Two New iShare Dividend ETFs Make Diversified Dividend Investing Easy

Own 200+ Stocks with these Domestic and International Dividend ETFs

Investing for dividends with dividend exchange traded funds, or dividend ETFs.
You don't have to be rich to begin investing for dividends thanks to new low-cost dividend ETFs such as the iShares Dow Jones Select Dividend and the Dow Jones International Select Dividend exchange traded funds.

Perhaps the greatest luxury of all is an investment that throws off cash because it provides a constant stream of earnings that can be used to buy the goods and services you desire without having to punch a time clock.

After all, a portfolio of $10,000,000 in bonds and dividend stocks could generate between $400,000 and $800,000 in annual income without touching your principal. That level of earning power would put you squarely in the capitalist class and can support even the healthiest Amouage Jubilation XXV habit, as you count your money from your new Clive Christian study or home office.

How Can Ordinary, New Investors Invest for Dividends Without a Lot of Money?

Most people, however, don't have that kind of money (or anywhere near it). So how can dividend investors take advantage of cost savings and achieve diversification without breaking the bank in brokerage commissions? Thanks to the iShares family of products, it is now possible. Mr. Monopoly and other dividend lovers can rejoice because iShares has created two major low-cost exchange traded funds (ETFs), or dividend ETFs, designed to let investors buy a block of dividend paying common stocks by purchasing a single security that trades just like a share of regular stock through their stock broker. That means instant diversification with only one brokerage commission, making passive income easier to achieve for those on a smaller budget.

In fact, by purchasing the two iShare dividend ETFs together, one of which invests in the United States and the other internationally, it is possible to acquire roughly 200 global stocks paying dividends in virtually every time zone and major currency with only two transactions, and thus two brokerage commissions.

For those who want widespread diversification and the lowest mutual fund management costs possible but don't have the $5 or $10 million necessary to open a private office, these dividend ETFs may just be the perfect solution depending upon the situation.

Dow Jones International Select Dividend Index Fund ETF

This dividend ETF owns a basket of roughly 100 individual dividend stocks from around the world, collecting cash dividends from Hong Kong, Switzerland, Australia, Great Britain, Spain, France, and more.

The expense ratio is only 0.50%, compared to 1.00% or 1.25% for most actively managed funds.

The current dividend yield for the Dow Jones International Select Dividend Index Fund is 3.52%, which is 0.52% higher than what 10 year United States Treasury bonds are offering. At today's market prices, the dividend ETF consists of the following sectors:

 

  • Dow Jones International Select Dividend Index Fund ETF Sector Breakdown as of 07/21/2010:
  • Financials - 20.14%
  • Consumer Services - 14.70%
  • Industrials - 14.67%
  • Oil & Gas - 11.94%
  • Utilities - 11.05%
  • Telecommunications - 10.25%
  • Consumer Goods - 6.51%
  • Basic Materials - 4.67%
  • Technology - 4.08%
  • Health Care - 1.50%
  • Other - 0.50%

 

Dow Jones Select Dividend Index Fund ETF

The domestic version of the dividend ETF, the Dow Jones Select Dividend Index Fund owns 101 stocks that pay cash dividends and boasts a low expense ratio of 0.40% annually. It trades under the ticker symbol DVY.

Holdings of this dividend ETF include blue chip stocks such as Kimberly-Clark, McDonald's, Chevron, Clorox, Caterpillar, General Mills, Coca-Cola, Bristol-Myers Squibb, Avon, General Electric, and Tupperware Brands. With a current dividend yield of 3.89%, it trades at a collective price-to-earnings ratio of only 13.

The sectors held by the Dow Jones Select Dividend Index ETF fund are as follows:

  • Dow Jones Select Dividend Index Fund ETF Sector Breakdown as of 07/21/2010:
  • Utilities - 28.42%
  • Consumer Goods - 19.46%
  • Industrials - 15.93%
  • Financials - 12.72%
  • Basic Materials - 6.50%
  • Oil & Gas - 4.14%
  • Health Care - 3.71%
  • Telecommunications - 3.06%
  • Technology - 1.11%
  • Other - 0.20%