We’ve discussed the virtues of dividend investing and even highlighted a good place to start if you want to invest in individual stocks – the Dividend Aristocrats. Next, I want to highlight a passive index style of dividend ETF investing. ETFs aim to follow the performance of an index. Like all ETFs, dividend ETFs typically carry low expense ratios. And there are ways to execute commission-free ETF trades through an online investment account, so that you do not pay when you buy or sell an ETF.
You do lose a little bit of freedom in choosing individual stocks, but that might not necessarily be a bad thing, as most of us are horrible stock pickers.
The positives for ETF investing vs. individual stocks include:
- Instant diversification, which can be relatively important as some of the highest yielding dividend stocks are the riskiest.
- Lower trading fees vs. individual stock investing if you execute commission-free ETF trading.
- A passive index investing style – simply add to your position when you have additional funds.
- Less record keeping on dividends for tax purposes. Owning a few ETFs cuts down on having to track dividend payouts on numerous stocks.
- Tax-efficiency.
To get you started, I thought I’d create a list of some of the top dividend ETFs on the market in to 3 separate categories – domestic, international, and sector. I’ll highlight the name, ticker, yield, and expense ratio of each. Note that the yields and expense ratios may change over time.
And remember, don’t simply chase yields!
Expense ratios and yields are as of 1/28/23, but change frequently, so make sure you do your homework and double check for updates.
Domestic Dividend ETF List
| Name & Focus | Ticker Symbol | Expense Ratio | 30-Day SEC yield (Annualized) |
|---|---|---|---|
| iShares Core High Dividend | HDV | 0.08% | 4.09% |
| Fidelity High Dividend | FDVV | 0.15% | 3.07% |
| Fidelity Dividend for Rising Rates | FDRR | 0.15% | 2.74% |
| Schwab U.S. Dividend Equity | SCHD | 0.06% | 3.56% |
| Vanguard Dividend Appreciation | VIG | 0.06% | 1.81% |
| Vanguard High Dividend Yield | VYM | 0.06% | 3.07% |
International Dividend ETF List
I’ve discussed why international diversification is important vs. putting all of your eggs in the U.S. domestic basket.
To that end, there are a number of international and emerging marketing dividend ETFs to choose from.
| Name & Focus | Ticker Symbol | Expense Ratio | Annual Yield |
|---|---|---|---|
| Fidelity International High Dividend | FIDI | 0.18% | 4.30% |
| iShares International Dividend Growth | IGRO | 0.15% | 2.69% |
| SPDR S&P International Dividend ETF | DWX | 0.45% | 3.75% |
| Global X SuperDividend ETF | SDIV | 0.58% | 11.82% |
| Vanguard International Dividend Appreciation | VIGI | 0.15% | 1.93% |
| Vanguard International High Dividend Yield | VYMI | 0.22% | 4.82% |
Sector High Dividend ETF List
There are also a number of sectors that inherently have high dividend payouts – real estate, government and corporate bonds, telecom, and utilities. Here are a few of the most popular dividend ETFs that cover these sectors.
| Name & Focus | Ticker Symbol | Expense Ratio | Annual Yield |
|---|---|---|---|
| Vanguard Real Estate | VNQ | 0.12% | 2.71% |
| Vanguard Global ex-US Real Estate | VNQI | 0.12% | 3.74% |
| Vanguard Long-Term Corporate Bond ETF | VCLT | 0.04% | 5.37% |
| Vanguard Telecommunication Services ETF | VOX | 0.10% | 0.83% |
| Vanguard Utilities ETF | VPU | 0.10% | 3.40% |
Dividend ETF Discussion:
- What are your favorite dividend ETFs?
- Do you own any of these ETFs?
- Do you prefer buying dividend ETFs vs. dividend stocks?
I do not understand why people are fascinated with dividends.
Dividends are not free money that get distributed from the dividend fairy.
Every dollar that is distributed was previously an asset of the company, and is reflected in the stock’s price.
Wish your favorite stock distributed a cash dividend of a couple percent? You can do it yourself by selling a few percent of your holdings in that stock. Same effect.
While somewhat true since dividends are a way to use cash in the best way for shareholders there are too many other factors in play.
Stocks don’t trade simply on the value of their assets, in fact, most trade on the earnings of the company (why P/E ratios matter to stock pickers). Most people correctly assume that dividends add to their return on investment, which is why stocks will pop if the company announces a dividend- market thinks that the stock is worth more because of the cash flow that the dividend provides. The market can also take it the other way- thinking the company doesn’t have any better internal investments to make, so the future is less rosy, pushing stock price down.
I prefer picking individual stocks, and dividends are an important factor in the decision.
For those who don’t want to put in the extra time ETFs are a great option, though.
I am a forex trader just started to invest in individual stocks. Dividends played an important role to pick individual stock. I am not familiar with all the companies listed above. So, I did not own any of the shared ETF’s and preferred dividend stocks.
Schwab’s U.S. Dividend Equity ETF (SCHD) is a very good option too. With a 0.07% expense ratio and 2.52% twelve-month yield, it’s even lower cost than Vanguard (and the same holds true for most of Schwab’s ETFs). They’re commission-free with a Schwab account.
I buy both dividend stocks and ETFs, among other categories. Dividends serve as an automatic filter for quality, though in choosing stocks one has to consider much more than just the dividend. The power of compounding works with reinvested dividends as it does with the growth of the original shares purchased.
I have a vanguard Roth IRA that is just in a target date ETF fund. However I started using the Stash app just for fun to invest here and there.
I’ve invested mostly into their delicious dividends fund, the S&P 500 etf and Costco, just because I like them :)