The Best Dividend ETF (2024)

Dividend ETFs invest in stocks with higher yields. These individual corporations are mature companies that provide modest income to their investors instead of reinvesting profits back into the company. These are usually large blue-chip companies with a long history of dividend payments.

The popularity of ETFs has made investing more accessible and cost-effective for novice investors. However, those seeking income often turn to dividend ETFs, which prioritize high-yield dividend stocks. These ETFs provide a consistent income stream and can be seen as stable long-term investments, sometimes offering monthly dividend income. Despite their convenience, it’s essential to consider the fees associated with ETFs, as they can impact returns.

What is the Best Dividend ETF?

1. DGRW: WisdomTree U.S. Quality Dividend Growth Fund
2. FDVV: Fidelity High Dividend ETF
3. SCHD: Schwab U.S. Dividend Equity ETF
4. VIG: Vanguard Dividend Appreciation Index Fund
5. DGRO: iShares Core Dividend Growth ETF
6. DLN: WisdomTree U.S. LargeCap Dividend Fund
7. DTD: WisdomTree U.S. Total Dividend Fund
8. VYM: Vanguard High Dividend Yield Index Fund
9. FDL: First Trust Morningstar Dividend Leaders Index Fund
10. SDY: SPDR S&P Dividend ETF

10. SPDR S&P Dividend ETF

SPDR S&P Dividend ETF (SDY) is designed to measure the performance of the highest dividend-yielding S&P Composite 1500 Index constituents that have followed a managed dividends policy of consistently increasing dividends every year for at least 20 consecutive years. Stocks within the Index are weighted by indicated yield (annualized gross dividend payment per share divided by price per share) and weight-adjusted each quarter. The Index components are reviewed annually in January for continued inclusion in the Index and re-weighted quarterly after the closing of the last business day of January, April, July and October.

• The SPDR S&P Dividend ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P High Yield Dividend Aristocrats Index
• The Index screens for companies that have consistently increased their dividend for at least 20 consecutive years, and weights the stocks by yield
• Due to the index screen for 20 years of consecutively raising dividends, stocks included in the Index have both capital growth and dividend income characteristics, as opposed to stocks that are pure yield

Top 10 SDY Holdings

9. First Trust Morningstar Dividend Leaders Index Fund

The investment objective of First Trust Morningstar Dividend Leaders Index Fund (FDL) is to replicate as closely as possible, before fees and expenses, the price and yield of the Morningstar Dividend Leaders Index.

• Securities selected for the Morningstar Dividend Leaders Index are determined by a proprietary screening model developed by Morningstar that has historically maintained consistent and sustainable dividend policies
• The selection universe for this index is based on the Morningstar US Market Index of securities issuing dividend payments that do not constitute qualifying income (e.g., real estate investment trusts) are excluded
• The remaining stocks are ranked by indicated dividend yield. The top 100 are selected for inclusion in the index
• Index constituents are weighted based on the dollar value of indicated dividend payments. Weightings are adjusted so that no individual security has greater than 10% weight, and securities with greater than 5% weight do not collectively exceed 50% of the index
• The index is rebalanced quarterly and reconstituted annually
• Based on forward looking earnings estimates and indicated dividends, stocks are eliminated from consideration if:
  • The five-year indicated dividend per share growth is less than zero
  • One year estimated earnings per share divided by its indicated dividend per share is less than or equal to one

Top 10 FDL Holdings

8. Vanguard High Dividend Yield Index Fund

Vanguard High Dividend Yield Index Fund ETF Shares (VYM) seeks to track the performance of the FTSE High Dividend Yield Index, which measures the investment return of common stocks of companies characterized by high dividend yields.

• Provides a convenient way to track the performance of stocks that are forecasted to have above-average dividend yields
• Follows a passively managed, full-replication approach

Top 10 VYM Holdings

7. WisdomTree U.S. Total Dividend Fund

WisdomTree U.S. Total Dividend Fund (DTD) seeks to track the investment results of broad dividend-paying companies in the U.S. equity market.

