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ETF Specialist

A Silver-Rated ETF Filled With Dividend Diehards

This fund only invests in the most disciplined dividend payers.

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Targeting firms that have raised their annual dividends in each of the past 20 years has made SPDR S&P Dividend ETF (SDY) one of the highest-yielding, highest-quality funds in its Morningstar Category. Pursuing yield can be risky, but this fund's strict selection criteria underpin a risk-conscious approach. It retains its Morningstar Analyst Rating of Silver.

This fund replicates the S&P High Yield Dividend Aristocrats Index, which features the S&P 1500 constituents that have increased their annual dividend payments in each of the past consecutive 20 years. This is a demanding requirement that only consistently profitable firms can meet, giving this portfolio an appealing quality tilt. However, this screen is backward-looking and may admit firms that cannot sustain their dividend growth, as it ignores payout ratios and expected earnings growth. Additionally, this screen limits the depth of the portfolio and filters out some quality dividend payers, like Microsoft (MSFT) and Home Depot (HD).

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Ryan Jackson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.