat this.

Because they are regulated, they can go to public utility commissions to request rate hikes. These requests are made to cover the rising costs of fuel, materials, and necessary infrastructure investments. This allows them to pass on the effects of inflation to customers.

When their costs go up, their revenue often follows, protecting profit margins. This financial stability helps them continue paying a healthy dividend. That dividend can help your income keep pace with the rising cost of living.

Finding the Best Utility Stocks for Your Portfolio

Not all utility stocks are created equal. You cannot just close your eyes and pick one at random. A little homework is needed to find high-quality companies that will serve your portfolio well for years.

You do not need a finance degree to make sound investment decisions. You just need to know what to look for. Here are a few key things to analyze before you buy a utility stock.

Look for Strong Financials

A healthy company is the foundation of a reliable dividend. You want to find an energy company with a strong balance sheet. This means its debt levels are manageable compared to its assets and earnings, a concept known as maintaining balance in its financial situation.

Utility companies are capital-intensive and almost always carry debt to fund their massive energy infrastructure. This can include multi-billion capital expenditure plans for power generation facilities or distribution networks. However, you want to avoid a company that is drowning in debt, as that can threaten the dividend.

Check the Dividend Yield and Payout Ratio

The dividend yield is the annual dividend per share divided by the stock’s price, giving you an idea of the return from the dividend alone. While a higher number is appealing, extremely high dividend yields can be a warning sign. The market may believe the dividend is at risk of being cut.

More important is the payout ratio, which shows the percentage of a company’s net income paid out as dividends. A payout ratio between 60% and 80% is common and often sustainable for a utility. If it creeps over 100%, the company is paying out more than it earns, which is a major red flag.

Regulated vs. Unregulated Utilities

You will encounter two main types of utilities. Regulated utilities have their prices set by a government commission, which provides stable, predictable profits. This is the classic, safe utility model that most dividend investors prefer.

Unregulated utilities, or merchant generators, sell their power on the open market. Their profits can be much higher but are also more volatile, subject to supply and demand for electricity. For an investor focused on stability and income, regulated utilities are often the safer bet due to their predictable revenue streams.

The Future of Utilities: New Growth Catalysts

While known for stability, the utility sector also has exciting growth drivers on the horizon. These trends are creating new investment opportunities and the potential for capital appreciation alongside dividends. For those willing to dig in, this is more than a 5 min read; it’s a look into the future of energy.

One of the biggest catalysts is the explosive growth of the digital economy. The demand for electricity from data centers, which power cloud computing and artificial intelligence, is soaring. This creates a huge opportunity for utilities located in data center hotspots.

Another major factor is increased electrification across the economy. The shift to electric vehicles and the electrification of industrial processes are creating more demand for power. This trend contributes to steady top-line growth for the entire sector.

Finally, the transition to renewable energy is a massive driver of investment. Utilities are spending billions to build new wind and solar generation capacity. These infrastructure investments are added to their rate base, leading to higher earnings and potential for long-term EPS growth.

Spotlight on Utility Stocks

To give you a better idea, let’s look at a few well-known companies. This information is for educational purposes and not a recommendation to buy anything. Always do your own research.

Company	Ticker Symbol	Primary Focus	Noteworthy Attribute
Duke Energy	DUK	Electric & Gas Utility	A dividend stalwart with a large service area experiencing population growth.
Dominion Energy	DGN	Electric Utility	Positioned to benefit from massive data center growth in Virginia.
CMS Energy	CMS	Electric & Gas Utility	Known for consistent operational execution and steady rate base growth.
Black Hills Corp.	BKH	Electric & Natural Gas	A smaller utility serving growing communities in the mountain west region.
New Jersey Resources	NJR	Natural Gas Utility	Focuses on natural gas distribution and has a strong dividend track record.

For example, a company like Duke Energy is a massive regulated utility serving millions of customers. Its focus on a multi-billion capital plan for grid modernization and renewable energy helps drive its rate base growth. Analysts often monitor its earnings report closely for updates on these projects.

Dominion Energy has strategically shifted its focus to its regulated operations, particularly in Virginia, where data centers are creating unprecedented demand for power. This gives it significant upside potential for earnings growth. Many investors follow its progress, hoping for a positive buy rating from analysts.

Companies like CMS Energy and DTE Energy in Michigan are examples of well-run mid-size utilities. They have a solid track record of working with regulators to achieve constructive outcomes. This allows them to invest in their distribution business and grow earnings at a predictable rate.

Potential Downsides to Watch For

Having a balanced view is important. Adding a utility stock to a dividend portfolio has excellent benefits, but there are risks. No investment is perfect, and it is better to proceed with your eyes wide open.

One of the biggest factors that can affect utilities stocks is interest rates. When interest rates rise, safer investments like government bonds offer higher yields. This makes them more competitive with a dividend stock, and some income investors might sell shares to buy bonds instead.

Another thing to remember is that these are not growth stocks in the traditional sense. The same regulations that make their profits stable also limit their growth rate. You probably won’t see your utility stock double in a year, as the primary return is the dividend income, not rapid capital appreciation.

Finally, there’s regulatory risk. The government commissions that approve rate increases can sometimes deny them. There is also operational risk; a major failure in the energy grid, such as an upstream connect error or unexpected connection termination, can lead to costly repairs and regulatory penalties.

How to Start Adding Utility Stocks to Your Portfolio

So, you have done your homework and are ready to start. How do you actually do it? The process is simpler than you might think.

First, you can choose to buy individual stocks. This gives you total control over which companies you own. You can hand-pick the ones with the best financials and a strong dividend stalwart reputation. This requires more research, and you will need to build a diversified group to spread your risk.

Your other option is to buy a utility sector ETF (Exchange Traded Fund). An ETF is a basket of stocks you can buy with a single click. A utility ETF would hold dozens of different utility stocks, giving you instant diversification, which is great for beginners.

Whichever path you choose, consider starting small. You do not have to build your entire position overnight. You can slowly add shares over time, a strategy known as dollar-cost averaging, which helps reduce the risk of buying everything at a market high.

Conclusion

You started this journey looking for a way to make your dividend portfolio stronger and more reliable. You wanted an income stream that you don’t have to worry about every time the stock market has a bad day. Adding utility stocks to a dividend portfolio can provide that missing piece.

The stability, consistent dividends, and defensive nature of this sector can give you exactly that. While they may not be the most exciting stocks on Wall Street, companies tend to do their job quietly and effectively. They are workhorses that deliver steady dividend growth, powered by new trends like AI and increased electrification.

For a long-term investor, the final verdict is clear: adding utility stocks to a dividend portfolio is a time-tested strategy for building wealth and creating dependable income. It’s about building a solid foundation that can weather any economic storm and help you reach your financial goals.

Exploring the Benefits of LVHI International Dividend ETF

June 25, 2025 by Kevin

international currency including US dollars

Are you exploring ways to invest internationally, secure dividends, and perhaps achieve a calmer investment experience? Many investors feel the market’s fluctuations, especially with global events causing uncertainty. Options like the LVHI international dividend ETF from Franklin Templeton enter this discussion as an interesting fund. The LVHI international dividend ETF attempts to address several common investor goals, particularly for those considering opportunities in public markets outside the U.S. This article will examine the LVHI international dividend ETF to help you understand if it aligns with your investment objectives, including its approach to providing a volatility high dividend stream.

Taking your investments beyond domestic borders can seem significant, but accessing international markets may present different growth avenues. Additionally, identifying companies that offer a consistent dividend yield can supplement your income. We will explore the specifics of the LVHI, an ETF that aims for both high dividend payouts and lower earnings volatility, often found in the category of smart beta funds.

What Exactly is the LVHI ETF?

So, what’s the story with LVHI? LVHI stands for the Franklin International Low Volatility High Dividend ETF (formerly Legg Mason). Although the name Legg Mason might be familiar to some, it’s now part of the Franklin Templeton family, a prominent ETF issuer. This fund, often searched as etf LVHI or simply LVHI, focuses on equity securities from developed countries outside of the United States. Think of established economies such as Japan, Canada, Australia, and nations in Western Europe when considering the fund’s investments.

The core idea behind the LVHI international dividend ETF is to achieve three primary objectives. First, it seeks to provide broad exposure to international stocks. This diversification can help spread investment risk because factors affecting the U.S. market might not impact other countries in the same way or at the same time; different economies often follow distinct cycles. The total assets under management contribute to the fund’s ability to diversify effectively across various holdings.

Second, LVHI targets a high dividend yield through steady dividend payments. These are distributions companies make to their shareholders from their profits. If you are looking for an income stream from your investments, this aspect is likely appealing.

Third, LVHI attempts to manage risk by selecting stocks that historically have shown lower price volatility. It also employs a currency hedge, a feature we will discuss in more detail, to potentially smooth out the investment journey even further. The analysis LVHI conducts aims for a favorable risk-return profile.

Breaking Down the LVHI Strategy

When you examine the mechanics of LVHI, several key components define its operational strategy. Jeff Silverman from Franklin Templeton has explained that strategies like LVHI were developed for periods of economic uncertainty. The approach is about offering portfolio diversification, a chance for good income, and a method to potentially lessen significant market dips. Let’s look at how LVHI, as an ETF, implements these elements.

Focus: Developed Markets, Not Emerging

You’ll notice that LVHI concentrates on “developed markets.” This means it primarily invests in companies from countries with mature, stable economies and well-established financial systems. It typically avoids “emerging markets,” which are countries with faster-growing economies that often come with higher risk and more unpredictable market data.

This choice is deliberate. Franklin Templeton previously explored an emerging market version of this low volatility high dividend strategy. However, as Jeff Silverman noted, it didn’t gain significant traction. Investors often view emerging markets as an asset class for higher growth potential, accepting greater risk. A strategy emphasizing lower volatility and currency hedging didn’t quite align with typical investor expectations for that specific market segment, where factors like might influence decisions differently.

