By Harry Domash
You’re probably aware of the advantages of using exchange-traded funds (ETFs) to easily move in and out of market sectors such as energy, technology, financial etc. But did you know that some exchange-traded funds pay significant dividends.
In fact, more than 300 exchange-traded funds pay dividends equating to 3 percent or greater yields (annual dividend divided by share price). Compare that to what you’re getting from your money market accounts or bank CDs. The downside is that unlike bank accounts, with exchange-traded funds, your principal (share price) is not insured, so you could lose money in a down market.
Here’s how to use Reuter’s ETF screener to find relatively low risk dividend-paying exchange-traded funds. Reuters allows you to screen for exchange-traded funds using Lipper’s “Consistent Return” rating that grades exchange-traded funds from 5 (best) to 1 (worst) based on risk-adjusted returns (higher is better) and return volatility (lower is better).
Start at Reuters’ home page (www.reuters.com), highlight “money” in the top row, and then click on Fund Screener.
Highlight the exchange-traded funds box in the Fund Universe selection area to limit your search to the exchange-traded funds tracked. Delete the selection criteria listed in the default screen and then select “Add More Criteria.”
Use the Add Criteria buttons to select Current Dividend Yield (Profile category), Five-Year Total Return (Total Return Performance), and Consistent Return (Lipper Leaders).
Then select rating levels four and five for Consistent Return to limit your list to the exchange-traded funds with the most consistent (least volatile) year-to-year returns. Then select “4 >” for Current Dividend Yield, “10 to 15” and “15 >” for Five Year Total Return, which specifies minimum 10 percent average annual returns counting dividends and share price appreciation. …