A version of this article appeared in the February 2018 issue of Morningstar ETFInvestor.
Funds that focus on dividend yield may look appealing to those seeking a consistent, stable source of income. Done well, they can deliver on this objective, but a shoddy process can expose investors to large amounts of risk and lead to poor long-term outcomes. Comparing a good high-yield-oriented dividend fund to one with less favorable characteristics should help illustrate some of the nuances that can make or break these strategies.
Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.