Therefore, Franklin Advisers, as the investment manager, decided to concentrate efforts where investor interest was stronger: developed international markets. These markets generally offer more predictable legal frameworks and transparent accounting for their equity securities, contributing to the fund’s stability goals. Investors interested in thought leadership from Franklin Templeton can often find more details on this rationale.

The Hunt for High, Sustainable Dividends

A significant part of LVHI’s identity is “High Dividend.” This signifies its search for companies that distribute a substantial portion of their profits to investors. However, the strategy is not merely about identifying the absolute highest dividend yield payers, because exceptionally high yields can sometimes be a warning sign. A company might be paying out more than it can sustain, which is detrimental in the long term and can lead to high earnings volatility.

Consequently, LVHI employs a rigorous screening process. It looks for companies whose earnings are greater than the dividends they pay out, providing a basic check for dividend sustainability. The dividend history of a company is also an important consideration. The objective is to find businesses that can consistently maintain these dividend payments, which is valuable if you rely on that income stream. This contrasts with some pure high yield strategies that might overlook sustainability.

Keeping Volatility in Check

The “Low Volatility” aspect is equally crucial for this dividend ETF. If you’ve experienced unease watching your investments fluctuate sharply, you’ll appreciate why some investors prefer a more stable investment path. LVHI attempts to achieve this by analyzing how much a stock’s price has historically moved up and down and also considers the volatility high aspect of a company’s earnings.

The fund scrutinizes both past price movements and earnings patterns, like those that might be reported around mar or sep. It also looks forward, attempting to select companies likely to remain less volatile. This focus on lower volatility aims to provide a more stable investment experience, reducing the impact of daily market swings. The premise is that if your investments decline less during market downturns, they have a shorter distance to recover when conditions improve, potentially aiding portfolio recovery. This careful security selection aims to achieve a better return profile over time, though some data might be n/a periodically.

Currency Hedging: What’s That About?

Investing internationally introduces an additional factor: foreign currency exchange rates. If you invest in a Japanese company, for instance, your U.S. dollars are converted to Japanese Yen. When that company pays a dividend, or if you sell the stock, the Yen must be converted back to U.S. dollars. If the Yen has weakened against the dollar during that period, you receive fewer dollars, even if the underlying ETF or stock performed well in its local currency.

LVHI utilizes “currency hedging” to try and mitigate this foreign currency risk. It’s a strategy that aims to lock in exchange rates, offering protection against unfavorable movements in currency values. According to Jeff Silverman, this hedging is another tool LVHI uses to try and lower overall volatility and stabilize daily returns for U.S. investors. It can be particularly important for income, as fluctuating currency can make dividend payments less predictable when converted back to dollars.

Interestingly, the fund also adjusts its hedging strategy for countries with high interest rates. This is because hedging can become quite expensive in those situations. So, the strategy tries to balance achieving good international exposure through its equity ETF holdings with managing the costs of this currency protection. The aim is to make the process more efficient than if an investor tried to manage these currency risks individually.

Understanding the LVHI International Dividend ETF Index

LVHI doesn’t arbitrarily pick stocks; it tracks a specific benchmark: the Franklin International Low Volatility High Dividend Hedged Index. This index has a clear, rules-based methodology for selecting and weighting its investments. Think of it as the blueprint the fund meticulously follows. The investment trust structure of the ETF helps in this systematic replication.

The process begins with a broad universe of approximately 3,400 of the largest international stocks from developed countries. From this pool, the screening process commences. First, as previously discussed, it identifies companies with a robust dividend history and the financial capacity to continue these payments. A key criterion is that earnings must exceed the dividends paid out, ensuring a margin of safety.

Next, the index filters for low volatility. This involves examining historical price volatility (how much stock prices have fluctuated) and the stability of company earnings (earnings volatility). The goal is to isolate companies that tend to be less erratic than the broader market. As Jeff Silverman highlighted, they analyze historical data and also make forward-looking assessments for both dividend sustainability and volatility, aiming for a consistent rating for its components.

These two primary screens – sustainable high dividends and low volatility – are combined to assign each stock a composite score. The index then constructs a portfolio, typically comprising around 120 to 150 securities that score favorably on these measures. Franklin Templeton believes this disciplined security selection process results in a portfolio of companies with attractive valuations, meaning their stock prices appear reasonable relative to their earnings or assets. The index undergoes rebalancing, often during months like December, March, June, or September, to maintain its target characteristics and may report data in its documentation.

Here’s a simplified overview of key LVHI features:

Feature	Description
Ticker Symbol	LVHI
Index Tracked	Franklin International Low Volatility High Dividend Hedged Index
Primary Focus	Developed international equity securities
Dividend Approach	Screens for high, sustainable dividend yield; considers dividend history
Volatility Management	Targets low price and earnings volatility; a volatility high dividend strategy
Currency Strategy	Hedges foreign currency exposure back to USD
ETF Issuer	Franklin Templeton (investment management by Franklin Advisers)
Sample Reporting Metric	Fund performance up to e.g., dec / mar / jun / sep. Full history available via issuer.
Hypothetical Data Identifier	Index component data, e.g., , or , may appear in detailed reports. Some specific custom fields might be n/a or n/a .
Fund Category Identifier	Could be category XYZ in certain databases, with a specific rating if available.

This systematic, rules-based approach helps remove day-to-day emotional decisions from the investment process. The index rebalances regularly (e.g., quarterly around periods) to verify it stays aligned with its objectives. Accessing the main content of the prospectus can provide further details.

What Are the Potential Upsides?

So, why might an investor consider incorporating an ETF like LVHI into their investment mix? This strategy aims to deliver several key advantages, aligning with various investing ideas.

1. Getting Global Exposure

One of the primary attractions is diversification through franklin international investments. Investing solely in U.S. stocks means all your financial eggs are in one economic basket. International stocks can behave differently because they are influenced by different economic cycles, government policies, and consumer trends across various public markets.

By including international developed market stocks through LVHI, you can spread your investments across a wider range of opportunities. This could potentially smooth out your overall portfolio returns over time, as strengths in one region might offset weaknesses in another. Franklin Templeton’s own materials on LVHI discuss its specific international focus and the benefits of this asset class diversification.

2. Consistent Income Potential

For those looking to generate income from their investments, the “high dividend” component of LVHI is a significant draw. The focus on companies with a history of paying out, and the capacity to continue paying out, dividends can provide a regular stream of cash. This income potential from its high yield focus can be especially appealing for retirees or anyone looking to supplement their income without needing to sell their investments.

The emphasis on sustainable dividends is important here, aiming for reliability rather than just chasing the highest current yields, which can sometimes be risky or associated with earnings volatility. While not a direct substitute for fixed income assets, the income generated can serve similar financial planning purposes. Investors sometimes compare the dividend yield to yields from real estate or other income-producing assets, though the risk profiles are different. The fund’s total assets support its capacity to invest across numerous dividend-paying companies.

3. Managing Market Swings

No one enjoys seeing their hard-earned money diminish during market downturns. LVHI’s focus on “low volatility” and currency hedging is intended to help with this aspect of investing. By selecting stocks that have historically been less erratic and by attempting to neutralize foreign currency fluctuations, the fund aims to deliver a less turbulent performance compared to broader international stock market indexes. This may be reflected in less dramatic swings in its daily returns.

Jeff Silverman pointed out that a key goal is to reduce those significant drops (drawdowns). If you lose less during downturns, it takes less of a gain to return to your previous level and start growing again when markets recover. This could mean a quicker recovery for your portfolio after challenging market periods. Market data and historical analysis LVHI (5 star rating with Morningstar) can offer insights into how funds with these characteristics have performed, for instance, during the market stress of March 2020 or the 2025 Trump Tariffs.

It’s about striving for positive returns over a full economic cycle, with hopefully less correlation to other, more aggressive parts of your investment portfolio. This can be a real comfort during uncertain times, especially for investors concerned about volatility high dividend stocks that might cut payouts.

A Few Things to Keep in Mind

While LVHI offers some compelling features, it’s always prudent to examine the complete picture. No investment guarantees success, and there are always factors to consider before deciding if it’s the right fit for your financial plan.

First, “low volatility” does not mean “no volatility.” International markets can still be unpredictable, and even carefully selected stocks can decrease in value. The fund aims to lessen the market’s bumps, not eliminate them entirely. While currency hedging can help, it isn’t always perfect and has its own minor costs and complexities, though LVHI’s strategy attempts to manage these by adjusting for countries with high interest rates. Some data points on hedging effectiveness might even be shown as or in detailed reports from the etf issuer.

Also, by focusing on developed markets, you might miss out on some growth potential from emerging economies. If high growth is your primary objective and you have a high tolerance for risk, LVHI’s more conservative approach might not be aggressive enough for that portion of your portfolio. As discussed, there’s a reason the emerging market version of this strategy by Franklin Templeton was discontinued; its characteristics didn’t align with what investors typically look for in that specific asset class. Some investors use a “core and explore” strategy, where LVHI could be a core holding, complemented by other, perhaps riskier, investments.

Past performance, as the standard disclaimer states, does not predict future results or return . Just because an etf stock was low volatility in the past doesn’t guarantee it will remain so. The screening process LVHI uses is based on historical market data and future projections from Franklin Advisers, but the future can always introduce unexpected variables. It is good practice for investors to periodically review how diversification is working within their portfolio and if their current strategy, including allocations to equity etfs like LVHI, still meets their goals.

Finally, consider the fund’s expense ratio and overall operating expenses. All ETFs charge a fee to manage the fund, and this ratio expense ratio can impact your net returns over time. You’ll want to compare LVHI’s fees to other similar international dividend ETF options or active ETF products to check its competitiveness. Information regarding expenses can usually be found in the fund’s prospectus or on the Franklin Templeton website, which may also offer a tax center for information on the tax implications of fund distributions. Market makers play a role in providing liquidity for LVHI on the trading market, which helps in efficient buying and selling of the ETF stock. The fund’s total assets can also influence its operational efficiency.

