There is a classic conundrum facing dividend-focused investors: Income or capital appreciation? The iShares Select Dividend ETF (NYSE: DVY) is a classic example. It delivers a 3% yield and relatively low volatility, but has underperformed the iShares S&P 500 Growth Fund (NYSE: IVW) by roughly 40 percentage points over the past ten years on a total return basis. A decent yield is always nice, but a 40% gap is too large to ignore. There is one way to get the best of both worlds. The secret is what type of income stocks you… Read More
There is a classic conundrum facing dividend-focused investors: Income or capital appreciation? The iShares Select Dividend ETF (NYSE: DVY) is a classic example. It delivers a 3% yield and relatively low volatility, but has underperformed the iShares S&P 500 Growth Fund (NYSE: IVW) by roughly 40 percentage points over the past ten years on a total return basis. A decent yield is always nice, but a 40% gap is too large to ignore. There is one way to get the best of both worlds. The secret is what type of income stocks you focus on. Many dividend-paying companies operate in mature industries with slower sales growth and competitive environments. Such dynamics often generate solid cash flow, but high payout ratios and saturated markets mean little in the way of stock price appreciation. Find one of these cash machines with new growth engines and you’ve got yourself a stock that could be the best of both worlds. A Cash Machine With Nowhere To Go For years, the U.S. telecom sector has been the model of slow-growth dividend stocks. Despite fairly reliable cash yields, the iShares U.S. Telecommunications ETF (NYSE: IYZ), for… Read More