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. 

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.

Looking for protection

I believe that high-dividend-paying shares can be protection against inflation. These companies tend to be steady firms in solid sectors. In an inflationary environment, they could even be able to increase the prices of their goods or services and maintain or increase their dividends more than the rate of inflation.

For my own portfolio, I’ve always liked ETFs (exchange traded funds). These are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low-cost.

One I’m considering

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one fund that’s always on my radar. Its aim is to invest in global high-dividend-yielding companies by following the S&P Global Dividend Aristocrats Quality Income Index. This tracks companies that have over a $1bn market capitalisation and that have sustained or elevated dividends for at least 10 consecutive years. At the same time, the firms must maintain a positive return on equity and cash flows from operations. Such companies should have pricing power in an inflationary environment.

Diversification is always on my mind when investing and this ETF scores well in terms of number of firms, geographical location and industries.

First, there are around 100 companies in this fund. No company has more than a 3% weighting within the ETF. Second, the fund is geographically diverse. US companies make up 45%, but the remaining firms come from all across the world. Finally, it covers a wide variety of industries including banking, utilities and insurance.    

This ETF is large at over $700m and has a reasonable ongoing charge. The dividend yield is currently around 3.7%, which is acceptable given the diversity of the ETF. 

The outlook

It’s worth me remembering that there are some risks. One that comes to mind is the dividend trap. This is where a dividend isn’t sustainable in the long run because the underlying business isn’t good. I’m also aware there are other alternatives that might provide more protection in the face of inflation, such as gold.

As I see it, demand for oil and gas is pushing up energy bills around the world. Shortages of many goods, because of factory shutdowns due to covid restrictions, are pushing up prices. The rise of the omicron Covid variant is likely to exacerbate things.

On balance, given that inflation is likely to continue to soar next year, I’m seriously contemplating adding this high dividend-paying ETF to my portfolio.

But rather than picking individual dividend-paying shares, I’m looking at an exchange traded fund (ETF).

ETFs are funds that track an index or sector and can be bought and sold like shares through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low-cost. 

The ETF I’m looking at

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one I’ve been considering for a while. Its aim is to invest in global high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. 

This index aims to track global companies that are over $1bn in market capitalisation, that have maintained or increased dividends for at least 10 consecutive years, while at the same time having 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 and this ETF ticks all the boxes across companies, countries and sectors.

First, there are around 100 companies in this fund, with no company having more than 3% weighting within the ETF. There are some household names in there like Exxon Mobil Corp and GlaxoSmithKline. Second, 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 around the world. Finally, I like the fact that sectors as diverse as banking, utilities and insurance are covered. 

Am I going to invest?

The dividend yield is currently around 3.7%, which is a reasonable return. If the market declines, I think this may encourage other investors to hang on to this ETF for the dividends. If so, it will be less volatile than other funds or shares out there.

I feel that this ETF can act as a safety buffer for me in uncertain times. That’s because with this fund holding only those companies that have sustained or increased dividends over 10 years, I’d feel more confident holding on to this ETF if the stock market crashes.

However, it’s not risk-free. Dividends can be reduced at any time and not all high-dividend shares are winners. Some companies maintain high dividends to keep their investors happy when the company isn’t actually growing. In the long run, firms like these are likely to fail.

That said, I believe diversification is important to my portfolio. Although other investors may disagree, I think a dividend-paying ETF like this can be a good addition in case of a stock market crash. I’m going to seriously consider adding it to my holdings.

ETFs are funds that track an index or sector and can be bought and sold like a share through most online brokers. The beauty is that they allow me to invest in multiple companies in a single fund and are usually low cost.  

Recently I have spotted an ETF that looks like it could be very interesting in terms of its potential to pay dividends to me in 2022 and beyond. 

What’s in my crosshair? 

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is the one I have been looking at. Its aim is to invest in global high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. There is a lot to like about this index. It aims to track global companies that are over $1bn in market capitalisation and that have maintained or increased dividends for at least 10 consecutive years whilst at the same time having a positive return on equity and cash flows from operations. 

Looking at the ETF itself, it’s a decent size at over $700m and is relatively low cost. For me, diversification is one of the most important ways to reduce risk 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 the fund. Names you might recognise include Exxon Mobil Corp and GlaxoSmithKline. Secondly, the fund is geographically diverse. 45% is invested in US companies, around 8% is invested in both the UK and Japan whilst other holdings come from all across the world. Finally, I get comfort from knowing that sectors as diverse as banking, utilities and insurance are covered.  

The dividend yield is currently around 3.7%. Some investors might not be that impressed and it’s true that I can find some companies within the FTSE 100 paying monster dividends at the moment, but I am looking for sustainable, long-term dividend streams.  

Of course, no investment is guaranteed, but with this fund holding only those companies that have sustained or increased dividends over 10 years, I feel that this might be a safer bet over the long term. 

Also, an ideal passive income stream is meant to be low maintenance. As the index this ETF tracks rebalances over 2022 and the following years, the companies within this ETF will automatically change. I can’t ask for more hands-off than that. 

Am I going to pull the trigger? 

It certainly is very tempting; however, I think there is more for me to consider, in particular, total return.  

The total return on a share investment needs to consider both the dividend yield and share price growth. As we move into 2022, I am not convinced that focussing only on dividend yield is the right strategy for me.  

The share price of this ETF has barely increased by 3% over five years, and looking to next year and beyond I feel that the technology sector as a whole might be the place to look for the best total return. The dividends might not be as good, but I think that the share price appreciation in certain technology companies will more than make up for it.