Yahoo Finance A Guide to the 10 Most Popular Dividend ETFs
Wall Street has been witnessing a remarkable rally so far in 2024, with all three major bourses hitting new milestones lately. However, elevated valuations and uncertain timing of the Fed rate cuts are expected to weigh on investors’ sentiment. These have raised the appeal for dividend investing.
Although dividend stocks do not offer dramatic price appreciation, they are a major source of consistent income for investors in any type of market. These stocks tend to outperform during volatile markets. Dividend-focused products offer safety and stability by investing in mature companies that are less volatile amid large swings in stock prices. This is because the companies that pay out dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.
Dividend-paying stocks are often found in sectors considered "defensive," such as utilities, consumer staples and healthcare. These sectors can hold up better during economic downturns as they produce essential goods and services that are in demand regardless of economic conditions.
Further, dividend-paying stocks can also serve as a hedge against inflation. The latest Fed minutes highlight concerns over stubborn inflation. While inflation has eased over the past year, it failed to show further progress toward the Fed’s 2% objective in recent months. As such, the disinflation process would likely take longer than previously thought. Companies that can pass on increased costs to customers can maintain or even increase their profitability during inflationary periods, which can support their ability to pay dividends (read: Interest Rate Hedge ETFs in Focus Post Fed Minutes).
Here, we have highlighted the 10 most popular dividend ETFs for investors seeking steady income irrespective of stock market directions.
Vanguard Dividend Appreciation ETF (VIG)
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space, with AUM of $78.1 billion and an average daily volume of 762,000 shares. The fund follows the S&P U.S. Dividend Growers Index, which is composed of stocks of companies that have a record of increasing dividends over time. Vanguard Dividend Appreciation ETF holds 340 securities in the basket, with none accounting for more than a 4% share. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Schwab U.S. Dividend Equity ETF (SCHD)
Schwab U.S. Dividend Equity ETF offers exposure to 103 high-dividend-yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. Schwab U.S. Dividend Equity ETF is well spread across components, with none holding more than 5% of the assets. It charges 6 bps in annual fees and trades in a solid volume of about 3 million shares a day. Schwab U.S. Dividend Equity ETF has AUM of $55.2 billion and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Vanguard High Dividend Yield ETF (VYM)
Vanguard High Dividend Yield ETF provides exposure to high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 557 securities, the product is pretty well spread out across components, as each holds no more than 3.5% of the assets. Vanguard High Dividend Yield ETF has amassed $53.5 billion in its asset base while trading in volumes of 860,000 shares a day on average. The expense ratio is 0.06%. VYM has a Zacks ETF Rank #2 with a Medium risk outlook (read: AI & Fed Driving Stock Market? ETFs to Bet On).
iShares Core Dividend Growth ETF (DGRO)
iShares Core Dividend Growth ETF provides exposure to companies having a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. It holds 419 stocks in its basket, with each accounting for less than a 3.3% share. iShares Core Dividend Growth ETF has AUM of $27 billion and trades in a solid volume of about 1.2 million shares. It charges 8 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook.
SPDR S&P Dividend ETF (SDY)
With AUM of $20.3 billion and an average daily volume of 261,000 shares, SPDR S&P Dividend ETF provides a well-diversified exposure to 133 U.S. stocks that have been consistently increasing dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.6% of the assets. SPDR S&P Dividend ETF charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Select Dividend ETF (DVY)
iShares Select Dividend ETF provides exposure to the high dividend-paying U.S. equities with a five-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 98 securities in its basket, with each accounting for no more than 3% of assets. iShares Select Dividend ETF has AUM of $18.6 billion and an average daily volume of around 427,000 shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust Value Line Dividend Index Fund (FVD)
First Trust Value Line Dividend Index Fund tracks the Value Line Dividend Index, which is a modified equal-dollar weighted index comprising U.S. exchange-listed securities of companies that pay above-average dividends and have the potential for capital appreciation. It is a bit pricier than many other products in the dividend space, charging investors 60 bps a year in fees. First Trust Value Line Dividend Index Fund holds 191 securities in its basket and has accumulated $9.6 billion in its asset base. It sees a solid volume of about 1 million shares a day on average. First Trust Value Line Dividend Index Fund has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Core High Dividend ETF (HDV)
iShares Core High Dividend ETF offers exposure to 74 high-quality and high-dividend stocks by tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms, with each making up for no more than an 8.3% share. iShares Core High Dividend ETF has AUM of $10.4 billion and trades in a solid volume of around 284,000 shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
WisdomTree U.S. Quality Dividend Growth Fund (DGRW)
WisdomTree U.S. Quality Dividend Growth Fund tracks the WisdomTree U.S. Quality Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics like long-term earnings growth expectations and three-year historical averages for return on equity and return on assets. It has gathered $12.8 billion in its asset base and charges 28 bps in fees per year from its investors. WisdomTree U.S. Quality Dividend Growth Fund holds 299 securities in its basket, with each accounting for no more than an 8% share. It trades in a volume of 486,000 per share on average and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Why Dividend ETFs Deserve a Place in Your Portfolio).
ProShares S&P 500 Aristocrats ETF (NOBL)
ProShares S&P 500 Aristocrats ETF focuses exclusively on the S&P 500 Dividend Aristocrats — high-quality companies that have not just paid dividends but grown them for at least 25 consecutive years, with most doing so for 40 years or more. It tracks the S&P 500 Dividend Aristocrats Index and holds 67 securities in its basket, with each accounting for no more than a 2% share. ProShares S&P 500 Aristocrats ETF has amassed $11.6 billion in its asset base and trades in a volume of around 440,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WisdomTree U.S. Quality Dividend Growth ETF (DGRW): ETF Research Reports
SPDR S&P Dividend ETF (SDY): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
First Trust Value Line Dividend ETF (FVD): ETF Research Reports
iShares Select Dividend ETF (DVY): ETF Research Reports
iShares Core High Dividend ETF (HDV): ETF Research Reports
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
