Dividend stocks are popular among income investors and those seeking more stability and lower volatility. Here we'll look at the best dividend ETFs for 2024. Most of the dividend ETFs below are part of the dividend portfolio I designed.
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Contents
Introduction – Why Dividend Stocks?
Dividends are simply a return of value to shareholders, in the form of periodic cash payments, by companies that can't reinvest profits into R&D and projects. Utilities, Consumer Staples, and REITs, for example, are popular among dividend investors for their relatively high yields.
Value stocks – stocks believed to be underpriced – typically pay dividends. Growth stocks, on the other hand, rarely pay dividends, as they use profits to drive future growth. As such, dividend stocks are a decent proxy for accessing the Value factor premium. Historically, Value stocks have outperformed Growth stocks. Moreover, specific indexes like the S&P 500 Dividend Aristocrats – companies with a long history of an increasing dividend payment – have historically beaten the broader market. These types of companies also tend to be more resilient during market downturns.
Below we'll explore the best ETFs for dividends.
The 11 Best Dividend ETFs
Below are the 11 best ETFs for dividends:
VIG – Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (VIG) is the most popular dividend ETF, and for good reason. The fund seeks to track the NASDAQ US Dividend Achievers Select Index, formerly known as the Dividend Achievers Select Index, comprised of companies with at least 10 consecutive years of an increasing dividend payment. Again, dividend growth stocks tend to be more stable and less volatile than the broader market. This ETF has over $55 billion in assets and an expense ratio of 0.06%.
I analyzed in VIG in greater detail in its own post here.
VYM – Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF is another dividend ETF from Vanguard. This one seeks to track the the FTSE® High Dividend Yield Index. These dividend stocks are selected from the FTSE All-World Index, excluding REITs, and ranked by forecasted dividend yield. I wrote a comprehensive review and VYM here. This fund has over $35 billion in assets and an expense ratio of 0.06%.
SDY – SPDR S&P Dividend ETF
The SPDR S&P Dividend ETF (SDY) seeks to track the S&P High Yield Dividend Aristocrats Index. These are U.S. large-cap dividend growth stocks with 20 years of an increasing dividend that also have a higher-than-average yield. The fund has over $15 billion in assets and an expense ratio of 0.35%.
NOBL – ProShares S&P 500 Aristocrats
Similarly, the ProShares S&P 500 Aristocrats (NOBL) tracks the famous S&P 500 Dividend Aristocrats Index, U.S. large-cap stocks in the S&P 500 with at least 25 consecutive years of an increasing dividend payment. Stocks within the index are equally weighted, allowing for better diversification and no concentration. The fund has over $6 billion in assets and an expense ratio of 0.35%.
SCHD – Schwab US Dividend Equity ETF
The Schwab US Dividend Equity ETF (SCHD) also offers somewhat of a combination of dividend growth and high-yield stocks, screening for earnings and a 10 year history of dividend payments. The fund seeks to track the Dow Jones U.S. Dividend 100 Index. This ETF is one of the most affordable, with an expense ratio of 0.06%.
I wrote a separate post on SCHD here.
DGRO – iShares Core Dividend Growth ETF
Think of the iShares Core Dividend Growth ETF (DGRO) as a more inclusive, more volatile version of VIG above. DGRO looks for stocks with at least 5 years of a consecutively increasing dividend payment. The fund seeks to track the Morningstar US Dividend Growth Index and has an expense ratio of 0.08%.
HDV – iShares Core High Dividend ETF
The iShares Core High Dividend ETF (HDV) provides exposure to stocks with a consistently high dividend yield. The fund seeks to track the Morningstar Dividend Yield Focus Index and has an expense ratio of 0.08%. This ETF also screens for earnings and excludes REITs.
SPHD – Invesco S&P 500 High Dividend Low Volatility ETF
Those specifically seeking low volatility dividend stocks may enjoy the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD). As the name suggests, this ETF holds companies in the S&P 500 that exhibit low volatility and a high dividend yield. This fund has over $2 billion in assets and an expense ratio of 0.30%.
SPYD – SPDR Portfolio S&P 500 High Dividend ETF
The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) indiscriminately tracks the highest-yielding stocks in the S&P 500. The fund has over $2 billion in assets and an expense ratio of 0.07%.
VIGI – Vanguard International Dividend Appreciation ETF
Those seeking international exposure to dividend stocks have a couple low-cost options from Vanguard. The first is the Vanguard International Dividend Appreciation Index Fund (VIGI). This ETF is just the international version of VIG, tracking dividend growth stocks via the NASDAQ International Dividend Achievers Select Index. The fund has an expense ratio of 0.20%.
VYMI – Vanguard International High Dividend Yield ETF
The Vanguard International High Dividend Yield ETF (VYMI) is the international version of VYM above. This fund seeks to track the FTSE All-World ex US High Dividend Yield Index, comprised of international (ex-US) stocks that exhibit higher-than-average dividend yield. This ETF has nearly $2 billion in assets and an expense ratio of 0.27%.
Where To Buy These Dividend ETFs
All these dividend ETFs are available at M1 Finance. Again, most of the above ETFs are components in the dividend pie I designed. M1 has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here. Investors outside the U.S. can find these ETFs on eToro.
Are you nearing or in retirement? Use my link here to get a free holistic financial plan and to take advantage of 25% exclusive savings on financial planning and wealth management services from fiduciary advisors at Retirable to manage your savings, spend smarter, and navigate key decisions.
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Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a research report. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. Hypothetical examples used, such as historical backtests, do not reflect any specific investments, are for illustrative purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
Are you nearing or in retirement? Use my link here to get a free holistic financial plan and to take advantage of 25% exclusive savings on financial planning and wealth management services from fiduciary advisors at Retirable to manage your savings, spend smarter, and navigate key decisions.
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