Who Might Find LVHI a Good Fit?

Considering all these aspects, who is the LVHI international dividend ETF potentially suitable for? It could appeal to several types of investors with specific investing ideas.

If you are an investor looking to add international stocks to your portfolio but are cautious about the typical market choppiness, LVHI’s low volatility approach might be attractive. It is structured to potentially offer a smoother experience when investing in overseas public markets. This might include those who have previously held a mutual fund with international exposure but are looking for an ETF structure.

Are you focused on income generation? The strategy’s emphasis on sustainable, high dividend payments could make it a contender if you’re looking for regular cash flow from your investments. This could be someone in retirement or simply anyone wanting their investments to work harder at producing income, similar to objectives one might have with certain fixed income or real estate investments, but through equity securities. The portfolio manager aims for a consistent dividend history from the underlying holdings.

For newer investors, or those who tend to become uneasy during market swings, LVHI’s risk-mitigation features might provide some reassurance. The combination of low volatility stock selection and currency hedging aims to offer downside protection, which can be psychologically more manageable. It offers a way to gain international exposure without potentially as much drama as some other international funds that might exhibit more significant daily returns fluctuations. This helps provide more etf education on nuanced strategies.

Ultimately, LVHI is for someone who desires that international diversification, wants an income component, and prefers a strategy that actively attempts to manage volatility from a recognized ETF issuer. It’s not aiming to be the highest-growth fund but rather a potentially more stable way to invest in developed markets outside the U.S., leveraging the security selection expertise of Franklin Advisers. Some might track its performance relative to specific benchmarks denoted with codes like ” ” or similar identifiers used in financial data services.

Conclusion

The LVHI international dividend ETF, from Franklin Templeton, offers a multi-faceted approach to international investing. It aims to provide diversification across developed markets, generate a steady stream of dividend income from its high dividend focus, and reduce overall portfolio volatility through careful stock selection and currency hedging. As Jeff Silverman of Franklin Templeton suggested, it’s a strategy developed for investors considering the current economic climate and looking for a potentially more resilient way to engage with global equity securities. The fund’s approach to volatility high dividend investing makes it a distinct option. Consider reviewing the main content on the Franklin Templeton website for the latest market data and fund details.

Like any investment, the LVHI international dividend ETF has its specific goals and methods, including its expense ratio and how it manages foreign currency exposure. It’s worthwhile to see how these align with your own financial journey, comfort level with risk, and overall investing ideas. Exploring the available thought leadership and resources from the fund provider can also be beneficial before making any investment decisions. Remember to consult with a financial advisor if you need personalized guidance for your portfolio, perhaps before you close this modal or window and move to other tasks.

International Dividend ETFs to Balance Your Portfolio

June 24, 2025 by Kevin

You’ve heard the chatter, haven’t you? Some investors believe U.S. stocks are the only worthwhile investment. Others point to potential opportunities overseas, particularly with international dividend ETFs. This differing opinion can leave you wondering about the best place for your hard-earned money. If you’re looking for ways to grow your investments and generate income, exploring international dividend ETFs could be a valuable addition to your portfolio strategy.

Why Even Look Beyond Our Borders for Dividends?

It’s a reasonable question, especially since U.S. stocks have performed well for many years. However, the investment landscape is constantly shifting. Strategies that were effective in the past may not always be the top choice for the future.

A significant reason to consider global markets is that foreign stocks can sometimes be more attractively priced. Compared to U.S. stocks, valuations overseas occasionally appear more compelling. Think of it as finding an overlooked gem; it presents a chance to potentially buy assets at a lower market price. Financial experts frequently highlight these valuation disparities as a primary motivation for considering international equity investments.

Another core concept is diversification, or not putting all your investment eggs in one basket. Investing solely in your home country means you could miss out on growth occurring in other parts of the world. Diversification can help smooth out the inherent ups and downs of investing because different countries’ economies often move at different rhythms. So, when one market might be experiencing a downturn, another could be performing well, potentially improving your total return.

However, it’s true that some advisors express caution. They note that many foreign stock markets have not matched the performance of the U.S. market over the past decade or so. They express concerns that factors like different regulatory environments or economic slowdowns in other nations create additional hurdles. These are valid points to consider, as such elements can certainly influence the returns you might see from overseas investments and your potential for capital gain.

So, who should you believe? Honestly, there is no perfect prediction. The ongoing debate features valid arguments on both sides. But if current international valuations and the prospect of income appeal to you, the yield from international dividend ETFs could be a decisive factor for your asset allocation.

Understanding International Dividend ETFs

Let’s clarify what these investment vehicles are. An ETF, or Exchange-Traded Fund, functions like a basket holding many different investments. This basket could contain stocks, bonds, or other assets, making it an equity etf if it holds stocks. When you purchase a share of an ETF, you are buying a small portion of all those underlying investments, simplifying diversification.

Now, let’s add “international dividend” to this concept. “International” signifies that the companies included in the ETF are based outside your home country. For U.S. investors, this means companies from Europe (perhaps even including some from Ireland), Asia, Canada, and other global regions. “Dividend” refers to the practice of these companies regularly distributing a portion of their profits to their shareholders, which can provide a steady income stream.

Therefore, an international dividend ETF primarily invests in stocks from foreign companies that pay dividends. The objective is to provide investors with exposure to global markets along with a stream of dividend income. Many investors favor dividend stocks because they can offer a more predictable component of total returns, even if stock prices are volatile. You can find more etf education materials on financial websites to learn how dividends work.

These international dividend etfs often track a specific index, which has predefined rules for stock inclusion. Some indices might concentrate on companies with the highest dividend yields. Others may prioritize companies with a long history of consistent dividend payments or dividend growth. Grasping the ETF’s underlying strategy and the specific dividend fund’s approach is very important before investing.

Are International Dividend ETFs Right for You?

Deciding whether to invest in international dividend ETFs requires careful consideration of your personal financial goals. Are you primarily seeking income now to supplement your cash flow? Or is your main focus on long term growth for the future? Perhaps your objectives involve a combination of both. These types of ETFs often appeal to investors who desire income from their investments, as the dividends can be reinvested or taken as cash.

Your comfort level with risk also plays a crucial role. Investing outside your home country introduces different types of risks, which we will discuss in more detail shortly. Generally, however, adding international exposure can potentially increase the stability of your overall portfolio over time by spreading risk across various economies. This diversification is a cornerstone of modern portfolio theory.

It’s also beneficial to assess your current holdings. If all your investments are concentrated in U.S. companies, adding an international dividend etf could provide valuable broader exposure. This helps ensure you are not overly reliant on a single economy’s performance. Many financial planners recommend such balance in an investment portfolio and overall asset allocation.

Exploring Some International Dividend ETF Options

If you are curious about specific funds, numerous options are available. It is essential to conduct thorough research on any investment before committing capital. Here, we will examine a few examples to give you an idea of the types of international dividend etfs available. Remember, these are illustrative examples, not personal recommendations; you must find investments that suit your individual circumstances.

Vanguard International High Dividend Yield Index ETF (VYMI)

First on our list is the Vanguard International High Dividend Yield Index ETF, which trades under the ticker VYMI. Vanguard is widely recognized for its low-cost funds, and VYMI aligns with this reputation. Its primary objective is to track the performance of the FTSE All-World ex-US High Dividend Yield Index, a benchmark composed of international stocks expected to have higher-than-average dividend yields.

This ETF adopts a broad strategy. It screens for foreign large and mid-sized companies outside the U.S. that pay dividends. Generally, it includes the half of those companies offering the higher yields, aiming for a robust international high dividend profile. These selected dividend stocks are then weighted by their market capitalization, meaning larger companies typically constitute a more significant portion of the ETF’s holdings.

A notable advantage of this methodology is its simplicity and diversification. By targeting approximately half of the dividend-paying companies, the fund often holds over 1,500 different stocks. This extensive diversification helps limit the impact if a few companies encounter financial difficulties. Sometimes, an exceptionally high yield can be a warning sign that a company is struggling; with so many holdings, the risk from any single “problem” stock is diluted. Investors looking for all-world high dividend yield exposure often consider this fund.

The market-cap weighting also tends to bias the portfolio towards larger, more established firms, often considered large cap stocks. These are typically companies with substantial resources to weather economic downturns. They might be more likely to maintain their dividend payments even during challenging economic periods. This broad reach and weighting method are structured to offer investors a relatively stable way to access high dividend yields from abroad. Vanguard funds are often competitive regarding their expense ratio, which is a key factor for long term investors.

Schwab International Dividend Equity ETF (SCHY)

Next, let’s discuss the Schwab International Dividend Equity ETF, or SCHY, from Charles Schwab. This is another option that typically features a low expense ratio, which is beneficial for maximizing your net returns. SCHY also concentrates on international companies that pay dividends, but it employs a slightly different methodology for selecting its holdings, focusing on quality dividend attributes.

This ETF seeks stocks that not only exhibit high dividend yields but also demonstrate strong financial health. It screens for fundamental factors such as good profitability, robust free cash flow, and manageable debt levels. It also prefers companies with lower stock price volatility and a consistent history of paying cash dividends. These additional quality checks are intended to identify stable dividend payers and potentially enhance total returns over time.

Because its selection process is somewhat stricter, SCHY usually holds fewer stocks than a broader fund like VYMI. Often, its portfolio comprises around 100 companies. To prevent a few stocks from dominating the fund, SCHY incorporates rules to limit concentration in any single company, sector, or country. This is an important feature when managing a more focused list of holdings, distinguishing it from a simple select dividend approach.

The goal here is to balance the pursuit of attractive dividends with a focus on underlying quality and financial strength. This can result in the fund holding companies with stronger profitability metrics compared to some other high-yield strategies. Over the 12 months through January 2025, this fund reportedly offered a yield of around 4.5%. That combination of profit focus and dividend payments could be appealing, especially if you’re seeking companies that might demonstrate resilience during market downturns. The fund tracks the Dow Jones International Dividend 100 Index.

