Dividend stocks are popular among income investors and those seeking more stability and lower volatility. Here we’ll look at the best dividend ETFs. Most of the dividend ETFs below are part of the dividend portfolio I designed.
Disclosure: Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.
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%.
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 comparison of VIG 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%.
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.
Interested in more Lazy Portfolios? See the full list here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Leave a Reply