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IShares Select Dividend: Bigger, But Not Better

DVY is one of the largest dividend-focused ETFs, but it has a number of flaws.

IShares Select Dividend: Bigger, But Not Better
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Mike Rawson: IShares Select Dividend (DVY) is one of the largest dividend-focused ETFs with nearly $15 billion in assets, but the fund has number of flaws. It is expensive by ETF standards. The fund's 39-basis-point expense ratio is more than twice as high as some of its dividend-focused competitors.

The fund seeks out stocks with the highest dividend yields, yet it does not adequately diversify or screen out companies that are likely to cut their dividends or have subpar earnings growth in the future. Chasing yield can be dangerous. Nearly half of the fund was invested in financial stocks on the eve of the financial crisis.

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