iShares Core High Dividend ETF (HDV): A Balanced Approach to Income Investing

Choosing the Right Dividend ETF: A Matter of Taste and Strategy

Sometimes, choosing the "best" stock or exchange-traded fund (ETF) boils down to a matter of personal preference. Just like choosing a birthday cake – some prefer chocolate, some vanilla, and some might even opt for an ice cream cake – there are no wrong answers, but there are important considerations. Similarly, when selecting dividend ETFs, there are many paths you can take. You might look for a fund that is outperforming the index but offers modest dividend returns. Or, you might find funds that offer fantastic returns but are lagging the market in overall performance. A more balanced approach is to select a fund that provides a good blend of solid performance, healthy dividend payouts, and a relatively low expense ratio. The iShares Core High Dividend ETF (HDV) represents a solid choice in this regard.

What is the iShares Core High Dividend ETF?

The HDV ETF is a passively managed fund operated by iShares, a subsidiary of Blackrock. The fund tracks 75 U.S.-based stocks in the Morningstar Dividend Yield Focus Index, with the goal of balancing yield, performance, and low costs. As fund managers rebalance the ETF quarterly, they specifically look for stocks that have sustainable dividends and strong balance sheets.

Key Features of the HDV ETF

* Low Expense Ratio: The expense ratio is only 0.08%, or $8 annually per $10,000 invested. * Attractive Dividend Yield: The dividend yield of 3.3% is comfortably higher than the 1.2% yield of the S&P 500. * Solid Performance: The fund has delivered a year-to-date gain of 9.1%, which is on par with the overall market.

What Stocks Does the HDV ETF Buy?

Buying shares of the iShares Core High Dividend ETF gives you a curated selection of blue-chip dividend stocks. Nearly 20% of the fund is invested in financial services stocks, but you also have a healthy representation of tech stocks (16%), healthcare (12.4%), and communications (11.3%). The fund's top holdings include ExxonMobil, Johnson & Johnson, AbbVie, Chevron, and Home Depot.
| Equity | Portfolio Weight | Dividend Yield | | :---------------- | :--------------- | :------------- | | ExxonMobil | 8.7% | 3.5% | | Johnson & Johnson | 6.7% | 2.9% | | AbbVie | 6% | 3.1% | | Chevron | 5.9% | 4.3% | | Home Depot | 4.7% | 2.2% |
The diversification and blue-chip names are a major selling point when looking for dividend ETFs. You can find some with a bigger payout ratio, such as the Alerian MLP ETF, which tracks master limited partnerships and offers an 8% yield. However, the downside is that you are heavily dependent on energy stocks, and it's generally not advisable to be overly exposed to any one sector. It should also be noted that the Alerian MLP ETF is trailing the market so far this year despite that oversized yield.

Comparing the iShares Core High Dividend ETF to the Competition

Let's look at the HDV ETF in a head-to-head comparison with two other popular dividend ETFs -- the Schwab US Dividend Equity ETF and the Capital Group Dividend Value ETF. [Performance Comparison Chart] Here you have three distinct flavors of funds. The Capital Group Dividend Value ETF is having the best year if you look strictly at returns, but that's because it's overloaded with technology stocks that pay a low dividend. Top holdings include Microsoft, which yields 0.6%, and Nvidia, which yields a paltry 0.2%. On the other hand, there's the Schwab US Dividend Equity ETF, which has a slightly superior yield to the iShares Core High Dividend ETF, but its year-to-date performance is subpar. [Dividend Yield Comparison Chart] That's why I lean towards the iShares offering here. I appreciate the blue-chip names and the balance of performance to yield. ETFs such as this are an excellent way to diversify a portfolio, and it's even better if you can find one that actually pays you back to hold it. If you take a position in this or any other dividend ETF, it's an excellent idea to ensure you reinvest your quarterly dividend payout back into the fund to allow your earnings to compound over time. By maintaining a diversified, well-rounded portfolio of dividend stocks, you'll be well on your way to meeting your retirement goals.