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Discovering the Power of Dividends: Top ETFs You Should Know
Dividends have proven to be an excellent investment strategy for me, even before retirement. Initially, I overlooked their significance—they were simply bonuses from the stocks I purchased. I invested as much as I could during some years, while in other years, funds were tight. However, even during those lean times, dividends helped my investment accounts grow, allowing me to buy more shares without overspending.
Consider incorporating dividends into your investment strategy. A solid way to do this is by investing in exchange-traded funds (ETFs), which allow you to buy small amounts of shares starting with just $500 or even less. For optimal results, it’s wise to invest regularly over many years. At first, the progress may feel slow, but the long-term returns can be impressive.
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10 Dividend ETFs Worth Considering
These ETFs can provide steady passive income that tends to rise each year:
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) |
9.00% |
N/A |
N/A |
|
iShares Preferred & Income Securities ETF (NASDAQ: PFF) |
6.00% |
3.33% |
3.87% |
|
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) |
3.64% |
6.95% |
12.71% |
|
Fidelity High Dividend ETF (NYSEMKT: FDVV) |
2.71% |
14.68% |
N/A |
|
Vanguard High Dividend Yield ETF (NYSEMKT: VYM) |
2.67% |
11.06% |
10.11% |
|
SPDR S&P Dividend ETF (NYSEMKT: SDY) |
2.26% |
8.78% |
9.71% |
|
iShares Core Dividend Growth ETF (NYSEMKT: DGRO) |
2.24% |
12.12% |
12.04% |
|
Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) |
1.68% |
12.98% |
11.94% |
|
First Trust Rising Dividend Achievers ETF (NASDAQ: RDVY) |
1.49% |
14.86% |
13.25% |
|
Vanguard S&P 500 ETF (NYSEMKT: VOO) |
1.22% |
15.91% |
13.39% |
Source: Morningstar.com, as of Nov. 8, 2024.
Analyzing the Top Dividend ETFs
Let’s take a closer look at some of these ETFs:
1. JPMorgan Equity Premium Income ETF
This ETF stands out by allocating about 80% of its assets to U.S. stocks and the remainder to writing call options. Though it’s relatively new, it garners attention for its substantial yield, with income disbursed monthly. It’s an interesting option worth exploring.
This ETF differs from others by focusing on preferred stocks rather than regular common stocks. Preferred stocks often provide higher dividends but typically don’t appreciate in value as quickly.
3. Schwab U.S. Dividend Equity ETF
This fund tracks the Dow Jones U.S. Dividend 100 Index, consisting of 100 companies that have reliably paid dividends for over a decade and maintain solid financial health.
4. Fidelity High Dividend ETF
This ETF invests in over 100 medium and large firms with a strong potential for sustaining and increasing their dividend payouts.
5. Vanguard High Dividend Yield ETF
Tracking the FTSE High Dividend Yield Index, this ETF includes roughly 550 companies known for high dividend yields.
6. SPDR S&P Dividend ETF
This ETF requires its companies to have raised their dividends annually for at least 20 consecutive years, currently holding 133 stocks.
This ETF tracks an index of U.S. stocks with a consistent history of dividend growth.
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Top ETFs for Consistent Dividend Growth
Explore Leading Dividend ETFs
Investors often seek companies that provide growing dividends. While the yield on these options may not always be high, the focus stays on companies that consistently increase their dividends rather than those offering larger, yet stagnant, yields.
1. Vanguard Dividend Appreciation ETF
This ETF follows the S&P U.S. Growers Index, which highlights firms that have raised their dividends for at least 10 consecutive years. It avoids stocks with extremely high yields, recognizing that such yields might indicate a struggling company. Currently, it features 338 stocks.
2. First Trust Rising Dividend Achievers ETF
Focused on the Nasdaq US Rising Dividend Achievers index, this ETF includes approximately 50 diverse companies that have a history of increasing their dividends and show the potential to continue this trend.
3. Vanguard S&P 500 ETF
This popular S&P 500 index fund presents a solid example of broad-based ETFs that also contribute considerable dividend income. Although the average yield isn’t as high as other dividend-specific ETFs, the total payouts are expected to rise over time. Historically, the S&P 500 has delivered average annual returns of close to 10% over extended periods.
Considerations for Investors
When evaluating the funds mentioned, determine whether you prefer steadily growing dividends or higher yield stocks. Additionally, pay attention to the expense ratios (annual fees) connected to the funds. Some funds charge less than 0.10%, while others may be higher.
Check if any of these funds are available through your workplace 401(k), which is a practical method to invest. If they aren’t, most can be accessed through a reliable brokerage account.
Opportunity for Potential Gains
Have you ever felt you missed out on buying successful stocks? Now is your chance to catch up!
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*Stock Advisor returns as of November 11, 2024
Selena Maranjian has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
