Dividend Growth ETFs?

[ken-do-nim]

Lately I've been trying to research the best dividend growth stocks (JNJ, AVGO, TXN etc.) when it occurred to me that it might be best to simply find a dividend fund that covers this area.  

This article seems to fit the bill: https://www.investopedia.com/articles/etfs/top-etfs/.  It covers ONEQ, SYLD, and TDV.  Does anyone here invest in these, or others?

From an income producing view, SYLD seems best of the 3 with its 2.16% yield, and of course ONEQ claims to have 48.1% performance in the last year which is nice.

[EricL]

(02-22-2021, 07:41 AM)ken-do-nim Wrote: Lately I've been trying to research the best dividend growth stocks (JNJ, AVGO, TXN etc.) when it occurred to me that it might be best to simply find a dividend fund that covers this area.  

This article seems to fit the bill: https://www.investopedia.com/articles/etfs/top-etfs/.  It covers ONEQ, SYLD, and TDV.  Does anyone here invest in these, or others?

From an income producing view, SYLD seems best of the 3 with its 2.16% yield, and of course ONEQ claims to have 48.1% performance in the last year which is nice.

DGRO, SCHD, and VIG are my three favorites.

[fenders53]

We discussed this sometime back. I think the ETFs fail to meet the DGI in part due to turnover. Hold them for years and you still get about the same yield. If in a taxable account they generate Cap gains taxes from trading. If you do it, VIG is among the recognized best. It's a Waterhouse ETF. I preferred VYM though, also from Waterhouse. Pays a considerably higher div because it holds more shares of the high yielding aristocrats like T, Chevron, ABBV etc. I say this without looking at them for about a year. I think DGI is properly done with individual stocks. Grab a couple of the best, (like AVGO) and just hold them for the DGI yield on cost trick to properly work.

[ken-do-nim]

(02-22-2021, 09:27 AM)fenders53 Wrote: We discussed this sometime back.  I think the ETFs fail to meet the DGI in part due to turnover.  Hold them for years and you still get about the same yield.  If in a taxable account they generate Cap gains taxes from trading.  If you do it, VIG is among the recognized best.  It's a Waterhouse ETF.  I preferred VYM though, also from Waterhouse.  Pays a considerably higher div because it holds more shares of the high yielding aristocrats like T, Chevron, ABBV etc.  I say this without looking at them for about a year.  I think DGI is properly done with individual stocks. Grab a couple of the best, (like AVGO) and just hold them for the DGI yield on cost trick to properly work.

I'd like to understand this better.  

Let's say I park $10k in AVGO.  In 10 years, that $10k grows to, let's say $20k.  They keep the dividend at 3%, so when I was getting $300 per year, now it's $600 per year.

Now let's say I instead put the $10k into VIG.  What happens differently?  I see today its yield is 1.41%.  Has that not remained constant as the price has appreciated?  Did it use to be higher?

[fenders53]

(04-09-2021, 11:48 AM)ken-do-nim Wrote:

(02-22-2021, 09:27 AM)fenders53 Wrote: We discussed this sometime back.  I think the ETFs fail to meet the DGI in part due to turnover.  Hold them for years and you still get about the same yield.  If in a taxable account they generate Cap gains taxes from trading.  If you do it, VIG is among the recognized best.  It's a Waterhouse ETF.  I preferred VYM though, also from Waterhouse.  Pays a considerably higher div because it holds more shares of the high yielding aristocrats like T, Chevron, ABBV etc.  I say this without looking at them for about a year.  I think DGI is properly done with individual stocks. Grab a couple of the best, (like AVGO) and just hold them for the DGI yield on cost trick to properly work.

I'd like to understand this better.  

Let's say I park $10k in AVGO.  In 10 years, that $10k grows to, let's say $20k.  They keep the dividend at 3%, so when I was getting $300 per year, now it's $600 per year.

Now let's say I instead put the $10k into VIG.  What happens differently?  I see today its yield is 1.41%.  Has that not remained constant as the price has appreciated?  Did it use to be higher?

If they held the same stocks in the same proportion forever it would be a similar outcome.  Fees compound too so that makes VIG much better than most other ETFs over the course of decades, but less attractive fees vs a no fee DGI port that was identical.  When you buy an index or any ETF you are assuming you can pick a smaller number of holding that will outperform a broad market average over time.  Understanding your funds investment strategy is important.  Will they automatically dump a stock that freezes their dividend or cuts it.  Do they adjust holding percentages by market cap?  Do they window dress at the end of a quarter so the next report looks good?  If not, then what criteria?  Most actively managed funds find a way to under perform for a variety of reasons.

