10 Best Performing Dividend ETFs and How to Find Them
Dividend exchange-traded funds (ETFs) are structured to invest in a basket of stocks with above-average dividend yields.
Aside from company dividends, funds can also generate income for shareholders via bond yields or other distributions; however, with relatively lower yields coming from bonds and other fixed-income products, dividend stocks and ETFs have become even more attractive. As an added benefit, because companies that offer the best dividend yields are often large and stable “blue chips,” dividend ETFs can also add balance to portfolios during times of uncertainty.
The 10 Best Performing Dividend ETFs
The above best performing dividend ETFs were identified using the YCharts Fund Screener. Filters were added to identify only equity ETFs that rank in the top 20% of all funds for dividend yield, top 50% for forecasted dividend yield, and top 50% for low expenses. Then, an objective Scoring Model was added to rank the best dividend ETFs using an equal-weighted score that considers dividend yield, dividend amount, forecasted dividend yield, and expense ratio.
The list of best performing dividend ETFs includes funds in the Large Value, Real Estate and Diversified Emerging Markets categories, among others. You can explore each fund further here:
• Global X MLP ETF (MLPA)
• VanEck Vectors Mortgage REIT Income ETF (MORT)
• iShares Emerging Markets Dividend ETF (DVYE)
• Global X MLP & Energy Infrastructure ETF (MLPX)
• Invesco KBW Premium Yield Eq REIT ETF (KBWY)
• iShares Mortgage Real Estate Capped ETF (REM)
• Global X SuperDividend™ US ETF (DIV)
• Xtrackers MSCI EAFE High Div Yld Eq ETF (HDEF)
• Tortoise North American Pipeline (TPYP)
• SPDR® Portfolio S&P 500 High Div ETF (SPYD)
Uses for Dividend ETFs
Beyond the normal diversification benefits that ETFs can provide, dividend ETFs are also different based on dividend strategies—they can include holdings that offer dividend consistency, dividend appreciation, or both. As is the case with dividends from individual stocks, dividends paid by ETFs can be reinvested or taken as investment income.
While some ETFs include “dividend” in their names and are marketed as such, plenty of others achieve high dividend yields just as a result of their investment strategies.
Although valuable for the investment income and stability they can provide, several major dividend ETFs have recently underperformed the broader market, as seen in the chart below. While each dividend ETF is yielding 2x that of the SPDR S&P 500 ETF Trust (SPY) dividend payments, strict asset appreciation over time may also be relevant depending on your time horizon.
The Benefits of Dividend ETFs
Equity income is the primary benefit of high-yield dividend ETFs. After all, dividends are meant to provide current income to company shareholders. But beyond income, dividend ETFs can provide portfolio stability, diversification, and usually lower than average fees.
Dividends and stability sometimes come as a package. Blue-chip industry leaders like Procter & Gamble (PG), Verizon (V), and Pfizer (PFE) are stable investments because of their long track records and corporate profits. But their ability to pay consistent dividends to shareholders also contributes to their images of stability. Top holdings for Vanguard High Dividend Yield ETF (VYM) are shown below.
While most dividend-paying companies are large or mega-cap firms, dividend ETFs can also offer diversification across market capitalizations. In fact, while some dividend ETFs use basic strategies that simply select dividend-payers from the S&P 500, more advanced strategies will add sector tilts, focus on emerging markets, or invest in small-cap stocks that pay dividends. Examples include:
• Diversified High Dividend ETF: SoFi Weekly Dividend ETF (WKLY)
• International Diversified High Dividend ETF: Fidelity International High Dividend ETF (FIDI)
• Dividend REIT: Invesco KBW Premium Yield Equity REIT ETF (KBWY)
• Technology ETF: iShares Semiconductor ETF (SOXX)
• Oil ETF: First Trust Natural Gas ETF (FCG)
• Small Value: VictoryShares US SmCp Hi Div Vol Wtd ETF (CSB)
• Mid-Cap Value: Principal Value ETF (PY)
• Large Blend: SPDR® SSGA US Large Cap Low Volatil ETF (LGLV)
Finally, because a strategy that targets dividend yield is relatively basic and easy to employ, expense ratios for dividend ETFs tend to be below average, and rival fees of index ETFs. Some dividend ETFs carry management expense ratios lower than 0.1%.
Important Metrics to Track Dividend ETF Performance
These are the most important factors to consider when evaluating dividend ETF performance and their holdings or when performing ETF comparisons.
