Finding a safe and reliable dividend stock to put in your portfolio is more challenging than ever before. With the economy in a recession and companies struggling to stay out of the red, even some of the safest dividend stocks have had to cut their payouts.
However, there's one option that may be a way for investors to continue collecting a dividend without having to worry about dividends, and that's by investing in exchange-traded funds (ETFs).
Since ETFs can hold many different stocks, investors don't have to worry about how one or two stocks do. While there's no guarantee a stock within an ETF won't cut or suspend its dividend, the overall impact will be much more manageable than if you only invested in that one stock.
The BMO Canadian Dividend ETF (TSX:ZDV) holds many top bank, utility, energy, and communications companies in its fund. With broad diversification, the ETF won't put your portfolio at much risk.
The average holding in the ETF trades at less than 13 times earnings and a price-to-book multiple of just 1.30. There are good value buys within the ETF and it's currently providing investors with a yield of 5.6%. That's a solid payout and one that isn't going to drop significantly even if a company the ETF holds decides to stop paying a dividend or just reduces it.
One of the reasons the ETF is paying such a high yield is that some of its stocks have suffered in 2020 and the ETF is down more than 20% year to date.
But at a cheaper price, there's plenty of incentive to invest in the ETF today as investors could position themselves for some strong capital gains over the long term while also locking in a good yield.
