When it comes to dividend stocks, it's easy to be tempted by companies based on a ranking of the highest dividend yields. After all, dividend yield is a direct measure of the cash payout a company provides for investors relative to its price, and the higher the yield the more enticing the distribution is, right? In actuality, there are other factors to consider when selecting dividend names, and investors attuned to the history of a dividend's growth—or lack thereof—may end up identifying more stable and successful investments.
Still, close monitoring of a potential dividend investment's history of payouts and growth can be difficult to manage for investors looking to trade quickly, and there always exists the risk that a company will face unexpected challenges and have to make cuts to its distributions. To diversify dividend investments, it may help to consider a dividend-focused exchange-traded fund (ETF), which not only holds a larger group of dividend-paying companies but also does the work of selecting and balancing the portfolio. For a broad view of the potent dividend growth space, consider the iShares Core Dividend Growth ETF (NYSEARCA: DGRO).
