How to Choose a Dividend Fund [Video]

Investors who want the stability of regular dividend income—people in or close to retirement, income investors, or those with a long time horizon—can find dividend funds and dividend exchange-traded funds to be a great long-term investment.

How Do Dividend Funds and Dividend ETFs Work?

A dividend fund or ETF holds a significant amount of dividend-paying stocks. A dividend fund collects the dividends it gets from its stock holdings, then distributes them to shareholders based on the number of shares owned.

Using dividend funds, investors can generate steady income from stable, profitable companies across a range of industries.

Many companies, especially those in the energy, utilities, and financial-services sectors, pay dividends. Technology firms and other swiftly expanding companies often don’t pay dividends, because any excess profits are used to grow their companies.

You might already have plenty of dividend stocks in your portfolio without knowing it. Dividend-paying companies are often larger firms whose stocks are popular holdings among large-cap mutual …