Vanguard Total International Stock ETF (VXUS)

Now, let’s consider a slightly different perspective with the Vanguard Total International Stock ETF, ticker VXUS. This fund is not specifically structured around dividends in the same way as VYMI or SCHY. Its primary function is to provide broad exposure to stocks from all over the world, encompassing both developed and emerging markets, offering a wide slice of international equity.

So, why is it included in a discussion about international dividend ETFs? It’s because a significant number of international companies pay dividends. In 2024, it was reported that approximately 84% of investable foreign stocks distributed dividends. For comparison, only about two-thirds of U.S. companies did so. Consequently, even though VXUS is not primarily a “dividend” fund, it naturally holds many dividend-paying stocks due to its comprehensive ownership of the international market.

The most significant attraction for VXUS is often its extremely low cost. It boasts one of the lowest expense ratios available for such a broad international fund, often just a few basis points per year. This means a greater portion of your investment is working for you, rather than being allocated to fund management fees. This factor alone can have a substantial impact on long term capital accumulation.

VXUS is genuinely massive in its scope. It includes large cap, mid-cap, and even small cap stocks from a multitude of countries. This can translate to holding shares in over 8,000 different companies. Similar to VYMI, it weights these companies by market capitalization. This approach relies on the market’s collective judgment regarding company values and helps to moderate the influence of the riskiest, smallest companies. Over the 12 months leading up to January 2025, VXUS had a dividend yield of about 3.3%, which was notably higher than the yield from typical S&P 500 ETFs during the same period.

For an investor who is undecided between focusing on yield or simply obtaining broad, low-cost international exposure, VXUS presents an interesting middle-ground solution. You receive extensive diversification, and a respectable dividend yield is an inherent part of the package. This can be a simpler way to achieve international diversification without needing to pick a specific dividend strategy.

Other Notable International Dividend ETFs

Beyond these examples, the market for international dividend ETFs offers other alternatives. For instance, WisdomTree International offers various funds, including those focusing on international high dividend or specific dividend weighting methodologies. Some investors might also look into iShares Core funds for broad international exposure, similar in some respects to VXUS, or specialized international dividend strategies. When evaluating these, consider factors like the index tracked, expense ratio, number of holdings, and geographical or sector concentrations detailed in the fund’s fact sheet.

Some ETFs might follow a FTSE All-World high dividend yield index or a similar benchmark focused on maximizing current income. Others might prioritize dividend growth, seeking companies that have a history of increasing their dividends year over year, which can be appealing for long term investors. A smallcap dividend fund focusing on international markets could offer different risk and reward characteristics compared to funds dominated by foreign large cap companies. Always read the fund’s prospectus or fact sheet carefully.

Understanding the nuances between a high dividend fund and one emphasizing dividend quality or growth is important. For example, some strategies might inadvertently overweight struggling companies if they only chase the highest current yield. Reviewing historical average annual returns can provide context, but remember past performance is not indicative of future results. The landscape includes a variety of choices, from broadly diversified equity fund options to more niche strategies.

Potential Downsides to Keep in Mind

Investing always involves a balance of potential rewards and risks, and international dividend ETFs are no different. It is important to approach these investments with a clear understanding of potential drawbacks. One key consideration is currency risk. When you invest overseas, your returns can be affected by fluctuations in exchange rates between the U.S. dollar and foreign currencies. If the dollar strengthens against these currencies, your international investment returns can appear smaller when converted back to dollars. This currency fluctuation introduces a layer of risk not typically present in domestic investments and can impact your net total returns.

Political and economic stability can also vary more significantly across different countries compared to the U.S. market. Some regions might face greater geopolitical uncertainty, regulatory changes, or economic headwinds. These factors can directly impact company profitability and, consequently, their ability to sustain or grow dividend payments. This is why diversification within international ETFs, across multiple countries and sectors, is so valuable; it helps spread this specific risk.

Taxes can also present additional considerations. Dividends from foreign companies may be subject to withholding taxes imposed by the foreign government. While U.S. investors can often claim a foreign tax credit on their U.S. tax return to offset these taxes, it represents an extra administrative step. Understanding the implications for capital gains, including short term capital gain and long term capital gain, is also crucial, and it’s wise to consult with a tax professional if you have questions.

Finally, no ETF perfectly mirrors the performance of its underlying index. Small discrepancies, known as tracking error, can occur due to management fees, transaction costs, or the fund’s sampling strategy. While usually not a major concern for well-managed funds, it’s a factor to be aware of when comparing different international dividend etfs. Looking at the n/a fields in a comparison might indicate missing data, so always seek comprehensive information from the official fact sheet.

Making the Choice: What Fits Your Goals?

So, how do you determine if international dividend ETFs are a suitable component of your investment strategy, and which specific ones warrant further investigation? The decision ultimately hinges on your personal financial situation and objectives. Reflect on what you want your investments to achieve for you. Are you primarily saving for a long term goal like retirement in 20 years, where growth might be prioritized? Or do you require supplementary income in the present? Some investors might seek a balance, aiming for both a reasonable yield and capital appreciation.

Your comfort level with risk is also a critical factor. If the prospect of market volatility makes you uneasy, you might gravitate towards strategies that emphasize stability. This could be achieved through funds employing quality screens, offering very broad diversification, or those focusing on established large cap companies. Conversely, if you are comfortable with potentially higher volatility in exchange for a higher potential yield or growth, other international dividend ETF options might seem more attractive. An equity fund focusing on growth, a growth fund, will have a different risk profile than a dedicated dividend fund.

Examine your current investment portfolio. How much exposure do you currently have to international markets and, specifically, to international dividend stocks? If your holdings are heavily concentrated in domestic assets, incorporating an international dividend ETF could provide beneficial diversification. Consider how such an ETF would integrate into your overall investment plan and asset allocation, which might also include fixed income or real estate investments. It is rarely prudent to chase the highest available yield without carefully considering the associated risks or how the investment complements your existing holdings.

Remember that past performance, including average annual returns, does not guarantee future results. Just because a particular ETF or market segment performed well in the previous year or even over several years does not mean it will continue to do so. The decision to invest, and where to allocate your capital, should be grounded in your long term financial goals and a thorough understanding of the investments you are considering. Consulting with a qualified financial advisor can also provide personalized guidance and help you assess if an international dividend etf aligns with your objectives.

Conclusion

Whether now is the absolute ideal time to increase allocations to foreign stocks is a subject of ongoing debate among financial professionals. However, if you find yourself seeking a balance between investment growth and current income, exploring the yield potential from well-structured international dividend ETFs can offer a compelling avenue. These funds can provide access to potentially undervalued global companies while simultaneously delivering a stream of dividends.

Such dividend etfs focused on international equity can be a valuable part of a diversified portfolio. As with any investment, understanding what you are buying, how it aligns with your financial goals, and keeping a close watch on costs like the expense ratio are vital. Conducting your own research on different international dividend ETFs will help you identify options that may be suitable for your investment journey and contribute to your long term capital gain potential.

Navigating Dividends During Recessions: A Beginner’s Guide

June 3, 2025 by Kevin

woman dancing at desk with cash in her hands

Thinking about your investments when the economy feels shaky can be a bit unsettling, can’t it? Many folks wonder specifically about dividends during recessions. You might be picturing your expected income stream suddenly drying up. This concern is valid, and it’s smart to understand what typically happens with dividends during recessions so you can feel more prepared for the coming years.

Understanding Recessions and Dividends
- What Exactly is a Recession?
- A Quick Refresher on Dividends
The Big Question: What Happens to Dividends During Recessions?
Looking Back: Dividends in Past Recessions
- General Trends in Dividend Payments
- Lessons Learned from History
Finding Potential Stability: Identifying Stronger Dividend Payers for a Recession
Broader Economic Influences on Dividends
Strategies for Dividend Investors During Economic Downturns
Conclusion

Understanding Recessions and Dividends

Before examining specific strategies, it’s helpful to have a clear understanding of recessions and dividends. This foundational knowledge makes their interplay clearer. It allows for a better appreciation of how economic shifts affect investment income.

What Exactly is a Recession?

A recession is not merely a brief dip in the stock market. It signifies a substantial and prolonged downturn in economic activity across the global economy. Picture the economy slowing down for an extended period, impacting nearly everyone.

Economists often point to Gross Domestic Product (GDP) declining for two consecutive quarters as a common, though not sole, recession indicator. Other signs include rising unemployment, reduced consumer spending, and falling business investment. Events like the great depression represent an extreme example of such an economic contraction, highlighting the severe impact recessions can have on livelihoods and financial markets.

Adjustments in monetary policy by the federal reserve can also contribute to or help mitigate recessions. Businesses definitely feel the pressure during these times. This economic pressure often leads to a market decline affecting various assets.

A Quick Refresher on Dividends

Dividends represent a method some companies use to distribute a portion of their profits to shareholders. If you own stock in dividend-paying stocks, you receive a share of these earnings. This is often seen as a reward for investing in the company.

Companies usually disburse dividends on a regular schedule, such as quarterly, providing a steady income stream for income investors. However, dividends are not guaranteed payments like interest from fixed income securities; their payment depends on the company’s profitability and policy. Companies pay dividends from their excess cash, and consistent dividend growth can be a sign of financial health.

The annual dividend amount is a key figure for those tracking their dividend income. Some investors specifically look for dividend growth stocks, which aim to increase their dividend payments over time. Dividends are an important component of long-term returns from equities.

The Big Question: What Happens to Dividends During Recessions?

This brings us to the central question: do dividend payments continue when a recession takes hold? The straightforward answer is that it varies significantly. There is no universal rule applying to all companies.

Economic slowdowns place considerable strain on businesses, making the topic of dividends during recessions a prime concern for income investors. The decision to maintain, cut, or suspend dividends is complex. It is influenced by many factors specific to each company and the broader economic environment.

