High-dividend ETFs offer a balanced approach to investing, combining income generation with the potential for capital appreciation. Whether you're looking to supplement your income or build long-term wealth, incorporating dividend-focused strategies into your portfolio could be a smart move.
What is high dividend-yield investing? A guide to passive income
Many investors are looking for ways to generate income from their portfolios. One approach is to invest in companies that pay dividends, which are regular cash payments made to shareholders. The dividend-yield factor focuses on identifying stocks that offer relatively high dividend payouts compared with their share price.
This strategy is not just about finding companies with the highest yields. It also emphasizes businesses with the financial strength to sustain and grow those dividend payments over time. By focusing on both yield and stability, the dividend-yield factor aims to provide a reliable source of income while maintaining a disciplined investment approach.
How do dividend stocks work?
The dividend-yield factor is a key component of many factor-based investment strategies. It targets companies with:
These characteristics help investors find companies that are not only supporting shareholders today but are also well positioned for the long term.
Why dividend ETFs matter
- Meeting income needs: With bond yields remaining historically low, dividend-paying equities offer a source of income, which can be especially important for those in the later stages of their lives, such as retirees and those nearing retirement.
- Strategic positioning: Dividend stocks tend to be more resilient during market volatility, providing stability through consistent income.
- Long-term growth: Reinvesting dividends can enhance total returns over time, building wealth gradually.
What is Fidelity’s approach to high dividend-yield factor investing?
Fidelity’s high dividend-yield factor ETFs aims to track the performance of tailor-made indexes that are actively designed. Fidelity’s approach strategically allocates to high dividend-yield stocks, with a focus on metrics like payout ratio and dividend growth, aiming to generate income and capital gains. These funds aim to offer:
- single-factor exposure to high-quality dividend-paying companies
- an outcome-oriented approach that seeks to deliver monthly income
- an efficient complement to a well-diversified portfolio
The key takeaways if you’re considering dividend ETFs
