In a high-flying stock market, this laggard dividend ETF stands out for its high yield and bounceback potential

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It is a way to capture the yield of out-of-favour dividend stocks in a diversified way that limits risk somewhat

). All of them have dividend yields in the 5 to 8-per-cent range, which is a reflection of how out of favour they are with investors.iShares Canadian Select Dividend Index ETF), which itself has a yield of 5.3 per cent based on its latest payout to investors. If you’re interested in capturing the yield of out-of-favour dividend stocks in a diversified way that limits risk somewhat, consider XDV.

XDV’s one-year performance to Feb. 29 was a loss of 0.3 per cent, which compares to gains around 4 per cent for some other dividend ETFs. XDV tracks the Dow Jones Canada Select Dividend Index, which is built using criteria including dividend growth, yield and payout ratio. Just now, this approach has produced a group of underperformers compared with the broader market.Canadian Natural Resources Ltd.). XDV has just 7 per cent of its assets in energy.

BCE is representative of the quandary dividend-hungry investors face right now. The yield has ballooned to 8.5 per cent after a 23 per cent 12-month decline in the share price. BCE recently increased its dividend payout by 3.1 per cent, right in line with inflation. But the falling share price and high yield highlight the concern investors have about the sustainability of BCE’s current dividend policy.

XDV has a weighting of around 4.7 per cent in BCE, while Canadian Tire represents about 8.5 per cent of the portfolio, Scotiabank about 5.6 per cent and TC Energy about 5 per cent. This diversification limits the risk of if any of these stocks further disappoints investors. If your investing goal is growth more than income, owning XDV would be a long-term project. But this ETF is worth a look if you’re open to owning high-yielding dividend stocks that have been frozen out of today’s hot stock market.

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