Some companies, like JPMorgan Chase, have navigated past recessions while adapting their dividend policies. Markets experience considerable volatility during these periods, and the dividends tend to reflect this uncertainty. Understanding these dynamics is crucial for any dividend investor.

Why Companies Might Cut or Suspend Dividends

During a recession, many companies experience a decline in sales and profits as consumer spending often decreases. With less revenue, businesses face difficult decisions to conserve cash. This cash is vital for operational continuity, employee salaries, and debt servicing.

Reducing or temporarily halting dividend payments can free up substantial cash reserves. While shareholders may find dividend cuts disappointing, such actions can be essential for a company’s long-term survival. These measures help businesses navigate the economic downturn and preserve capital.

Consider your personal finance: if your income fell, you would likely reduce discretionary spending. Companies adopt a similar approach. Management’s primary responsibility is to maintain the company’s health and viability for the future, even if it means short-term pain for dividend seekers.

Not All Dividends Disappear

Fortunately, the news isn’t entirely negative. Many companies successfully continue to pay dividends, even throughout challenging economic periods. These are frequently well-established businesses operating in more stable, less cyclical industries with strong financial foundations and a history of consecutive dividend payments.

What types of companies often show such resilience? Typically, businesses that provide essential products or services people need regardless of the economic climate. Examples include companies in food and beverage, basic household goods, utilities (electricity and gas), and healthcare sectors.

These companies may not exhibit the rapid growth rate of some growth stocks during economic booms. However, their consistent demand helps them sustain profits and, consequently, their dividend payments. This reliability is a significant advantage for investors prioritizing a stable income stream.

Dividend Aristocrats and Dividend Kings, known for their long track records of dividend increases, are prime examples of such resilience. Their commitment to increasing dividends, year after year, often persists through bear markets.

The Impact of Fear and Market Sentiment

Recessions affect more than just company financials; they profoundly influence investor psychology. Widespread fear and uncertainty can permeate financial markets. This can lead to falling stock prices, even for fundamentally sound companies, potentially affecting their share price.

Occasionally, a company might implement dividend cuts partly due to this prevailing fear. Management might opt for extra caution, even if current financials appear stable. Investor sentiment plays a critical role in market movements and corporate decisions during these turbulent times.

Looking Back: Dividends in Past Recessions

Historical analysis can offer valuable insights, though history rarely repeats itself exactly. Examining how dividends behaved in previous recessions provides perspective. It helps identify potential patterns and informs expectations.

While certain individual companies undoubtedly reduced or eliminated dividends, aggregate dividend payments across the market have, at times, shown more resilience than corporate profits. For instance, during some past downturns, such as those after War II, dividends for the S&P 500 did not decline as sharply as earnings. However, this outcome varies with each recession’s unique characteristics and severity.

General Trends in Dividend Payments

Data from past recessions, including analyses of Dow Jones dividend trends, indicate that overall dividend payouts tend to decrease. However, they usually do not vanish entirely. Some financial studies suggest that dividends are often less volatile than stock prices during recessions, offering a degree of stability.

A dip in the total amount of dividends paid market-wide is common during recessions. Then, as the economy recovers, financially healthy companies often resume or start increasing dividend payments. This pattern shows that for strong businesses, dividend policies generally focus on long-term sustainability and income growth for their investors, sometimes even offering inflation adjusted returns.

It is also noteworthy that certain types of companies have historically demonstrated a better ability to maintain their payouts. These are typically the mature, stable businesses mentioned earlier. Their capacity to generate consistent cash flow is a critical factor in sustaining dividends paid to shareholders.

The Great Depression provided harsh lessons, but even then, some resilient companies continued to pay dividends, showcasing the importance of quality.

Lessons Learned from History

A primary lesson from past financial markets is the importance of company quality. Businesses with robust balance sheets, manageable debt levels, and a solid history of profitability are generally better equipped to handle economic shocks. They possess greater financial flexibility.

Another key takeaway is the benefit of diversification when building a dividend portfolio. Avoid concentrating all your investments in one stock or sector, particularly if you rely on dividend income. Spreading investments across various companies and industries can mitigate the impact if one company is forced into dividend cuts.

Perhaps most importantly, history underscores the value of patience in long-term investing. Recessions eventually end. Making rash decisions and selling sound investments at low prices during bear markets is often detrimental in the long run. Focusing on your long-term financial goals can help maintain composure and strategy.

Company Characteristic	Impact on Dividend Stability During Recession
Strong Balance Sheet (low debt)	Higher likelihood of maintaining dividends.
High Payout Ratio (paying out most earnings as dividends)	Higher risk of a cut if earnings fall.
Essential Product/Service	More stable demand, potentially more stable dividends.
Cyclical Industry (e.g., travel, luxury goods)	Earnings more affected by economy, higher dividend risk.
Long History of Dividend Increases	Indicates management commitment, but not a guarantee.
Significant Exposure to Discretionary Consumer Spending	Higher vulnerability to dividend cuts during downturns.

Finding Potential Stability: Identifying Stronger Dividend Payers for a Recession

If you are an investor who values dividend income, you are likely wondering how to identify these more resilient companies. It is not about predicting the future with certainty. It is about looking for specific indicators of financial strength and operational stability.

No company is entirely immune to economic difficulties. However, some are structured to weather storms more effectively than others. This resilience is particularly relevant when assessing the reliability of dividends during recessions.

A solid dividend strategy often involves looking for quality companies that can sustain payments. Income investors focus on these characteristics. Dividend investors often research thoroughly.

Key Financial Metrics to Check

When evaluating a company, several financial metrics can offer significant insights into its health. These indicators become especially crucial during uncertain economic times. You do not need to be a financial expert to grasp the fundamentals.

One critical metric is the payout ratio, which indicates the percentage of a company’s profits paid out as dividends. A very high payout ratio, for instance, above 80% or 90%, might suggest limited flexibility if profits decline. A lower, more conservative payout ratio implies the company retains more earnings, which can serve as a buffer or fund growth.

Another vital aspect is the company’s debt level. Significant debt can become a heavy burden, particularly when financial conditions tighten. Look for companies with manageable debt relative to their earnings and equity, often assessed using the debt-to-equity ratio and interest coverage ratios.

Strong and consistent cash flow is also extremely important. Cash flow reveals the actual amount of money moving into and out of the business. A company with healthy, predictable cash flow is better positioned to meet all its financial obligations, including consistent dividend payments.

The Power of a Long Dividend History

Some companies possess an extensive track record of paying dividends. Even more impressively, some have a history of increasing their annual dividend year after year, even through past recessions. This demonstrates a strong commitment from management to return value to shareholders and is a hallmark of many dividend growth stocks.

While past performance is never a guarantee of future results, a long and growing dividend history is a positive indicator. It suggests the company has a durable business model and a resilient operational structure. It also implies that dividends are a central component of their financial strategy.

Consider this: a company that has increased its dividend for 25 (like a Dividend Aristocrat) or 50 consecutive years (like a Dividend King) is unlikely to want to break that streak. Management will probably strive to maintain it if feasible. Such companies, often tracked by indices like the S&P High Yield Dividend Aristocrats or the Dividend Achievers Select index, often exhibit this discipline.

Sectors That Often Show Resilience

As touched upon earlier, certain economic sectors tend to be less affected by recessions than others. Their products and services are often necessities, leading to more stable demand. This stability can support more reliable dividend payments.

These sectors frequently include:

Consumer Staples: Companies selling food, beverages, and essential household products. People require these items irrespective of the economic climate.
Utilities: Providers of electricity, gas, and water. These are fundamental services with consistent demand.
Healthcare: Pharmaceutical firms, healthcare providers, and medical device manufacturers. Health needs persist during downturns.

Businesses in these areas typically have more predictable revenues and earnings, contributing to more stable dividend payments. This does not mean every company within these sectors is a guaranteed safe investment. However, the sectors themselves generally offer more defensive characteristics for those looking to hold dividend stock.

Even real estate, particularly certain types of REITs focusing on essential properties, can offer resilience, though commercial real estate tied to discretionary spending might suffer. Quality companies in these sectors are a focus for many creating a diversified dividend income stream.

Broader Economic Influences on Dividends

Beyond individual company metrics and sector trends, broader macroeconomic factors significantly influence dividend sustainability during recessions. These external forces shape the environment in which companies operate. Understanding them provides a more complete picture for dividend investors.

The Role of Monetary Policy and the Federal Reserve

Monetary policy, primarily managed by the federal reserve in the U.S., plays a critical role in the economy. By adjusting interest rates and managing the money supply, the Fed influences borrowing costs, credit availability, and overall economic activity. Aggressive interest rate hikes to combat inflation can slow economic growth, potentially leading to a recession and impacting corporate profits and their ability to pay dividends.

Conversely, during a downturn, the Federal Reserve might lower interest rates and implement quantitative easing to stimulate the economy. Such actions can eventually help businesses recover, supporting a return to dividend growth. The effectiveness and timing of these policies are crucial for financial markets.

Government Spending and Fiscal Stimulus

Government spending and fiscal policy also impact the economy and, indirectly, dividends. During recessions, governments may increase spending on infrastructure, provide direct aid to individuals and businesses, or enact tax cuts. These measures aim to boost demand and support economic recovery.

Successful fiscal stimulus can cushion the blow of a recession on corporate earnings, making it easier for some companies to maintain their dividend payments. The scale and targeting of government spending are key to its effectiveness. This can influence how quickly the global economy recovers.

Inflation, Consumer Prices, and Real Returns

Inflation, the rate at which consumer prices are rising, affects the real value of dividends. If inflation is high, the purchasing power of your dividend income decreases, even if the nominal dividend amount remains the same or increases slightly. Investors should consider inflation adjusted returns when evaluating their dividend strategy.

High inflation can also pressure companies by increasing their input costs. If companies cannot pass these higher costs on to consumers, their profit margins may shrink. This could lead to decisions to reduce or suspend dividend payments to conserve cash.