Dividend Yield: the sum of all dividends paid, divided by current share price; a higher dividend yield indicates a larger payout
Dividend Payout Ratio: the percentage of company net income paid as dividends to shareholders; a higher dividend payout ratio is better
Dividend Growth: period over period growth of dividends paid, usually expressed as trailing twelve month (TTM) growth; higher dividend growth is better
Dividend Consistency: the track record of paying dividends to shareholders at a regular interval, usually quarterly, over a given lookback period; a company cutting or canceling a dividend payment is a negative event, but dividend ETFs with plenty of holdings can mitigate that risk
Total Returns: unlike price return, total return includes paid dividends in addition to security price appreciation; a higher total return is better
Expense Ratio: the percentage of fund assets that shareholders pay as management fees and operating expenses; a lower expense ratio means less fees (luckily, dividend ETFs tend to have relatively lower expenses)
Market Cap Allocation: the percentage of fund assets invested in large-cap, mid-cap, and small-cap stocks; greater exposure to large-cap companies tends to be preferred among dividend ETF investors
Current Yield: a fund’s annual interest income from bond holdings, divided by current share price; while dividends come from equity holdings, an equity-bond blended fund may also provide interest income and be relevant for income-seeking investors.
Using YCharts to Find Dividend ETFs
Several YCharts tools and pre-built templates enable you to find high-yield dividend ETFs and facilitate more informed dividend ETF comparisons. Below are a few examples.
Identify the Best Performing ETFs using the Fund Screener
As noted previously, some dividend ETFs have underperformed the broader market in recent years. Here’s how YCharts helps you find high-yield dividend ETFs that outperform their peers.
The Fund Screener’s Top Performing Dividend ETFs is one of many pre-built screens available on YCharts. This template locates equity ETFs with above-average dividend yields and total returns over several lookback periods, below-average management fees, and a track record of consistent dividend payments. Some top results from that template screen are shown below, sorted by dividend yield.
Dividend Growth ETFs: YCharts gives you access to proprietary lists that can easily identify dividend ETFs that have consistently paid dividends, or have regularly grown their dividends over time. Using the YCharts Fund Screener, click Modify, then Dividend Policies, and select Dividend Growth or Dividend Consistency.
Monthly Dividend ETFs: Most ETFs distribute dividend income quarterly, but if you’re looking for more frequent income, some ETFs pay monthly dividends. Using the Fund Screener, click Modify, then Dividend Policies, and select Monthly Dividend Frequency.
Generate Custom Dividend ETF Comparison Reports
FINRA-reviewed Comparison PDF Reports analyze and compare portfolios, mutual funds, and other securities using clean and client-friendly visuals in a PDF format, and are customizable with your firm’s logo, colors, and disclosures.
Use Side-by-Side Comparison Reports to examine the performance, key metrics, and holdings of two dividend ETFs, like the Vanguard High Dividend Yield ETF (VYM) and BlackRock iShares Select Dividend ETF (DVY). VYM has outperformed during the last four years, but DVY currently carries a higher dividend yield and better performance year-to-date. This ETF Comparison report is generated within seconds, saving you time and energy to focus your attention on other tasks.
Take a Deeper Dive Using Comp Tables to Evaluate ETFs Head-to-Head
With YCharts Comp Tables, you can define the specific financial metrics for a set of dividend ETFs and how they stack up against one another. Comp Tables make it easy for you to identify each ETF’s strengths and weaknesses. Use custom Scoring Models to establish an objective ranking based on the financial metrics you value most to ensure you find the best performing dividend ETFs.
Using the dividend ETFs identified from the Fund Screener’s Top Performing Dividend ETFs template, you can quickly input tickers into Comp Tables and add any financial metrics of interest. As seen below, Invesco Dow Jones Industrial Average Dividend ETF (DJD), Vanguard S&P Mid-Cap 400 Value ETF (IVOV), and Schwab US Large-Cap Value ETF (SCHV) are the top three securities when ranked evenly across Dividend Yield, Dividend, Expense Ratio, and Forecasted Dividend Yield. Not an obvious result, given that only DJD ranked in the top three for dividend yield. Performing a comparison using Comp Tables and Scoring Models helps you look beyond the obvious and identify the best performing dividend ETFs.
Evaluate Dividend ETFs faster with Pre-built Quickflows
YCharts Quickflows leverage already powerful tools and data to conduct higher quality research in less time. Based on investment research best practices and the most common workflows, our Quickflows blog shares more details on how to automate your analyses.
The Tax Adjusted Return Comparison Quickflow evaluates up to 12 ETFs for total return, tax cost ratio, and tax-adjusted total return over several periods. Because investors face income tax for dividends collected, this pre-built analysis helps you find dividend ETFs that outperform net of taxes paid. Click here to see the Quickflow’s results for several dividend ETFs.
Similarly, the Equity Style Exposure Quickflow compares holdings of multiple ETFs based on their allocations to Morningstar’s nine equity style boxes. Click here to see an example.
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