It’s no secret that 2022 was a difficult year in the market for stocks, but dividend stocks actually delivered solid returns for investors. And that’s good news for retirees who rely on dividend stocks as a source of income. With last year’s impressive performance from dividend stocks, we’ll take a look at what’s in store for 2023 and the best dividend mutual funds and exchange-traded funds (ETFs) to monitor.
Consider working with a financial advisor to create an investment plan for yourself.
Dividend Stocks Provided Gains in 2022
Last year wasn’t a kind one for stocks. The S&P 500, Dow Jones Industrial Average (DJIA) and NASDAQ all saw their worst year since 2008. But some dividend stocks were able to find quality gains.
But according to Morningstar, the Morningstar Dividend Yield Focus Index (MDYFT) was able to outperform the broad-based Morningstar US Market Index by more than 25 percentage points. MDYFT’s success in 2022 can be attributed to the energy and health sectors, which both saw quality gains. In fact, if you take a look at the S&P 500, despite its down year in 2022, the top 10 performing stocks in the index were all energy stocks, according to CNBC.
What Are Dividend Stocks?
Dividend stocks are from publicly traded companies that pay out dividends on a regular basis. Typically this includes well-known, established companies that have a history of paying dividends to their respective shareholders. If investors are looking to get into dividend funds, there are quite a few that Morningstar has to offer in 2023.
Morningstar’s Top Dividend Funds and ETFs to Watch in 2023
- 1.) BlackRock Equity Dividend (MADVX)
- 2.) ClearBridge Dividend Strategy (SOPYX)
- 3.) Columbia Dividend Income (LBSAX)
- 4.)Fidelity High Dividend ETF (FDVV)
- 5.) FlexShares Quality Dividend ETF (QDF)
- 6.)Franklin U.S. Low Volatility High Dividend ETF (LVHD)
- 7) Schwab US Dividend Equity ETF (SCHD)
- 8) SPDR S&P Dividend ETF (SDY)
- 9) T. Rowe Price Dividend Growth (PRDGX)
- 10) T. Rowe Price Dividend Growth ETF (TDVG)
- 11) Vanguard Dividend Appreciation ETF (VIG)
- 12) Vanguard Dividend Appreciation Index (VDADX)
- 13) Vanguard Dividend Growth (VDIGX)
- 14) Vanguard High Dividend Yield ETF (VYM)
- 15) Vanguard High Dividend Yield Index (VHYAX)
- 16) WidsomTree US Large Cap Dividend ETF (DLN)
- 17) WisdomTree US Midcap Dividend ETF (DON)
- 18) WisdomTree US Small Cap Dividend ETF (DES)
Above, you will notice the list is highly concentrated in funds with high-dividend stocks. These high-dividend stocks are from experienced, publicly traded companies that pay out dividends on a regular basis. If you are retired, investing in a high-dividend fund can be enticing to you depending on your risk profile as a short-term or long-term investor.
You will also notice a good chunk of dividend growth stocks. They might not offer high yields like high-dividend stocks do, but they offer more reliability. Dividend growth stocks can be a safe haven given the fact it has companies that are typically financially healthy. And dividend growth stocks often see companies increasing their respective dividends as well.
Bottom Line
Choosing between a high-dividend fund and a dividend growth fund could depend on your risk tolerance. Your choice can also depend on whether or not you are a short-term or long-term investor. And if you are looking to invest in dividend funds, finding those with major investments within the energy and healthcare sectors can be a good starting point.
Tips for Investing
- Consider working with a financial advisor if you have a more complex financial situation or just prefer talking face-to-face. SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you don’t have a lot to invest, you might want to consider a robo-advisor. Robo-advisors, which are entirely online, offer lower fees and account minimums than traditional financial advisors.
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