• Gain exposure to core U.S. all cap equity from a broad range of dividend paying companies
• Use to complement or replace all cap value or dividend oriented active and passive strategies
• Use to satisfy demand for growth potential and income focus

Top 10 DTD Holdings

6. WisdomTree U.S. LargeCap Dividend Fund

WisdomTree U.S. LargeCap Dividend Fund (DLN) seeks to track the investment results of dividend-paying large-cap companies in the U.S. equity market.

• Gain exposure to core U.S. large cap equity from dividend paying companies
• Use to complement or replace large cap value or dividend oriented active and passive strategies
• Use to satisfy demand for growth potential and income focus

Top 10 DLN Holdings

5. iShares Core Dividend Growth ETF

iShares Core Dividend Growth ETF (DGRO) invests in the stocks of U.S. companies that have a history of growing dividends. This has been a key historical driver of returns and an attractive source of income for investors. The fund has also delivered competitive performance, kept costs low and been tax efficient for investors.

• DGRO offers low-cost exposure to U.S. stocks focused on dividend growth
• Access companies that have a history of sustained dividend growth and that are broadly diversified across industries
• Use at the core of your portfolio to seek income

Top 10 DGRO Holdings

4. Vanguard Dividend Appreciation Index Fund

Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) seeks to track the performance of the S&P U.S. Dividend Growers Index

• Passively managed, full-replication approach
• Fund remains fully invested
• Large-cap equity, emphasizing stocks with a record of growing their dividends year over year
• Low expenses minimize net tracking error

Top 10 VIG Holdings

3. Schwab U.S. Dividend Equity ETF

Schwab U.S. Dividend Equity ETF (SCHD) goal is to track as closely as possible the total return of the Dow Jones U.S. Dividend 100 Index.

• A straightforward, low-cost fund offering potential tax-efficiency 
• The Fund can serve as part of the core or complement in a diversified portfolio
• Tracks an index focused on the quality and sustainability of dividends 
• Invests in stocks selected for fundamental strength relative to their peers, based on financial ratios

Top 10 SCHD Holdings

2. Fidelity High Dividend ETF

Fidelity High Dividend ETF (FDVV) normally invests at least 80% of assets in securities included in the Fidelity High Dividend Index. It may lend securities to earn income for the fund. The Fidelity High Dividend Index is designed to reflect the performance of stocks of large- and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.

Top 10 FDVV Holdings

1. WisdomTree U.S. Quality Dividend Growth Fund

WisdomTree U.S. Quality Dividend Growth Fund (DGRW) seeks to track the investment results of dividend-paying large-cap companies with growth characteristics in the U.S. equity market.

• Gain access to the current investment landscape of U.S. large cap dividend growing companies by applying quality and growth screens
• Use as a complement to high yielding dividend strategies or as a replacement for large cap quality strategies

Top 10 DGRW Holdings

Do ETFs Pay Dividends?

For beginners, using ETFs to target dividend stocks is a practical strategy, providing exposure to dividend investing while maintaining diversification. These dividend ETFs track indexes composed of dividend-paying stocks, employing various dividend strategies based on yield, market capitalization, or location.

Investors approaching retirement often favour dividend ETFs for their consistent income, diversification benefits, risk mitigation, and inflation hedging. With the number of dividend ETFs growing, it’s essential to align your choice with your specific goals, considering factors like investment style, past performance, sector diversity, and fees.

Is a Dividend ETF a Good Investment?

Dividend ETFs bring together a proven investment strategy with the benefits of ETF investing: low costs, tax efficiency and transparency that includes daily disclosure of holdings.

Most dividend-oriented ETFs distribute income to investors quarterly, a frequency that can help investors meet their current spending needs. Fixed bond payments are also regular but tend to be more exposed to inflation than equities. Because stocks may grow their dividends and realize capital appreciation, they can be better positioned to keep pace with or exceed inflation over the long term. In recent years, dividends have come to represent a greater proportion of income than bonds in a typical blended portfolio.

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