ISA investors don’t have to pay a penny in tax on the dividends they receive. What’s more, unlike a Self-Invested Personal Pension (SIPP), ISA users aren’t liable to pay income tax when they withdraw their cash.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Choosing funds

It’s critical to remember that dividends are never guaranteed, as company payouts during the pandemic showed. As the Covid-19 crisis exploded, even the most reliable of passive income stocks cut, postponed or cancelled dividends entirely as earnings faltered and balance sheets deteriorated.

Yet over the long term, we’ve seen that a well-diversified portfolio can deliver a reliable stream of dividends. A portfolio whose holdings are spread across dozens of companies, industries and regions can provide a solid income across all points of the economic cycle.

Here are two top ETFs worth considering that I believe could deliver a large long-term dividend income.

1. Broad appeal

With holdings in scores of companies worldwide, the SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE:GBDV) offers excellent diversification straight off the bat.

It’s designed to track the performance of high-yield global shares “that have followed a managed-dividends policy of increasing or maintaining dividends for at least 10 consecutive years“. Prioritising dividend growth reduces the erosionary impact of inflation on returns over time.

In total, this ETF has holdings in just over 100 different shares. Major holdings range from Verizon Communications and CVS Health to Universal Corp.

On the downside, half the fund (49.5%) is tied up in US shares. This means it carries greater geographical risk than more regionally spread vehicles. However, this allocation also taps into the long-term outperformance that Wall Street has enjoyed.

This SPDR ETF’s quest for dividend growth doesn’t mean that yields are sacrificed however. Its 12-month trailing dividend yield’s currently a market-beating 3.9%. During the last five years, the fund’s delivered a total average annual return of 10.5%.

2. A targeted approach

Investing in property stocks is another way to target a dependable passive income. There are many themed ETFs available to play this hand, one of which is the iShares MSCI Target UK Real Estate (LSE:UKRE).

Thanks to their consistent rental incomes, property stocks tend to enjoy consistent cash flows that support regular dividend payments. I like this particular fund because it focuses more specifically on real estate investment trusts (REITs). These investment vehicles are required to pay at least 90% of annual earnings from their rental operations out in dividends.

What’s more, the REITs it holds span multiple sectors including healthcare, retail and residential, providing an attractive balance of reward and safety. A large portion of the fund’s also dedicated to UK government bonds as well, which provides added security.

Since 2020, this iShares fund has delivered an average annual return of just 0.6%. It could continue disappointing if interest rates remain higher than normal. But with inflation dropping, I expect returns to improve strongly from this point.

The 12-month trailing dividend yield here’s a huge 6.6%.

The post Here are 2 ETFs to consider that could supercharge a retiree’s ISA passive income appeared first on The Motley Fool UK.

I’m looking for an ETF paying high dividends and want companies within a fund like this to be steady, reliable firms in solid sectors. For me, that’s a good long-term investment.

A top ETF pick

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one I’ve been considering for a while. It aims to invest in high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. This includes companies that have over $1bn in market capitalisation and that have maintained or increased dividends for at least 10 consecutive years. Firms must also have a positive return on equity and cash flows from operations.

This ETF is a good size at over $700m and is relatively low-cost. For my portfolio, diversification is one of the ways I try to reduce risk over the long term and this ETF ticks all the boxes across companies, countries and sectors.

Firstly, there are around 100 companies in this fund, with no company having more than 3% weighting within it. There are some household names in there like Exxon Mobil Corp and GlaxoSmithKline. Secondly, the fund is geographically diverse. Some 45% is invested in US companies, around 8% is invested in both the UK and Japan, while other holdings come from all over the world. Finally, I like the fact that sectors as varied as banking, utilities and insurance are covered. 

The dividend yield is currently around 3.7%, which is a reasonable return given the diversity of the fund.

Over the long run

Of course, it’s not risk-free. Dividends can be reduced at any time and not all high-yielding shares are winners. Some companies maintain high dividends to keep their investors happy when the company isn’t growing. In the long run, firms like these are unlikely to grow.

However, though nothing is certain, there are three reasons why I still have confidence in this ETF for the long haul. I like that no company has more than a 3% weighting. Even if one firm fails, it shouldn’t be too significant to my holdings overall.

Then, if and when there’s a stock market decline, this ETF may well be less volatile than some other funds or shares out there. This is because investors may hang on for the dividend stream rather than selling.

Finally, the fund’s policy of only holding companies with strong track records over 10 years+, underlines its long-term focus. And I feel firms like these have the potential to produce dividend streams for a long time into the future, even though I know past performance is no guarantee of what might happen next.

That’s why for my own portfolio, this is a top ETF pick that I’d buy and hold for years.

The post 1 top ETF pick to buy and hold for years! appeared first on The Motley Fool UK.

Looking for protection

I believe that high-dividend-paying shares can be protection against inflation. These companies tend to be steady firms in solid sectors. In an inflationary environment, they could even be able to increase the prices of their goods or services and maintain or increase their dividends more than the rate of inflation.

For my own portfolio, I’ve always liked ETFs (exchange traded funds). These are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low-cost.

One I’m considering

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one fund that’s always on my radar. Its aim is to invest in global high-dividend-yielding companies by following the S&P Global Dividend Aristocrats Quality Income Index. This tracks companies that have over a $1bn market capitalisation and that have sustained or elevated dividends for at least 10 consecutive years. At the same time, the firms must maintain a positive return on equity and cash flows from operations. Such companies should have pricing power in an inflationary environment.

