While many investors have a problem with share price, dividends are an important component of any long-term plan. This is because dividend stocks’ monthly payouts may act as protection against short-term falls or as a tailwind that enhances overall performance over time. They can also provide a much-needed source of income in retirement, avoiding the need to liquidate assets in order to obtain cash and pay bills.
Whatever your investment needs are, dividend exchange-traded funds, or ETFs, are likely to have a place in your portfolio. These diversified vehicles let you to invest in a basket of dividend stocks in a single holding – and in select funds, you’ll also discover a strategic aspect that may align well with your particular investment objectives. Best Dividend ETFs to Buy Now
Largest Dividend ETF: Vanguard Dividend Appreciation ETF
The almost $69 billion Vanguard Dividend Appreciation ETF, one of the largest ETFs in terms of assets, provides diversified exposure to significant (Best Dividend ETFs to Buy Now) dividend-paying equities in the United States. The portfolio includes over 300 businesses, including well-known names such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), UnitedHealth Group Inc. (UNH), and Exxon Mobil Corp. (XOM).
Unfortunately, these four large equities account for around 16% of the portfolio. This not only makes VIG a bit top heavy, but it also keeps dividends in check, as both Apple and Microsoft now yield less than 1%. In fact, the headline yield of this Vanguard dividend fund is less than 2%, compared to the S&P 500’s average of roughly 1.6%. This fund doesn’t provide significantly more income than purchasing the whole large-cap index, but it’s nevertheless worth highlighting because to its size and longevity.
Morningstar analysts offer it a gold label, suggesting that they are most confident that VIG will beat its index or rivals throughout a market cycle.
Highest-Yielding Dividend ETF: Global X SuperDividend ETF (SDIV)
Of course, part of the reason VIG doesn’t give a high yield is because it is distributed over hundreds of the most valuable firms on Wall Street, including companies like Apple, which only pay tiny dividends to stockholders. If you truly desire yield, you must adopt a more tactical strategy, such as the one provided by SDIV, which prioritises payouts independent of firm size or region.
This $760 million fund invests in 104 hand-picked stocks for a more concentrated portfolio. Real estate accounts for around 32% of its assets, with materials companies accounting for nearly 19%. It’s also global, with just around 31% of assets based in the United States.
In addition to this dividend screen, the strategy also offers a low volatility screening constituent which may have provided the ability for investors to reduce a level of systematic risk in their income portfolios,” said Rohan Reddy, the director of research at Global X ETFs. “We believe that having access to a dividend strategy that offers an additional quality-control overlay is prevalent during heightened levels of uncertainty within the broader U.S. macroeconomy to maintain consistent income and drive potential returns.”
Based on the previous year’s dividends, you might earn up to 15.1% with this high dividend ETF – over seven times more than the previous fund. This type of focused strategy obviously carries greater risk, but if you’re looking for the highest potential payout, SDIV may be worth a look despite its more aggressive character
Morningstar experts are gloomy on SDIV’s prospects, awarding it only one star and a neutral label, implying the team isn’t confident in its capacity to outperform in the future.
JPMorgan Equity Premium Income ETF (JEPI)
JEPI is another high yielder with an 11.5% trailing-12-month yield. To boost monthly income, the fund blends a bottom-up fundamental stock-picking technique with a call options strategy. It has a smaller portfolio of 135 firms, with around 15.3% of its $26.8 billion assets concentrated in the top ten names, the majority of which you’ll recognise, including Adobe Inc. (ADBE), Microsoft, Amazon.com Inc. (AMZN), and Hershey Co. (HSY). While JEPI’s expense ratio is acceptable at 0.35%, it has a high turnover of 195%, which can contribute to the fund’s total expenses.
ProShares S&P 500 Aristocrats (NOBL)
One approach to finding dividend stocks is to seek for yield, but another is to look for consistency in distributions. That’s what NOBL provides, with a portfolio of more than 65 S&P 500 “dividend aristocrats” that have grown their dividend distributions for 25 years or more.
That is a particularly significant range right now, spanning before the dot-com collapse of the 2000s, the 2008 financial crisis, and subsequent pandemic-related disruptions. The dividends aren’t always outstanding in terms of yield, with a current 30-day SEC yield of only 2%, but NOBL does offer the potential for future increase in those paydays.
Vanguard International High Dividend Yield ETF (VYMI)
VYMI has a 4.6% yield due to its concentration on high-yielding prospects outside of the United States. Japan now has roughly 13.5% of the portfolio’s assets, followed by the United Kingdom at 11.8% and Australia at little under 8%.
To be clear, they aren’t obscure or hazardous firms; they’re well-known corporations like Dutch oil giant Shell PLC (SHEL) and Japanese manufacturer Toyota Motor Corp. (TM). This Vanguard fund is a decent choice if you want a little extra income with some regional variety.
Global X U.S. Preferred ETF (PFFD)
“Preferred ETFs present an enticing choice for income-focused investors, as they primarily invest in preferred stocks that combine features of both stocks and bonds,” Reddy explains.
Franklin U.S. Low Volatility High Dividend Index ETF (LVHD)
If you desire yield but don’t want to take on a lot of risk, this low-volatility product could be worth checking into. The current payment is around 3.5%, indicating that this dividend ETF is designed for income. Its assets are also chosen based on firms with reduced realised volatility in both price and profits over the previous year.
As a result, a limited group of 125 firms built for dividends and stability has emerged, including software behemoth Cisco Systems Inc. (CSCO) and health-care behemoth Johnson & Johnson (JNJ), among others.