Dividend ETF

A dividend ETF is an ETF (exchange-traded fund) that’s invested in stocks that pay out high dividends (some money paid regularly, usually quarterly, from a company to its shareholders). Not all stocks pay dividends, but some do—and if you’re wanting to live the dividend life, a dividend ETF is an excellent way to go about it.

Okay, back, back, back it up...what’s an ETF again?

ETFs are kinda like mutual funds, except ETFs track a certain index or group of different securities (which mutual funds only sometimes do). How does that work? Well, ETFs are passively managed, since they’re just following an index (think: algorithms that tinker with the giant basket of stocks every once in awhile), which makes the expense ratios (the fee you pay for whoever is managing the ETF for you) super low.

For instance, you could invest in the dividend ETF called ALPS Sector Dividend Dogs (SDOG). Snoop Dogg—-errr, SDOG—tracks an equal-weighted index of the five highest-yielding securities in the S&P 500 in each sector, and is rebalanced every quarter.

Dividend ETFs mean you can be raking in the dividends while paying minimum expense ratios, all the while staying balanced (since it’s an ETF). Oh yeah, and ETFs are better than mutual funds come tax-time, offer lower minimum investment requirements, and are more transparent.

Cool? Cool. See: ETF. And then WTF.