Dividend ETA

TheSilverBullet

Hi all,
Newbie here.
As we all know, banks are paying next to nothing in interest on our savings so I am looking to put some money in a dividend paying ETF.
After doing a bit of research, one particular one that stood out was the iShares UK Dividend UCITS (LSE:IUKD).
My questions are:
Which Broker should I choose?
Has anyone on this forum got this ETF and if so what sort of dividend return would I see per annum on 10k?
Would anyone recommend a different ETF for dividend income?
Thanks to all in advance!
TheSilverBullet
 
 

Thrugelmir

You do realise that your capital is at risk. Nor are dividends guaranteed to be paid by companies that you invest in. As has been the case in the past year. 

Another_Saver

Since you appear to be new to investing, it's important to understand you don't invest just for the income, you invest for the total return - the growth of the stocks in the fund or ETF you buy + the dividends. Chasing high dividends is often riskier, and has underperformed over the past decade and this year, as has the UK.
Investing is not a magic way to get a higher interest rate than cash savings.
IUKD is particularly risky because it only buys the highest yielding stocks in the UK, which is already a very high yielding market by global standards.
If you're thinking about investing for the long term, a general global equity index fund like HSBC FTSE all world, or multi asset fund like the Vanguard Life Strategy or HSBC global strategy range is generally considered a sensible starting point for newbies.

That said, there is some research that higher yielding stocks tend to outperform over the very long term, however this research is always retrospective, markets are more efficient at balancing things like this these days, and this may not be true in future.
You may also see IUKD as a value or recovery play.
For a global high dividend yield ETF you could use VHYL, yielding around 4%.

Alexland

While there are many benefits of passive investing the danger with using it in the higher income space is you end up selecting a lot of companies with very poor anticipated future prospects (which is why their share price is so low compared to their historic yield). Some of the top holdings in that ETF have already announced material reductions to future income.

If a sustainable income is more important to you than total return then consider an investment trust.

https://www.theaic.co.uk/income-finder/dividend-heroes

As always don't invest the money unless you are sure you won't need the capital back for 5-7 years preferably longer to avoid needing to withdraw when prices are low. If this is a one-off lump sum investment via an S&S ISA and you will not be reinvesting dividends you may find iWeb (operated by Halifax) pricing attractive at £25 setup and £5 for the initial investment with no cost to draw income. There is no FSCS protection on either ETFs or Investment Trusts they could both drop in value tomorrow by 50% or more before hopefully eventually recovering.

Sailtheworld

If you'd put £10k in it 12 months ago you'd have about £350 in dividends and £7,775 worth of shares. A net loss for the year of £1875.

The future might be different.

Linton

I will quote a post I made in August 2019, with minor changes for context:
IUKD dropped 60% in the 2008 crash and more than 10 years later, without dividends reinvested which they wouldnt be in this case, it is still 40% below its value prior to the crash. .........Never mind, it's low cost and we know that's the important thing.

I believe investing for income is one area where one really needs the human touch.

If you want dividend income I suggest you look for a specialist active fund rather than a a blind passive.  The fund must have some means of ensuring that it is well diversified  and should be able to tell the diference between a company with a high yield because its price is lustifiably low and one that is paying a dividend from its high profits.

csgohan4

OP what is your strategy, why income? are you in retirement or close to it?

george4064

I would stay well clear of IUKD, it’s effectively an ETF that invests in UK companies that have little growth prospects (hence why they pay such big divis rather than reinvesting back into their businesses). A lot of the companies are in ‘dinasour’ sectors which don’t have much, if at all, bright futures.

If you really want income, either go for a specialist income fund/trust or invest in companies with lower yields, better dividend coverage ratios and better prospects to grow revenue and dividends!

TheSilverBullet

Wow! I'm glad I posted! Some great info here.
Yep I am new to investing. I'm near to retirement and looking for a way to supplement my tiny pension.
Thanks for all the info so far.

Another_Saver

TheSilverBullet said:

Wow! I'm glad I posted! Some great info here.
Yep I am new to investing. I'm near to retirement and looking for a way to supplement my tiny pension.
Thanks for all the info so far.

Stick the money in a SIPP? Have you looked at putting into one of your pensions?

Alexland

This thread did get me thinking about City Of London IT again. Similar negative overall UK performance down about 15% YTD but currently offering 5.4% dividend yield which is alluring even if you don't need the income and, although there is some overlap with IUKD, the underlying holdings are far more attractive for holding long term. Very tempted to use it for some UK bias as an income compounder and recovery play. Passive has done us very well but I'm struggling to see much future upside given current valuations particularly with the heavy US weightings.