Avoid Dividend Offenders With This ETF

Core Viewpoint - The article discusses the importance of selecting dividend stocks carefully, highlighting that some companies with long histories of dividend increases have recently cut or suspended their payouts due to company-specific issues. It emphasizes the role of ETFs like the ALPS O'Shares U.S. Quality Dividend ETF (OUSA) in helping investors avoid potential dividend offenders through a focus on dividend growth, volatility traits, and quality [1]. Group 1: ETF Characteristics - OUSA has a trailing 12-month yield of 1.39%, which, while not appealing to yield-seeking investors, suggests potential for long-term payout growth [1]. - The ETF is designed to provide exposure to sectors with low to moderate payout ratios, with technology, financials, and healthcare stocks making up over 53% of its portfolio [1]. - The article notes that companies with high payout ratios are more likely to cut dividends, indicating that a balanced approach to payouts is essential for equity-income investors [1]. Group 2: Market Insights - In a low-yield environment, investors may be tempted to pursue high-yield stocks, which can be risky as these yields often come from troubled sectors or companies [1]. - Dividend durability is highlighted as a critical factor, with some stocks and ETFs, including OUSA, providing more reliable payouts compared to others [1]. - The article cites that many companies with high payout ratios have historically been the most likely to reduce their dividends, reinforcing the need for careful selection [1].