A Reason To Be Careful With Dividend ETFs Today

Investors focused on generating income in retirement have generally be pushed to equities as the only viable place to receive meaningful income in recent months.

As bond yields have collapsed, those searching for a way to generate a mid-single digit yield or higher have, in many cases, looked to exchanged traded funds (ETFs) with a dividend mandate to create a diversified income stream, for good reason.

Many ETFs such as the BMO Tactical Dividend ETF (TSX:ZZZD) provide investors with a highly diversified portfolio of the highest quality stocks. These types of ETFs often have a focus on defensive stocks. In this regard, I think this is one of the best income options or bond proxies investors can consider.

This is especially true for investors who find themselves with few good income options today.

That said, this fund does have a relatively high level of exposure to safer, slower growth companies in sectors with less in the way of strong, near-term sentiment.

This has resulted in far less capital appreciation than other funds focused on high flying, technology growth stocks, for example, which have absolutely taken off in recent months. For those with a higher risk tolerance or the need for capital appreciation growth, such dividend ETFs may not be the best choice, particularly in this current market.

Invest wisely, my friends.