Diversification is always on my mind when investing and this ETF scores well in terms of number of firms, geographical location and industries.

First, there are around 100 companies in this fund. No company has more than a 3% weighting within the ETF. Second, the fund is geographically diverse. US companies make up 45%, but the remaining firms come from all across the world. Finally, it covers a wide variety of industries including banking, utilities and insurance.    

This ETF is large at over $700m and has a reasonable ongoing charge. The dividend yield is currently around 3.7%, which is acceptable given the diversity of the ETF. 

The outlook

It’s worth me remembering that there are some risks. One that comes to mind is the dividend trap. This is where a dividend isn’t sustainable in the long run because the underlying business isn’t good. I’m also aware there are other alternatives that might provide more protection in the face of inflation, such as gold.

As I see it, demand for oil and gas is pushing up energy bills around the world. Shortages of many goods, because of factory shutdowns due to covid restrictions, are pushing up prices. The rise of the omicron Covid variant is likely to exacerbate things.

On balance, given that inflation is likely to continue to soar next year, I’m seriously contemplating adding this high dividend-paying ETF to my portfolio.

The post As world inflation soars, here’s one ETF I’m looking at appeared first on The Motley Fool UK.

But rather than picking individual dividend-paying shares, I’m looking at an exchange traded fund (ETF).

ETFs are funds that track an index or sector and can be bought and sold like shares through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low-cost. 

The ETF I’m looking at

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one I’ve been considering for a while. Its aim is to invest in global high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. 

This index aims to track global companies that are over $1bn in market capitalisation, that have maintained or increased dividends for at least 10 consecutive years, while at the same time having a positive return on equity and cash flows from operations.

This ETF is a good size at over $700m and is relatively low-cost. For my portfolio, diversification is one of the ways I try to reduce risk and this ETF ticks all the boxes across companies, countries and sectors.

First, there are around 100 companies in this fund, with no company having more than 3% weighting within the ETF. There are some household names in there like Exxon Mobil Corp and GlaxoSmithKline. Second, the fund is geographically diverse. Some 45% is invested in US companies, around 8% is invested in both the UK and Japan, while other holdings come from all around the world. Finally, I like the fact that sectors as diverse as banking, utilities and insurance are covered. 

Am I going to invest?

The dividend yield is currently around 3.7%, which is a reasonable return. If the market declines, I think this may encourage other investors to hang on to this ETF for the dividends. If so, it will be less volatile than other funds or shares out there.

I feel that this ETF can act as a safety buffer for me in uncertain times. That’s because with this fund holding only those companies that have sustained or increased dividends over 10 years, I’d feel more confident holding on to this ETF if the stock market crashes.

However, it’s not risk-free. Dividends can be reduced at any time and not all high-dividend shares are winners. Some companies maintain high dividends to keep their investors happy when the company isn’t actually growing. In the long run, firms like these are likely to fail.

That said, I believe diversification is important to my portfolio. Although other investors may disagree, I think a dividend-paying ETF like this can be a good addition in case of a stock market crash. I’m going to seriously consider adding it to my holdings.

The post Can this dividend-paying ETF help protect me against a stock market crash? appeared first on The Motley Fool UK.

ETFs are funds that track an index or sector and can be bought and sold like a share through most online brokers. The beauty is that they allow me to invest in multiple companies in a single fund and are usually low cost.  

Recently I have spotted an ETF that looks like it could be very interesting in terms of its potential to pay dividends to me in 2022 and beyond. 

What’s in my crosshair? 

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is the one I have been looking at. Its aim is to invest in global high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. There is a lot to like about this index. It aims to track global companies that are over $1bn in market capitalisation and that have maintained or increased dividends for at least 10 consecutive years whilst at the same time having a positive return on equity and cash flows from operations. 

Looking at the ETF itself, it’s a decent size at over $700m and is relatively low cost. For me, diversification is one of the most important ways to reduce risk and this ETF ticks all the boxes across companies, countries and sectors. 

Firstly, there are around 100 companies in this fund, with no company having more than 3% weighting within the fund. Names you might recognise include Exxon Mobil Corp and GlaxoSmithKline. Secondly, the fund is geographically diverse. 45% is invested in US companies, around 8% is invested in both the UK and Japan whilst other holdings come from all across the world. Finally, I get comfort from knowing that sectors as diverse as banking, utilities and insurance are covered.  

The dividend yield is currently around 3.7%. Some investors might not be that impressed and it’s true that I can find some companies within the FTSE 100 paying monster dividends at the moment, but I am looking for sustainable, long-term dividend streams.  

Of course, no investment is guaranteed, but with this fund holding only those companies that have sustained or increased dividends over 10 years, I feel that this might be a safer bet over the long term. 

Also, an ideal passive income stream is meant to be low maintenance. As the index this ETF tracks rebalances over 2022 and the following years, the companies within this ETF will automatically change. I can’t ask for more hands-off than that. 

Am I going to pull the trigger? 

It certainly is very tempting; however, I think there is more for me to consider, in particular, total return.  

The total return on a share investment needs to consider both the dividend yield and share price growth. As we move into 2022, I am not convinced that focussing only on dividend yield is the right strategy for me.  

The share price of this ETF has barely increased by 3% over five years, and looking to next year and beyond I feel that the technology sector as a whole might be the place to look for the best total return. The dividends might not be as good, but I think that the share price appreciation in certain technology companies will more than make up for it. 

The post I think this dividend-paying ETF could be a no-brainer investment for 2022 and beyond appeared first on The Motley Fool UK.