Make It Rain With These Dividend ETFs

It won't go down as the best year on record for dividends, but it is fair to say 2011 was kind to income investors. Dividend increases reached $50.2 billion in 2011, an 89.2% rise over the $26.5 billion in dividend increases posted in 2010, according to Standard & Poor's. Over 1,950 companies raised their payouts last year compared to just 101 dividend cuts, S&P noted, and the fourth quarter alone there were almost 650 positive dividend actions compared to just 27 negative dividend moves. There's more good news. “For 2012, we expect to see dividend increases continue across the board for all sectors with another double-digit gain in actual cash payments. Given underlying fundamentals, low payouts and cash reserves, we expect 2012 to set a new record for dividends despite lingering concerns over the economy,” S&P's Howard Silverblatt said in a statement. Something to take note of: January and February are usually two of the best months of the year for dividend increases and March and April aren't bad, either. Put another way, savvy income investors should be evaluating ETFs right now in anticipation of a spate of positive dividend news throughout the first quarter and into the early part of the second quarter. Here are a few ETFs loaded with chronic dividend raisers.

No, the yield of 2.68% on the Consumer Staples Select Sector SPDR isn't jaw dropping, but it's better than short-term cash instruments without much more risk. Not to mention, XLP was one of the best performing sector ETFs in 2011. And no, XLP isn't a dividend ETF per se, but when you look at the ETF's top-10 holdings, it's not a matter of if, but when at least seven of these companies will raise their dividends this year. In fact, it's not unreasonable to expect that at least of five of XLP's top-10 holdings will have increased their payouts by the end of the second quarter.

One of 2011's best new ETFs in terms of gathering assets (HDV debuted in late March 2011 and has over $918n million in AUM) could prove to be one of 2012 best ETFs period for dividend hunters. HDV is home to 76 stocks and without the benefit of a crystal ball, we're not sure how many of those names will boost payouts this year. However, the dividend track records of HDV's lineup, particularly the top 15-20 holdings, indicate this ETF is in store for plenty of increased dividends in 2012.

When an ETF is home to over 930 stocks, putting a finger on how many dividend increases to expect, is a trying task. Over 16% of DTD's weight is allocated to financials and that's not an endorsement, but let's assume the worst and that is no banks raise their dividends next year. That still leaves about 62% of DTD's weight in sectors littered with serial dividend increases (staples, health care, industrials, energy, utilities and telecom).

It's a fact of life: Investors love master limited partnerships because of the dividends and as an added bonus, MLPs take their dividend increases seriously. We're comfortable in saying a good portion of AMLP's holdings will finish 2012 with higher payouts than they started the year with.

Of course, the low expense ratio (0.18%) is what we've come to expect from Vanguard, but the firm also deserves some credit for slashing VYM's allocation to financials to 5% at the end of 2011 from 10% at the end of 2010. VYM is home to 425 stocks and $3 billion in AUM. More importantly, there are plenty of VYM constituents poised to raise their payouts this year with a fair amount coming in the next 90-120 days.