With the virus pandemic going on right now causing businesses to temporarily shut down, this means these businesses aren’t making money. And when they’re not making money one of the first things that happens to their stock is cutting or suspending their dividend. It seems like over half the companies right now are slashing or suspending their dividend payouts.
Why Index Funds?
It’s nice to own individual stocks when the market is going up because you can get some great returns and solid dividends. But if all you own are stocks right now and they’re cutting dividends it can be painful to see. The reason I am liking index funds right now is because not all companies are taking them away. When a fund has a portfolio of 100 stocks, chances are some of those stocks will still be paying a dividend. So I’m still getting some sort of dividend and reinvesting it while the index fund price is so cheap. I’m getting more shares while the market is down. So eventually when it goes back up I’ll be making more money. Its a beautiful thing.
Index Funds I Own that are Still Paying Dividends:
XLF is the Spider Financial Index Fund. Their portfolio consists of some heavy-hitting banks such as Citi, JP MOrgan Chase, Wells Fargo and Bank of America. They dropped from $32 all the way down to below $20.while still paying out a 2.82% dividend yield. I was able to collect 19 cents per share recently in dividends, reinvesting it while the share price was still around $20. Banks have held their own when it has come to keeping their dividend during this recession in 2020.
BIZD is a small cap business developement and finance ETF. They are a monthly dividend payer. Their share price has got beaten up pretty bad, dropping to below $10 per share. The share price has raised their yield to over18%, which is astronomical. I was recently paid 35 cents per share on my dividend and that made a big splash reinvesting it back into my investment since the share price is so low.
MORT is a small cap REIT that has gone down substantially. Currently sitting around $10 per share, they also currently have a crazy yield of over 19%. I recently was paid 36 cents per share and reinvested that back into MORT.
I have a couple more dividend index funds that don’t pay until mid-April. I don’t want to get my hopes up on those. But if they end up paying a dividend I will do a part two of this. But my point is, having an index fund with a huge basket of stocks is nice because chances are, not all of the companies in the fund will cut out their dividend. So you still have a chance to get paid. And while share prices are so low, reinvesting the dividends back into them is a beautiful thing right now. Or you can take the dividends and invest the money into beaten down growth stocks. The choice is yours.