The Global Economy’s Reach

Many dividend-paying stocks belong to multinational corporations with operations and sales spread across the global economy. A recession in one major economy can have ripple effects worldwide. This impacts the earnings of these international companies and their capacity to sustain or grow dividends.

Conversely, a diversified global presence can sometimes provide a buffer if some regions are performing better than others. For dividend investors, understanding a company’s geographic exposure is important. It helps assess risks associated with global economic downturns.

Strategies for Dividend Investors During Economic Downturns

Knowing these factors is one aspect, but what practical steps should you take as a dividend investor? Recessions can be a challenging period for managing your dividend portfolio. Having well-thought-out strategies can help you make more informed decisions.

The aim is not to eliminate all risk—an impossibility in investing. Rather, it’s about managing risk prudently and remaining focused on your long-term personal finance objectives. A calm and rational approach often yields the best results, especially when markets experience turmoil.

Developing a robust dividend strategy before a downturn is ideal. This proactive planning can help you generate income consistently. It also helps you prepare for potential dividend cuts from some holdings.

Don’t Panic, Have a Plan

This is perhaps the most critical piece of advice for any investor, particularly during a market decline. Economic downturns can evoke fear, and anxiety is a natural response. However, making impulsive decisions driven by fear rarely leads to favorable outcomes for your nest egg.

Before a recession materializes (or even during one), having a clear investment plan is beneficial. Understand why you invested in specific dividend stocks. Assess your risk tolerance and your income requirements. This plan serves as your anchor during turbulent economic seas, guiding your decisions about whether to hold dividend positions or adjust.

Focus on Quality, Not Just High Yields

When searching for dividend stocks, an exceptionally high dividend yield can seem very attractive. However, sometimes a very high dividend yield acts as a warning signal. It could indicate that the stock price has fallen significantly because the market is concerned about the company’s ability to sustain that dividend, a situation often termed a “yield trap.” High dividend yields might reflect underlying problems.

Instead of solely chasing the highest dividend yields, concentrate on the quality of the underlying company. Look for the strong fundamentals discussed earlier: reasonable payout ratios, manageable debt, consistent cash flow, and a sound business model. A slightly lower, but more secure, dividend from a quality company is often preferable to a high, but risky, one, ensuring more reliable dividend income.

The Magic of Reinvesting Dividends

If you do not currently need the dividend income for living expenses, consider reinvesting your dividends. Many brokerage firms offer Dividend Reinvestment Plans (DRIPs). These plans automatically use your dividend payments to purchase additional shares of the same stock or income stock.

During a recession, stock prices are often lower. Reinvesting dividends at these reduced prices means you acquire more shares for the same dividend amount. When the market eventually recovers, these additional shares can significantly enhance your total long-term returns and help your nest egg grow faster.

This is a powerful way to make market downturns work to your advantage over time. It also facilitates compounding, a key principle in long-term investing. This strategy helps build wealth and generate income for the future.

Diversification Still Matters

This point has been mentioned previously, but its importance cannot be overstated for managing risk related to dividends during recessions. Do not concentrate all your dividend expectations on just a few stocks or a single sector. Spread your investments across different areas to create a diversified dividend portfolio.

Even high-quality companies can face unforeseen challenges that necessitate dividend cuts. By diversifying, you lessen the impact if one or two of your holdings are forced to reduce their dividend payments. This approach helps to make your overall dividend income stream more stable and resilient, contributing to steady income growth.

Consider looking into dividend ETFs or funds, such as those tracking the Dividend Achievers index or Achievers Select benchmarks, to achieve instant diversification among dividend-paying stocks. This can be an efficient way for a dividend investor to manage risk.

Conclusion

Managing your investments through uncertain economic times, especially regarding dividends during recessions, requires a steady hand and clear thinking. Dividends are not entirely shielded from economic pressures. Some companies will likely reduce or pause their dividend payments when profits contract and conserving cash becomes a priority.

However, it is also accurate that many strong, well-managed companies, particularly those in resilient sectors with a track record of consecutive dividend increases, continue to provide dividend income. By focusing on quality companies, understanding financial health indicators like cash flow, and maintaining a long-term investing perspective, you can approach the subject of dividends during recessions with greater confidence. Adhere to your financial plan, and try not to let short-term market fluctuations or temporary dividend cuts derail your pursuit of long-term returns and a growing income stream.

Ultimately, a well-researched dividend strategy, possibly incorporating dividend growth stocks and a focus on businesses that can sustain payments, will serve you well as markets experience different cycles. Remember that while recessions bring challenges, they also present opportunities for the discerning dividend investor.

How to Invest in Lindt & Spruengli AG If You Don’t Have $16,000 to Spend on Each Share

June 2, 2025 by Kevin

red and blue Lindt Lindor truffles on white ceramic tray

Swiss-based Chocoladefabriken Lindt & Spruengli has caught the attention of more US investors looking for international dividend exposure. Lindt & Spruengli makes some of the most popular, luxurious chocolates in the world that include Lindt (Lindor truffles, Excellence bars), Ghirardelli, and Russell Stover. Their 2024 annual report was released in March, and investors have been buzzing about the Swiss chocolatier’s growth prospects, especially with Trump tariffs seemingly stuck in higher for longer.

The stock ticker for Lindt & Spruengli AG is LDSVF and as of this article, each share costs $16,159.74. For many US based investors, that can be a tough hurdle. I’m an avid Lindor truffle fan (we keep them well stocked in our own home), and wanted to dollar-cost-average into the stock without forking over $16k per share.

Finally, I discovered CHLSY , Chocoladefabriken Lindt & Sprungli AG ADR. Each ADR is a 100th of 1 regular LDSVF share (100:1 ratio).

How Is an ADR Different from a Regular Share?

An American Depositary Receipt (ADR) and a regular share (common stock) have distinct differences in terms of their structure and functionality:

Definition: An ADR is a negotiable certificate representing shares in a foreign company that are traded on U.S. exchanges. In contrast, a regular share refers to the ownership stake in a domestic company, directly traded on its local exchange.
Purpose: ADRs allow U.S. investors to invest in foreign companies without the complexities involved in investing in international stocks directly. Regular shares, however, pertain simply to the ownership in companies listed domestically.
Trading and Currency: ADRs are traded in U.S. dollars, making them more accessible for American investors, while regular shares are traded in their respective local currencies.
Dividends: Dividends from ADRs may be paid in U.S. dollars, while regular share dividends are paid in the company’s local currency.

Overall, while both ADRs and regular shares represent ownership in companies, ADRs provide a pathway for U.S. investors to access international markets, simplifying the process of cross-border investing.

CHLSY Dividend Information and History

The CHLSY ADR, representing Lindt & Sprüngli AG, has embarked on a dividend journey that began recently in 2023. In its inaugural year, the ADR paid a dividend of $0.06548 per share. The latest declared dividend amount was $0.1807 per share, with the pay date scheduled for May 9, 2025 and an ex-dividend date of April 23, 2025 . This systematic approach to dividend distribution reflects the company’s commitment to sharing its successes with investors.

In their March 2024 annual report, Lindt & Sprüngli announced an increase in their dividend for the 29th consecutive year , reinforcing their attractive dividend policy. The Board proposed a distribution of CHF 1,500 per registered share, an increase from CHF 1,400 the previous year (an increase of 7.1%), along with a likewise increase for participation certificates. Additionally, the company has introduced a buyback program worth up to CHF 500 million , further demonstrating confidence in their financial health and commitment to return capital to shareholders.

In their 2024 annual report, leadership projected that Lindt & Sprüngli expects a 7-9% increase in organic growth in 2025 and “improved operating profit margin of 20-40 basis points per year.” They believe that in the long term, they can achieve a 6-8% increase in operating profit margin. With that in mind, their dividend looks like it has room to run over the next few years based on their own projections.

Lindt & Sprüngli AG, Lindy Consumer Staple for International Investors

Lindt & Sprüngli AG, as part of the consumer staples sector, exemplifies a business characterized by its resilience and consistent demand, irrespective of economic cycles. Companies in this sector focus on essential goods—products that consumers consistently purchase, such as food, beverages, and personal care items.

Market Stability: Lindt, renowned for its premium chocolates, benefits from the stable demand inherent to consumer staples. During economic downturns, consumers may cut back on discretionary spending, but they typically maintain their purchases of essential goods, including gourmet chocolate treats for occasions or personal enjoyment.
Brand Loyalty: A significant facet of Lindt’s operation is its strong brand equity. Established in the market with a reputation for quality, consumers often exhibit brand loyalty, choosing Lindt’s products over less familiar alternatives, even as budget-conscious shopping behaviors emerge.
Pricing Power: Lindt’s positioning as a premium brand grants it robust pricing power. In times of inflation or rising costs, the company is better equipped to pass on price increases to consumers without substantially impacting demand, a key trait of successful companies in the consumer staples category.
Growth Opportunities: Despite being a mature player in the industry, Lindt continues to explore growth avenues, such as expanding its product range and entering new markets, thereby enhancing its profitability. This strategy aligns with the behavior of successful consumer staples companies that often seek to innovate while maintaining their core offerings.

In essence, Lindt & Sprüngli AG illustrates how a well-established company in the consumer staples sector can maintain stability and growth potential by leveraging brand loyalty, pricing power, and strategic expansion, even amidst economic fluctuations.

Unwrapping Lindt & Sprüngli AG’s Dividend and Total Return Future Opportunity

In conclusion, Lindt & Sprüngli AG represents a compelling opportunity for U.S. investors seeking exposure to international dividends within the consumer staples sector. The company’s strong focus on premium products and its established brand reputation create a solid foundation for consistent demand and financial resilience. With an impressive track record of annual dividend increases and strong growth projections, Lindt’s ADR, CHLSY, offers an accessible alternative for those hesitant to commit significant capital to its regular shares.

