Why Make Changes?

ETF – Time to Evaluate and Clean House

Although most, or many of our investments, are buy-and-hold long-term plays, that doesn’t mean I don’t review our holdings from time-to-time and make changes. Today I plan to sell all of the DVY shares in the six UTMA accounts and in Cindie’s accounts. I don’t own any DVY in my accounts, so no action is needed there. The reasons for my changes fall into four buckets. They will go from least important to most important.

DVY Expenses – iShares Select Dividend ETF

DVY has high expenses relative to many others. Is the high expense justified? No.

DVY has the dubious distinction of having the highest expense ratio of my favorite ETFs. When I compare DVY to VYM, DGRO, SCHD, and VEU, DVY loses. Expense ratios aren’t my only criteria, and they certainly aren’t a deal-breaker, but high dividend yields don’t justify high expense ratios.

DVY ETF Seeking Alpha Grades

When you are in school, it isn’t generally wise to accept grades that are C- or lower.

Just like school, I prefer A’s and B’s over D’s and F’s. When I see C- and F for any of the five Seeking Alpha ETF grades, I pause and think about the reason those grades have been given. Grades aren’t everything, but I have found that those investments with good grades tend to out-perform those with crummy grades.

DVY Dividends and Performance

DVY has a nice yield. But that is only a part of the picture.

Although DVY has a decent dividend yield, it doesn’t shine as brightly when it comes to dividend growth or overall performance. Performance does matter. One of the reasons that DVY will struggle has to do with HOLDINGS.

DVY Holdings

DVY has substandard top ten holdings. Why? Because they are chasing dividend yield.

VYM and DGRO certainly have some strong similarities in the top ten investments. They share seven of the large-cap holdings. But VYM does have a higher dividend yield, so the overall mix of investments is different. The top ten investments in DVY are disappointing and likely to underperform. I highlighted the ones I find disappointing in yellow and red.

Full Disclosure

I will be selling all of the DVY shares in all of the UTMA accounts and Cindie’s accounts.