I’m finding it a difficult time to invest right now. We’re in an inflationary environment and worries about rising interest rates are causing stock market volatility. Against this backdrop, I’m looking for a top exchange traded fund (ETF) pick for the long haul. Something that I’m hopefully comfortable holding for years to come.
I’m looking for an ETF paying high dividends and want companies within a fund like this to be steady, reliable firms in solid sectors. For me, that’s a good long-term investment.
A top ETF pick
SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one I’ve been considering for a while. It aims to invest in high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. This includes companies that have over $1bn in market capitalisation and that have maintained or increased dividends for at least 10 consecutive years. Firms must also have a positive return on equity and cash flows from operations.
This ETF is a good size at over $700m and is relatively low-cost. For my portfolio, diversification is one of the ways I try to reduce risk over the long term and this ETF ticks all the boxes across companies, countries and sectors.
Firstly, there are around 100 companies in this fund, with no company having more than 3% weighting within it. There are some household names in there like Exxon Mobil Corp and GlaxoSmithKline. Secondly, the fund is geographically diverse. Some 45% is invested in US companies, around 8% is invested in both the UK and Japan, while other holdings come from all over the world. Finally, I like the fact that sectors as varied as banking, utilities and insurance are covered.Â
The dividend yield is currently around 3.7%, which is a reasonable return given the diversity of the fund.
Over the long run
Of course, it’s not risk-free. Dividends can be reduced at any time and not all high-yielding shares are winners. Some companies maintain high dividends to keep their investors happy when the company isn’t growing. In the long run, firms like these are unlikely to grow.
However, though nothing is certain, there are three reasons why I still have confidence in this ETF for the long haul. I like that no company has more than a 3% weighting. Even if one firm fails, it shouldn’t be too significant to my holdings overall.
Then, if and when there’s a stock market decline, this ETF may well be less volatile than some other funds or shares out there. This is because investors may hang on for the dividend stream rather than selling.
Finally, the fund’s policy of only holding companies with strong track records over 10 years+, underlines its long-term focus. And I feel firms like these have the potential to produce dividend streams for a long time into the future, even though I know past performance is no guarantee of what might happen next.
That’s why for my own portfolio, this is a top ETF pick that I’d buy and hold for years.