When seeking long-term stable investment returns, we often think of dividend stocks. However, directly buying and holding individual dividend stocks can be quite cumbersome for many investors. At this point, exchange-traded funds (ETFs) that include dividend stocks become a convenient and effective solution. However, don't assume that all dividend ETFs perform similarly. In fact, they each have unique methods for selecting holdings, which directly affects their performance. Some may be more suitable for your investment strategy, while others may not be as appropriate.

Now let's take a look at two dividend-related ETFs suitable for income investors, as well as a fund that you may want to avoid for the time being.

# # Recommendation: Schwab U.S. Dividend Equity ETF

First, let's talk about the Schwab U.S. Dividend Equity ETF. This fund has a trailing yield of nearly 3.8%, making it a solid choice for income-focused investors. While it is possible to find funds with higher yields, it may not be easy to ensure similar quality. This fund has selected some stable companies in its Holdings, such as Chevron, AbbVie, Altria, and PepsiCo. It chooses a partially equal-weighted index from the Dow Jones U.S. Dividend 100, and the Holdings will change during quarterly adjustments.

This selection criteria relies not only on dividends but also on the company's cash flow and return on equity. This overall evaluation method has proven to be effective. The result of this strategy is the selection of a series of value stocks that may not generate large amounts of revenue or profit growth but are of reliable quality. For example, many companies enhance their value through generous stock buyback programs. Over the past five years, the fund has accumulated a growth of 45%, and over the past ten years, the increase has exceeded 130%. With dividend reinvestment, performance can be improved by an additional 60% to 70%. Although it still falls short of the S&P 500 index in the long term, considering its value characteristics and relatively low risk, it is still worth a try.

# # Recommendation: Vanguard Dividend Appreciation ETF

Next, the Vanguard Dividend Appreciation ETF has gained a lot of favor among market investors. With a market capitalization of about $100 billion, it is built on the S&P U.S. Dividend Growers and holds some of the most trusted dividend growers in the market, such as Broadcom, Microsoft, and JPMorgan Chase. Over the past decade, its quarterly payments have nearly doubled, fulfilling expectations. At the same time, it has also contributed to decent capital appreciation, with the fund price rising by up to 186% during the same period.

Of course, this fund has a noticeable drawback, which is that its dividend yield is slightly lower compared to other products. The trailing 30-day dividend yield currently just exceeds 1.6%. This low yield mainly stems from the selection criteria of the S&P, which excludes high-yield stocks to avoid market unease regarding high growth potential or potential high risk. For investors, this means that while this fund can bring long-term capital gains, it is not the best option for providing cash flow, making it more suitable for growth-oriented blue-chip investors who have confidence in income growth but do not need to use it immediately for payments.

# # Avoid: Vanguard High Dividend Yield ETF

On the other hand, if what you need is a stable and continuous investment income, it may be necessary to avoid the Vanguard High Dividend Yield ETF for now. This fund has a 30-day average dividend yield of only 2.5%, and it has been even lower at times. Although the naming of this fund seems to emphasize high dividends, its performance is not as expected. For example, compared to the previously mentioned Schwab fund, it is slightly inferior in terms of yield.

It is important to note that this temporary lull does not mean it is not worth holding forever. The fund tracks the FTSE High Dividend Yield Index, which is relatively robust in its principles and execution, but the market's abnormal performance and the price fluctuations of its Holdings have temporarily weakened its yield. There are other attractive dividend payment options in the current market, so it may require some time to wait for its return.

These funds have different positions, so it is advisable to choose based on your investment goals and risk preferences. Remember, the market can change at any time, so it is most important to stay flexible and adjust your strategy in a timely manner. Do you have any questions about investment goals or strategies? Feel free to leave a message to chat! 😊