Don’t assume all your investments must have a direct upwards dividend growth path. While I often recommend VYM, SCHD, DVY and DGRO, there are other things to consider when buying income investments. One of those is the fund’s Average Annual Return over ten years. VYM and DVY have very good ten-year results, but so does a fund with the ticker symbol PFM. This was an ETF in the table for a dividend article in the AAII November 2019 Journal.
The yield for PFM isn’t terrific, and the expense ratio is just a touch higher than I like to see it at 0.54% but the performance of this fund is something to notice. Novice investors often chase yield. If they see one stock yields 1.5% and another yields 10%, they can be seduced by the higher yield. Yield is generally a poor deciding factor to use when considering dividend investing. The reality is that the 10% yield may be due to most investors selling the stock because they understand the current dividend is not sustainable. What is often coming is a dividend cut, and that makes the stock even less attractive.
The lessons are: don’t chase yield and don’t assume that a lack of dividend growth makes an investment unacceptable. PFM could be a good addition to your portfolio. Before you buy, check out the holdings in PFM at the Invesco web site. The link is below, along with a link to the Wallmine page.