Investors are ending the year in a wary mood. Sure, 2006 was a very good year for U.S. investors and substantially better for global ETF investors but what is going to happen next year?
The honest answer is that nobody knows.
The smart investor will make sure that their portfolios can benefit from rising global markets but still weather the inevitable pullbacks. One way to achieve this is to have a nice chunk in Dividend and Income rich ETFs.
In 2007, Chartwell ETF Advisor is adding a seventh model ETF portfolio which will focus on these markets. The reason is that baby boomers need to generate retirement income and fixed income alone will probably not get the job done. Investors need the prospect for capital appreciation plus some downside protection from high dividend lower volatility stocks.
Here are some positions that the Chartwell Dividend/Income ETF portfolio will likely hold going into 2007.
The PowerShares International Dividend Achievers ETF basket (PID) contains 60 international ADRs (American Depository Receipts) that trade on U.S. exchanges. All of these companies have increased their annual dividend for five or more consecutive fiscal years. The portfolio is rebalanced quarterly and reconstituted annually. 55% of the companies in this ETF are classified as large-cap value, 16% mid-cap value and 13% small cap value.
Another interesting new ETF from Powershares is the Financial Preferred Equity ETF (PGF). This is the first ETF to provide investors access to preferred shares within the tax efficient ETF structure. The preferred marketplace is over $200 billion and again it is a way to enjoy potential of capital appreciation with dividend income. All dividends from this ETF are expected to be qualified dividend income.
Another Option is the recently introduced First Trust Morningstar Dividend Leaders ETF (FDL). This is a portfolio of the top 100 highest yielding U.S. stocks screened for consistent records of dividend payments as well as the ability to sustain future payments. Individual company weightings in the ETF are capped at 10% and stocks weighing more than 5% each cannot exceed 505 of the total portfolio.
Then of course there is the fast-growing family of WisdomTree ETFs which weight all holdings in their ETFs based on dividends. These range form domestic ETFs such as the Total Dividend Fund (DTD) to international options such as the International Dividend Top 100 ETF (DOO) and a variety of international sector ETFs like the International Utilities sector ETF (DBU).
Investors need to be careful not to have the same positions in all of your dividend/income ETFs. It is important to spread it around by having ETFs with different weighting schemes such as market weight, equal weight, dividends per share/price and available dividends.
It would be nice to have your 2007 Christmas stockings full of dividends
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Source by Carl Delfeld
