Dividends, Dividends, Dividends!

Although dividend yields from U.S. listed companies have declined over the past 40 years, we can still find a good handful of dividend yielding companies today. These companies not only have paid regular dividends for many years, but have also increased their dividend payouts consistently.

Research have shown, companies that pay regular dividends not only are able to survive much longer than their counterparts in the same industry, but have also seen their stock prices increase higher than companies that do not have a regular dividend payout policy.


Dividend Paying Mutual Funds

Before I put down any names, let me remind you that when buying Mutual Funds it is essential to find funds with low, or very low Expense Ratio. And also make sure that you buy funds, if possible with No Loading.

Here are 2 funds that are termed Balanced Funds. This is because these funds contain both Stocks and Bonds. Recent studies have found that Balanced Funds do significantly better than funds that are 100% investing in Equity, or funds that are 100% invested in Bonds.

• Vanguard Wellesley Income Fund (VWINX) - 4% Yield
• Berwyn Income Fund (BERIX) - 5% Yield

Both funds have an expense ratio lower than 1%.

Here are 3 BlackRock Closed-Ended Funds that pay dividends to consider:

• BlackRock Dividend Achievers Trust (BDV)
• BlackRock Strategic Dividend Acheivers Trust (BDT)
• BlackRock Enhanced Dividend Achievers Trust (BDJ)

*Take note though that both funds may withdraw capital to substantiate their dividend payment, because these funds aim at offering a consistent payout yield of around 6%.


Dividend oriented Exchange Traded Fund (ETF)

Nowadays ETFs are gaining a lot of popularity due to it's low management costs and stock-like characteristics.

Here are the most popular ETFs:

• iShares Dow Jones Select Dividend Index (DVY)

The Dow Jones Select Dividend Index contains 50 of the highest dividend paying stocks on the Dow Jones Index. The DJ Dividend Select Index is the most commonly used index to benchmark against.

For instance, you wanted to know whether you should invest in a particular stock and do not know whether the dividend yield is sufficient. You therefore look at the latest yield offered by DVY and if the stock you were contemplating to buy is offering a yield higher than the DJ Select Dividend Index, than it is considered a good income stock.

• Mergent Dividend Achievers (DAA)

Mergent selects companies that has made dividend payouts in the last 10 consecutive years. Mergent Dividend Achievers contain more than 300 stocks. There are a few funds under Mergent and also funds that traces the Mergent Dividend Achievers Indices, like the BlackRock Closed-Ended Funds already mentioned earlier.

Mergents offers 11 Dividend Achievers indices: six indices for U.S. stocks, one for international stocks, three for Canadian stocks and one index for U.S. and Canadian stocks:

• Achievers Select Index
• Dividend Achievers 50 Index
• High Growth Rate Dividend Achievers
• NASDAQ Dividend Achievers Index
• KLD Dividend Achievers Social Index
• International Dividend Achievers Index
• Canadian Dividend Achiever Index
• Canadian Dividend Achievers Select Index
• Mergent’s Canadian Dividend & Income Trust Achievers Index
• Mergent’s North American
• Dividend Achievers50 Index
• PowerShares Dividend Achievers Portfolio
• PowerShares High Growth Rate Dividend Achievers Portfolio
• PowerShares High Yield Equity Dividend Achievers Portfolio
• PowerShares International Dividend Achievers Portfolio
• Vanguard Dividend Appreciation Index Fund Investor Shares
• Vanguard Dividend Appreciation ETF
• Claymore CDN Dividend & Income Achievers ETF

• Standard & Poor's Dividend Aristocrats (SDY)

The S&P's Dividend Aristocrats portfolio goes one step further than the Mergent Dividend Achivers Index that it tracks and buys invests in companies that have increase dividends in the past 25 consecutive years.


Mix n' Match

If you wanted to have 'the best of both worlds' you may like to buy both the Dow Jones Select Dividend Index, which is a fund that contains the highest dividend paying companies, and combine your portfolio with a fund that contains reliable, long lasting dividend paying companies; such as the Standard & Poor's Dividend Aristocrats, or the Mergent Dividend Achievers.


Buying individual stocks

You may like to create your portfolio by buying into individual stocks. Investing in income stocks this way may be a costlier affair, but if you know which stocks to buy and by buying into them at a discount you may have a set of stocks that is yielding higher than the above mentioned indices.

Please do diversify your stocks in different sectors, and give equal weightings to each stock.

How do you find good high yielding stocks?

Well, take a look at the different funds mentioned, and build your own index based on them (If you are looking at buying foreign stocks, email: DiverseWealthAsia.com to find out more).

Of course, do remember to do your own research before buying into any stock. Besides researching on individual companies to buy, also look at the current economic condition, and business/sector cycle.