The potential for growth, underscored by expectations for organic revenue increases and improved operating profit margins, suggests that Lindt’s dividend could see substantial growth in the upcoming years. As the chocolate market maintains its allure and consumer loyalty remains robust, investing in Lindt & Sprüngli AG through CHLSY not only provides the chance to enjoy the company’s premium products but also to reap the financial rewards of a stable and growing dividend yield. For investors looking to combine their passion for quality chocolates with sound financial strategy, Lindt & Sprüngli AG stands out as a delectable choice.

ETF vs CEF Dividends: Choosing the Right Income Strategy

April 2, 2025 by Kevin

When it comes to generating income from investments, ETF vs CEF dividends are often a hot topic among investors. Both exchange-traded funds (ETFs) & closed-end funds (CEFs) can provide attractive dividend yields, but they operate differently. Understanding these differences is crucial for investors looking to maximize their income potential while managing risk.

Let’s explore the world of ETF vs CEF dividends. We will examine their structures, dividend policies, advantages, & drawbacks to help you make informed decisions about which might be better suited for your investment objectives.

Understanding ETFs and CEFs
- Exchange-Traded Funds (ETFs)
- Closed-End Funds (CEFs)
Dividend Policies: ETF vs CEF Dividends
- ETF Dividend Policies
- CEF Dividend Policies
Yield Comparison: ETF vs CEF Dividends
Factors Influencing ETF vs CEF Dividends
Advantages and Disadvantages: ETF vs CEF Dividends
Making the Right Choice: ETF vs CEF Dividends
FAQs about ETF vs CEF dividends
Conclusion

Understanding ETFs and CEFs

Before we compare ETF vs CEF dividends, it’s essential to understand the basic structure of each fund type.

Exchange-Traded Funds (ETFs)

ETFs are investment funds that trade on stock exchanges, much like individual stocks. They typically track an index, sector, commodity, or other assets. ETF shares can be bought and sold throughout the trading day. ETFs are known for their liquidity & low costs. These investment products offer great tax efficiency for the fund investor.

Closed-End Funds (CEFs)

CEFs also trade on exchanges but have a fixed number of shares. Unlike ETFs, which can create or redeem shares based on demand, CEFs raise capital through an initial public offering (IPO). Then they trade on the secondary market. This structure can lead to CEFs trading at premiums or discounts to their net asset value (NAV), which may fluctuate throughout the trading day.

Dividend Policies: ETF vs CEF Dividends

When it comes to dividends, ETFs and CEFs have some distinct differences in how they generate & distribute income to shareholders.

ETF Dividend Policies

ETFs typically pass through dividends from their underlying securities to investors. The frequency & amount of these distributions can vary depending on the fund’s focus.

Equity ETFs often pay quarterly dividends based on the dividends received from stocks in their portfolio.
Bond ETFs may pay monthly dividends, reflecting the interest payments from their fixed-income holdings.
Some specialized ETFs focus on high-dividend ETF stock or use strategies to enhance yield.

It’s worth noting that ETF vs index fund comparisons often highlight the similarity in dividend policies, as many ETFs are designed to track indexes.

CEF Dividend Policies

CEFs are known for their potential to offer higher yields compared to ETFs. Several factors account for this.

Active management: CEF managers can use various investment strategies to enhance income, including leverage & investing in higher-yielding securities.
Flexibility in distribution policies: CEFs can set distribution targets & may return capital to maintain consistent payouts.
Closed structure: The fixed number of shares allows managers to invest fully without worrying about redemptions.

However, it’s important to note that higher yields can come with increased risk & the potential for return of capital. This may erode the fund’s NAV over time. Therefore, the CEF market has unique risks & opportunities for individual investors.

Yield Comparison: ETF vs CEF Dividends

When comparing ETF vs CEF dividends, yield is often a primary consideration for income-focused investors. Let’s look at how these two fund types typically stack up in terms of yield potential.

Aspect	ETFs	CEFs
Average Yield	1-3%	6-8%
Yield Range	0-10%	0-20%+
Consistency	Generally stable	Can be more variable
Distribution Frequency	Typically quarterly	Often monthly

It’s important to note that these figures are general ranges & individual funds can vary significantly. For instance, some specialized ETFs focusing on high-yield sectors or using covered call strategies can offer yields comparable to or even exceeding those of some CEFs. Understanding expense ratios is also very important when comparing funds.

Factors Influencing ETF vs CEF Dividends

Several factors can impact the dividend yields & policies of both ETFs & CEFs.

Market Conditions

Economic cycles, interest rates, & overall market performance can significantly affect dividend yields for both ETFs & CEFs. In low-interest-rate environments, for example, income-seeking investors may drive up prices of high-yielding funds, potentially reducing their effective yields. Therefore, risk tolerance should be carefully considered.

Fund Management

While most ETFs are passively managed, CEFs typically employ active management strategies. The skill & approach of CEF fund managers can substantially impact the fund’s ability to generate returns and maintain distributions. Their expertise in active management is a key differentiator.

Use of Leverage

CEFs often use leverage to enhance returns & income. While this can boost yields in favorable market conditions, it also increases risk & can lead to larger losses during market downturns. Leverage can amplify both gains & losses, making it a critical factor for potential fund investors to consider.

Expense Ratios

ETFs generally have lower expense ratios compared to CEFs. Higher expense ratios in CEFs can eat into returns but may be offset by potentially higher yields & active management benefits. A lower expense ratio can lead to better long-term investment outcomes.

Advantages and Disadvantages: ETF vs CEF Dividends

Let’s break down the pros & cons of ETF vs CEF dividends to help you understand which might be more suitable for your investment strategy.

ETF Dividend Advantages

Lower costs: ETFs typically have lower expense ratios, which can help preserve more of your investment returns.
Tax efficiency: ETFs often generate fewer capital gains distributions, potentially reducing your tax burden when dividends taxed.
Transparency: Most ETFs disclose their holdings daily, allowing you to know exactly what you own, which can influence the fund specific.
Liquidity: ETF shares can be bought and sold easily throughout the trading day at market prices, which makes ETFs a strong candidate for etf liquidity.

ETF Dividend Disadvantages

Lower yields: On average, ETFs tend to offer lower yields compared to CEFs.
Limited income enhancement strategies: Most ETFs are passively managed & don’t use leverage or other yield-boosting techniques.
Market price closely tracks NAV: While this is generally a positive, it limits opportunities to buy at a discount nav depending.

CEF Dividend Advantages

Higher yields: CEFs often offer more attractive yields compared to ETFs in similar asset classes, so investors pay for potential income.
Active management: Fund managers can adjust investment strategies to maximize income & total return potential, seeking to generate returns.
Opportunity to buy at a discount: CEFs frequently trade at discounts to their NAV, potentially offering value for fund investor.
Stable asset base: The closed-end structure allows managers to stay fully invested without worrying about redemptions of redeem shares.

CEF Dividend Disadvantages

Higher costs: CEFs typically have higher expense ratios than ETFs, as managed etfs can be expensive.
Potential for return of capital: Some CEF distributions may include return of capital, which can erode the fund’s NAV over time, needing careful consideration.
Added complexity: Understanding CEF strategies, use of leverage, & premium/discount dynamics requires more research.
Less liquidity: CEFs may have lower trading volumes compared to popular ETFs, potentially leading to wider bid-ask spreads on the secondary market.

Making the Right Choice: ETF vs CEF Dividends

When deciding between ETF vs CEF dividends for your income strategy, consider the following factors.

Income needs: If maximizing current income is your primary goal, CEFs might be more appealing due to their typically higher yields from fixed income.
Risk tolerance: CEFs often carry more risk due to leverage & active management, requiring a high risk tolerance. If you prefer a more conservative approach, ETFs might be a better fit.
Investment horizon: Long-term investors may be better positioned to weather the volatility that can come with CEF investments, including real estate holdings.
Tax considerations: If you’re investing in a taxable account, the tax efficiency of ETFs might be more advantageous when considering dividends taxed.
Diversification: Consider how either option fits into your overall portfolio strategy for emerging markets. A mix of both ETFs & CEFs could provide a balance of steady income & growth potential for underlying securities.
Research commitment: CEFs generally require more ongoing research & monitoring compared to index-tracking ETFs.

Remember, there’s no one-size-fits-all answer when it comes to ETF vs CEF dividends. Your choice should align with your financial goals, risk tolerance, & overall investment strategy.

FAQs about ETF vs CEF dividends

Are CEFS better than ETFs?

CEFs & ETFs each have their strengths, & neither is inherently “better.” CEFs often offer higher yields & the potential for buying at a discount, while ETFs typically have lower costs & greater tax efficiency. The better choice depends on your specific investment objectives and risk tolerance.

Is it better to buy dividend stocks or dividend ETFs?

Dividend ETFs offer diversification & professional management, which can be advantageous for many investors etfs. However, individual dividend stocks allow for more targeted investments & potentially higher yields. Your choice should depend on your investment knowledge, time commitment, & desire for diversification in your investment strategies.

What is the downside to closed-end funds?

The main downsides of CEFs include higher expense ratios & potential use of leverage which increases risk. There is also less liquidity compared to many ETFs, & the possibility of trading at a premium to NAV. Additionally, some CEF distributions may include return of capital, which can erode the fund’s asset base over time if not managed properly by fund managers.

How do closed-end funds pay high dividends?

CEFs can pay high dividends through active management strategies to maximize income, or use leverage to enhance yields. Investing in higher-yielding securities, & sometimes returning capital to shareholders is another method. It’s important to understand that higher yields often come with increased risk & the potential for NAV erosion if distributions are not fully covered by fund earnings, especially from preferred stock.

Conclusion

When it comes to ETF vs CEF dividends, there’s no clear winner for every investor. Both fund types offer advantages & potential drawbacks that need to be carefully considered. Consider your individual financial goals & risk tolerance when deciding between ETF vs CEF dividends.

ETFs offer cost-efficiency, transparency, & ease of trading, making them an excellent choice for investors etfs seeking broad market exposure with a dividend component. CEFs, on the other hand, can be powerful income generators. They often provide higher yields & the opportunity to buy assets at a discount to their intrinsic value for cef investors.

