Selecting the Right Dividend ETF
Does iShares or PowerShares offer the best?
The battle of the dividend-focused exchange-traded funds may already be over. At least in terms of assets and fund flows, iShares Dow Jones Select Dividend Index (DVY) looks dominant. Its main rival, PowerShares HighYield Dividend Achievers (PEY), has amassed a respectable $287 million in net assets since its December 2004 launch. However, that's still less than a third of the $947 million in net new money that iShares Dow Jones Select Dividend gathered in the first two months of 2005.
Asset flows don't tell the whole story, though. Despite the size disparity, it's hard to render definitive judgment on which ETF is better because their real-world track records are so short (the iShares ETF has been around for less than two years and the PowerShares fund for little more than one quarter). That doesn't stop people from asking, however, so let's look at how these two yield-centric ETFs stack up so far.
On the surface, the funds look similar: They both try to offer exposure to stocks that have above-average yields and the ability to continue paying and increasing their dividends. The benchmarks they track, however, use different recipes.
Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.