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Dividend ETFs Or High-Yield Dividend Stocks | Which Alternative Is Better?

I’ve received a mail on my Facebook page from one of my readers. Here is what he wrote:

“From what I have read you focus mostly in quality individual stocks that have good dividends. In your opinion, are there any good high yield dividend index ETFs? I don't have a lot of time to watch the markets and individual stocks so I am basically a long term investor with little time to manage. I do reinvest dividends and continually add and increase my investments.

Also, I am about 7 years from retirement. In post retirement, would you recommend continuing to invest in high yield dividend stocks and living on the dividend? Should this be individual stocks or Index ETFs? I appreciate your opinion.”

Yes I am focused on high-quality dividend growth stocks. So I have no knowledge about good ETFs to recommend. I'm not really sure if it makes sense to buy an ETF. Sure if you have only a few thousand dollars but only with $10k it makes sense to buy single stocks and hold them to receive the dividend. In a recent article about “How to invest 15,000 and get diversified”, I’ve described how to proceed. ETFs have their eligibility. They have pros and cons. A nice site about dividend investments with related ETF articles and income focus is Seeking Alpha.

If you are 7 years away from your retirement, I wouldn’t recommend you to buy or hold high-yield stocks. It’s very dangerous and my experience is that most of the high-yield stocks are no high-quality stocks. Here I answered a question about "Why High-Yield stocks produce losses".

So, if you buy them and they go down, you have a problem because the business model is often not qualified enough to recover and the dividends will be reduced.

It’s too easy to write about your risk exposure without having information about your wealth situation. If you don’t need the money for your living standard and you like to speculate because it’s fun for you and you enjoy it, then it makes sense to look for riskier stocks. But I wouldn’t do this because investing should bring profits and make you happy in your retirement age.

If you have any further questions, to not hesitate to contact me. If you like my answer, please give me a Facebook Like. You can also subscribe to my free e-mail list or follow me on Facebook or Twitter.

Happy Investing!
Tom

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