[EricL]

(04-09-2021, 12:02 PM)fenders53 Wrote:

(04-09-2021, 11:48 AM)ken-do-nim Wrote:

(02-22-2021, 09:27 AM)fenders53 Wrote: We discussed this sometime back.  I think the ETFs fail to meet the DGI in part due to turnover.  Hold them for years and you still get about the same yield.  If in a taxable account they generate Cap gains taxes from trading.  If you do it, VIG is among the recognized best.  It's a Waterhouse ETF.  I preferred VYM though, also from Waterhouse.  Pays a considerably higher div because it holds more shares of the high yielding aristocrats like T, Chevron, ABBV etc.  I say this without looking at them for about a year.  I think DGI is properly done with individual stocks. Grab a couple of the best, (like AVGO) and just hold them for the DGI yield on cost trick to properly work.

I'd like to understand this better.  

Let's say I park $10k in AVGO.  In 10 years, that $10k grows to, let's say $20k.  They keep the dividend at 3%, so when I was getting $300 per year, now it's $600 per year.

Now let's say I instead put the $10k into VIG.  What happens differently?  I see today its yield is 1.41%.  Has that not remained constant as the price has appreciated?  Did it use to be higher?

If they held the same stocks in the same proportion forever it would be a similar outcome.  Fees compound too so that makes VIG much better than most other ETFs over the course of decades, but less attractive fees vs a no fee DGI port that was identical.  When you buy an index or any ETF you are assuming you can pick a smaller number of holding that will outperform a broad market average over time.  Understanding your funds investment strategy is important.  Will they automatically dump a stock that freezes their dividend or cuts it.  Do they adjust holding percentages by market cap?  Do they window dress at the end of a quarter so the next report looks good?  If not, then what criteria?  Most actively managed funds find a way to under perform for a variety of reasons.

I think ETF's are a really good way to invest in DGI companies if you don't want to deal with individual stock picking or portfolio management.

VIG
Expense Ratio - 0.06%
3YR annual returns - 15.49%
5YR annual returns - 14.82%
10YR annual returns - 12.54%

SHCD
Expense Ratio - 0.06%
3YR annual returns - 18.03%
5YR annual returns - 16.30%
10YR annual returns - n/a

DGRO
Expense Ratio - 0.08%
3YR annual returns - 15.33%
5YR annual returns - 15.57%
10YR annual returns - n/a

The annual income growth may be a bit lumpier because of the continual rebalancing of the portfolio, but overall they hold high quality stocks that any typical DGI portfolio would.

Just for fun, here are some sector based ETF returns.

XLK - Technology
Expense Ratio - 0.12%
3YR annual returns - 25.90%
5YR annual returns - 27.99%
10YR annual returns - 19.19%

XLV - Healthcare
Expense Ratio - 0.12%
3YR annual returns - 12.28%
5YR annual returns - 13.15%
10YR annual returns - 15.16%

XLY - Consumer Discretionary
Expense Ratio - 0.12%
3YR annual returns - 17.14%
5YR annual returns - 18.29%
10YR annual returns - 16.76%

Pretty amazing results really.

[ken-do-nim]

Awesome thanks Eric. Now I need to compare those to ONEQ, SYLD, and TDV from the Investopedia article. Yeah I've become ETFs first, individual stocks second. So while I don't mind holding some DGI individual stocks, I'm missing the ETF(s) that should have come first.

[fenders53]

(04-09-2021, 03:46 PM)ken-do-nim Wrote: Awesome thanks Eric.  Now I need to compare those to ONEQ, SYLD, and TDV from the Investopedia article.  Yeah I've become ETFs first, individual stocks second.  So while I don't mind holding some DGI individual stocks, I'm missing the ETF(s) that should have come first.

I think an ETF/stock combination can be a good plan and may be where I end up when I decide I don't want to spend so much time managing a portfolio.  

Using your DGI as an example, you probably have some good ideas for stocks that will likely excel over the average.  IMO AVGO is one of them.  But do we have 15-20 great ideas, and the willingness to monitor them?  You need a fairly diversified basket to maintain the safety of VIG so that isn't just a small handful of stocks.   But you could add two or three stocks to an ETF and maybe boost your returns.  Maybe it doesn't work out, but you leaned VIG a little more into a few sectors you believe in long-term.  You maintain some control.

I hold about 35 stocks I would consider DGI.  At any given time five of them don't seem like such a great idea for the next few years, but I tend to hold most of them a bit too long.  Charlie Munger has discussed this at length even 5 stocks is good enough.  He leaves out the part that Tim Cook the AAPL CEO will take his call or go have lunch.  Normal folks can't possible have adequate info to make a bet with our entire net worth on five stocks. It's one of the few pieces of horrible advice I've ever heard from Charlie. You would never hear that from Peter Lunch and Berkshire Hathaway is noting at all like that.

