You Should Buy Individual Stocks Instead of Dividend ETFs

The simultaneous rise in popularity of dividend-paying stocks has opened the floodgates within the ETF landscape for a slew of dividend-focused ETFs. These funds offer the convenience of a one-stop solution. They allow investors to own baskets of the market's highest-quality dividend stocks. At the same time, though, an analysis of the yields offered on popular dividend ETFs reveals a troubling trend -- one that should compel investors to consider individual stocks instead.

There are now an abundance of dividend-oriented exchange-traded funds to choose from. One of the most popular choices is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG ) , which is a convenient, low-cost way to own several of the market's premier dividend-growers. At the same time, though, even a cursory analysis of the Vanguard fund should leave investors with some concerns. Specifically, the fund's yield of just 2.1% -- barely equal to the yield on the broader S&P 500 index -- leaves a lot to be desired.

Source: Motley Fool

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