Ultimately, the choice between ETF vs CEF dividends should be part of a comprehensive investment strategy. Many investors find value in incorporating both types of funds into their portfolios. They leverage the strengths of each to build a diversified income stream, with distributions typically taxed dividends. As with any investment decision, thorough research & consultation with a financial advisor can help.

Mastering Dividends in Stagflation: Your Guide to Income Investing

March 12, 2025 by Kevin

AI generated image of stock market floor

The economy can be unpredictable, especially with “stagflation” becoming a common term. Understanding how to approach dividends in stagflation is important, even if you’re not an economist. It’s easier to understand than you might think.

Stagflation is a mix of slow economic growth, high unemployment, and high inflation. So, how can dividends help? Let’s get some clarity.

Understanding Dividends in Stagflation
Sectors That Tend to Shine in Stagflation
Stagflation Investing Beyond Dividends
Building a Diversified Portfolio
- Value vs. Growth Stocks
Considerations and Cautions
- The Risk of Chasing Yield
- Don’t Try to Time the Market
The Importance of Flexibility
FAQs about dividends in stagflation
Conclusion

Understanding Dividends in Stagflation

Stagflation isn’t ideal, combining slow economic growth, rising unemployment, and high inflation. However, economic challenges don’t impact all investments the same way.

Dividend-paying stocks could offer some stability. Dividends represented about two-thirds of the S&P 500’s total return during the 1970s stagflation. This shows increased resilience.

Why Dividend Stocks Might Hold Up Better

Companies that pay dividends are usually established, with solid business models. They’re like seasoned ships, ready for rough economic seas.

These dividend aristocrats have a reliable history of paying dividends. Some even increase payments for 25 years or more.

The Power of Pricing

Companies with pricing power often thrive. Certain products have consistent demand, making dividends strong regardless of the economic climate.

During higher inflation, these businesses can often pass on increased costs to customers. People continue paying for their products or services.

Cash Flow is King

Companies generating substantial free cash flow have more potential to boost earnings, dividends, and business operations. This free cash supports dividends even with slow economic growth.

This consistent cash flow acts as a safety net. It allows for continuous operations without major financial strain.

Sectors That Tend to Shine in Stagflation

Certain sectors are less vulnerable to economic downturns, sustaining dividend payments. Some sectors, like utilities, energy, healthcare, and software, have good track records.

Here are some key players in various sectors.

The Essentials: Utilities and Consumer Staples

People need certain products regardless of the economy. This includes electricity and basic household items.

This makes things more reliable for cash flow during uncertainty. Focus on stocks meeting essential consumer needs.

Energy: Fueling Returns During Inflation

Rising energy costs often cause inflation during stagflation. Energy companies, like oil and gas, are essential for infrastructure.

Surging energy prices can lead to profits for these providers. Consider pipelines and energy production companies.

Healthcare: A Resilient Demand

Healthcare is always a priority, in any economic situation. The need for health products is vital for daily life.

This includes pharmaceuticals, healthcare providers, and medical devices. All are important for people’s health.

Software: Subscription Strength

Software companies present unique advantages. Many businesses depend on software, much like people depend on electricity or essential goods.

Businesses often rely on these services, likely paying regardless of difficulties. Many offer subscriptions, leading to steady revenue.

Stagflation Investing Beyond Dividends

Dividend stocks are just one part of the solution. Protecting investments involves using multiple approaches.

Here’s a look at some simple strategies.

Real Estate: A Tangible Asset

Real estate offers some security in a tough market. It provides vital support for how society operates.

Properties generate rental income, potentially boosting real estate value. Many home values rise with market prices, even with a fixed-rate mortgage.

Commodities: Riding the Inflation Wave

Industrial commodities can provide relief during economic challenges. Many have consistent industrial demand, essential for the economy.

Commodities such as oil, copper, and agricultural products can perform well as they are essential for economic activity.

TIPS: Protection Against Rising Prices

Treasury Inflation-Protected Securities (TIPS) are another option. These government-backed bonds help maintain value by tracking inflation.

As the Consumer Price Index (CPI) increases, the principal value of TIPS also goes up. This maintains competitiveness against economic downturns.

Building a Diversified Portfolio

Investing doesn’t have a foolproof method. However, you can improve resilience by diversifying.

Here’s a historical market analysis by users on the Bogleheads forum.

This table shows asset performance from 1972-1981:

Asset Class	Real Return
US stock	-1.27%
Small cap	3.55%
Micro Cap	5.3%
Cash	-0.49%

Diversifying investments is helpful in any market. It builds resilience during uncertain periods.

Value vs. Growth Stocks

Value stocks concentrate on current earnings, making them a solid choice for diversifying income. The focus is on long-term gains.

Value stocks outperformed growth stocks by about 7-11% during high-inflation decades (1940s, 1970s, 1980s). The data highlights their potential.

Considerations and Cautions

Past high-inflation periods don’t guarantee future outcomes. Markets change based on global factors.

Still, there are important factors to consider.

The Risk of Chasing Yield

Extremely high dividend yields might mean a company is struggling. A dividend cut could reduce future income.

A stable payout ratio helps support overall dividend yields and payouts. Companies with low or decreasing cash flow are less reliable.

Don’t Try to Time the Market

Predicting the perfect moment to buy or sell rarely works, even during potential stagflation. Investing is challenging but offers long-term benefits.

A well-planned strategy is crucial. Always consider the long-term perspective in investments.

The Importance of Flexibility

Even well-designed plans can face challenges. Disruptions can arise from supply chain problems or increasing energy costs.

Some newer investors might look at the ProShares Dividend Aristocrats ETF (NOBL). Other investment options include Coca-Cola and IBM.

Adaptability is essential. Watch for economic trends impacting investments, and see if dividends fit your strategy.

FAQs about dividends in stagflation

Are dividend stocks good during stagflation?

Dividend stocks can be useful in a diverse portfolio during stagflation. Their effectiveness can depend on your other investments.

What is the best investment for stagflation?

Historically, commodities, real estate, and value stocks like dividend-paying companies are more stable than growth stocks. Past results aren’t guarantees, so look for current data, such as that shown in forums like Bogleheads.org.

How to get $1000 a month in dividends?

Generating this level of dividend income needs a large investment portfolio, with inherent risks and potential rewards. Diversify across multiple companies for stability.

What happens to dividends during a recession?

While many companies aim to maintain dividend payouts, they might reduce or eliminate them if profits decline. Some sectors, like consumer staples, might keep paying dividends and remain stronger during recessionary periods.

Conclusion

Managing dividends during stagflation might feel complex. Making decisions without complete information can be stressful.

But, it helps to stay flexible, informed, and diversified. Finding reliable high dividend paying stocks in an uncertain market improves your chances of success and helps you understand the stagflationary environment better.

Dividend Updates

Table Of Contents:

What Makes a Great Dividend Stock?

Top Dividend Stocks for September 2025: A Closer Look

BlackRock (BLK)

Essential Utilities (WTRG)

Roche (RHHBY)

Exploring Different Types of Dividend Payers

Beyond the Ticker: Building Your Dividend Strategy

Conclusion

Table of Contents:

What Is Dividend Reinvesting Anyway?

The Big Question: Should You Reinvest Your Dividends?

When Reinvesting Makes Perfect Sense

When Taking the Cash Is the Smarter Move

Understanding Dividend Reinvesting and Your Taxes

Taxable vs. Tax-Deferred Accounts

The Headache of Cost Basis in a Taxable Account

Are All Dividends Taxed the Same?

How to Set Up Your Dividend Reinvestment Plan (DRIP)

A Look at the Bigger Picture

Conclusion

Table of Contents:

What Exactly is ETF Overlap?

Why You Should Care About Hidden Overlap

The Illusion of Diversification

Unintended Sector Bets

Paying Fees for the Same Stocks

Common Examples of ETF Overlap

The S&P 500 Crowd: VOO vs. IVV vs. SPY

Tech-Heavy Titans: QQQ vs. VGT

Total Market vs. S&P 500: VTI vs. VOO

How to Find Your ETF Overlap in 3 Simple Steps

Step 1: List Your ETFs

Step 2: Use an ETF Overlap Checker

Step 3: Analyze the Results

So You Have Overlap. Now What?

Decide Your Goal

Consolidate Your Portfolio

Find Complementary ETFs

A Quick Note on Taxes

Conclusion

Table of Contents:

What Exactly Are Utility Stocks?

Why You Should Consider Adding Utility Stocks to a Dividend Portfolio

The Allure of Consistent Dividends

A Shelter in Stormy Markets

Natural Inflation Hedge

Finding the Best Utility Stocks for Your Portfolio

Look for Strong Financials

Check the Dividend Yield and Payout Ratio

Regulated vs. Unregulated Utilities

The Future of Utilities: New Growth Catalysts

Spotlight on Utility Stocks

Potential Downsides to Watch For

How to Start Adding Utility Stocks to Your Portfolio

Conclusion

Table of Contents:

What Exactly is the LVHI ETF?

Breaking Down the LVHI Strategy

Focus: Developed Markets, Not Emerging

The Hunt for High, Sustainable Dividends

Keeping Volatility in Check

Currency Hedging: What’s That About?

Understanding the LVHI International Dividend ETF Index

What Are the Potential Upsides?

1. Getting Global Exposure

2. Consistent Income Potential

3. Managing Market Swings

A Few Things to Keep in Mind

Who Might Find LVHI a Good Fit?

Conclusion

Table of Contents:

Why Even Look Beyond Our Borders for Dividends?

Understanding International Dividend ETFs

Are International Dividend ETFs Right for You?

Exploring Some International Dividend ETF Options

Vanguard International High Dividend Yield Index ETF (VYMI)

Schwab International Dividend Equity ETF (SCHY)

Vanguard Total International Stock ETF (VXUS)