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ETF Specialist

4 Medalist ETFs That Help You Reach for Yield With Less Risk

This dividend strategy mitigates risk and offers above-market yields.

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Not all dividend strategies are alike. Some prioritize dividend growth, while others prioritize current income. Those that aggressively chase yield are often riskier than their growth-oriented counterparts, as many of their holdings offer high yields because of falling share prices often resulting from deteriorating fundamentals. Additionally, these companies may pay out a large share of their earnings and have a narrow buffer to cushion these payments if their business weakens.

While a narrow focus on yield increases the risk of overweighting low-quality firms, a narrow focus on dividend growth is often accompanied by low current yields. A trade-off for low current yields in exchange for higher payouts in the future may result in a portfolio with only a minimal yield pickup relative to the total market. There is a middle ground of dividend strategies that mitigate risk and yet offer above-market yields. This article will illuminate some Morningstar Medalists that offer a yield pickup compared with Vanguard Total Stock Market ETF (VTI), while demonstrating a history of increasing dividend payments.

Venkata Sai Uppaluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.