It's no wonder that dividend stocks are considered a strong defensive play—passive income is increasingly enticing in the face of a potential downturn—but what happens to investors when a dividend-paying firm faces challenges and has to reduce or cut its distributions? Keeping track of metrics like dividend payout ratio can be one way to protect against this risk, but for many investors the best solution is diversification.
Fortunately, facilitating diverse exposure to dividend names is straightforward with a number of exchange-traded funds (ETFs) that focus on the space. However, not all dividend ETFs are the same, and it's crucial that a fund's basket provides the breadth of diversification necessary to complement an investor's broader portfolio. Below is a deep dive into three leading dividend ETFs worthy of investor attention.