I think you are going to be more at ease with an ETF and a couple individual DGI stock picks.  We will scold you for impatience lol, but you aren't stuck with those picks for 20 years.  The facts may change.   It's actually likely there is a better idea for 2030, but AVGO sure looks pretty good for at least the next few years.

I know I am hard on you here but I do mean to help.  You have a few years before the port gets so large that a big mistake is painful.  I won't hit your $3MIL goal but I will sure be ecstatic if you do Ken.

[ken-do-nim]

When I first got the refinance cash-out money, I bought a huge number of stocks and funds. What I realized is that even if they all turned out to be good ideas, I just can't absorb that many at once. I monitor my stocks constantly, and I establish a feel for them. I know how they behave on good days and bad days, and whether they tend to ride up or down early or late in the trading day. And with all these new ones, I just can't develop that sense fast enough. So I've already started contracting down to a smaller more manageable amount (with higher balances in each, obviously). My taxes will be complicated next year but it's all imported automatically anyway.

So yeah, I think I will keep a few of the good ones like Target and Accenture, and turn the rest into VIG, and over time, I can start branching out to the other ones again.

I know you're hard on me, but I can take it We also have different investing philosophies. I would rather take $100k, turn it into $200k, then possibly watch it shrink to $150k in a downturn, as opposed to invest conservatively and turn that $100k into $125k with minimal effect from the downturn. I also am not a full believer in diversification. The goal is to grow the portfolio over time, not to have some do well and some do not as well on any given day/month.

Assuming I keep my job through age 60, the market doesn't have a major downturn, and child support payments end when they should, I shouldn't have any problem hitting my goal. Thanks I appreciate that you are cheering for me!

[fenders53]

You have to find a manageable amount of investments so you can put in the DD time and have conviction. No waking up one morning and dumping JNJ because it is stagnant. I have too many holdings as well. Most of the active members here do. When the bull runs it works well enough and any strategy look reasonable. Mediocre stocks are forgiving now.

[ken-do-nim]

So, I ended up settling on SCHD.  I'm going to eventually turn it into a dominant position in my portfolio as I get closer to retirement, as the safer option to my yield traps.

Here are some comparisons of everything discussed so far in this thread.

Yield
SCHD: 2.93%
VYM: 2.79%
DGRO: 2.10%
VIG: 1.56%
SYLD: 1.42%
XLV: 1.40%
VOO: 1.34%
TDV: 1.11%
XLK: 0.73%
XLY: 0.63%
ONEQ: 0.58%

5 year performance (not including dividend reinvestment)
SCHD: +81.82%
VYM: +47.58%
DGRO: +87.58%
VIG: +89.12%
SYLD: +107.52%
XLV: +83.98%
VOO: +103.57%
TDV: +52.39%
XLK: +228.37%
XLY: +116.48%
ONEQ: +175.98%

In my case, I'm prioritizing yield (since that represents monthly income) and SCHD's performance is adequate compared to the others, whereas VYM falls short.  SYLD beats VOO, which is impressive, but this is just one 5 year span.  It is worth having as well.  XLK is obviously the star performer here, but yield under 1 doesn't really help very much with monthly income. It's a good growth etf like SOXX (311.18% in 5 years).

[kblake]

(08-18-2021, 08:25 AM)ken-do-nim Wrote: So, I ended up settling on SCHD.  I'm going to eventually turn it into a dominant position in my portfolio as I get closer to retirement, as the safer option to my yield traps.

Here are some comparisons of everything discussed so far in this thread.

Yield
SCHD: 2.93%
VYM: 2.79%
DGRO: 2.10%
VIG: 1.56%
SYLD: 1.42%
XLV: 1.40%
VOO: 1.34%
TDV: 1.11%
XLK: 0.73%
XLY: 0.63%
ONEQ: 0.58%

5 year performance (not including dividend reinvestment)
SCHD: +81.82%
VYM: +47.58%
DGRO: +87.58%
VIG: +89.12%
SYLD: +107.52%
XLV: +83.98%
VOO: +103.57%
TDV: +52.39%
XLK: +228.37%
XLY: +116.48%
ONEQ: +175.98%

In my case, I'm prioritizing yield (since that represents monthly income) and SCHD's performance is adequate compared to the others, whereas VYM falls short.  SYLD beats VOO, which is impressive, but this is just one 5 year span.  It is worth having as well.  XLK is obviously the star performer here, but yield under 1 doesn't really help very much with monthly income.  It's a good growth etf like SOXX (311.18% in 5 years).

You really like buying at those peaks don't you