A basket of stocks that trade just like individual stocks, ETFs or exchange-traded funds can provide exposure to a broad market, an industry sector or any other subsegment, generally with less risk than when investing in individual stocks. Having become increasingly popular in the last decade and now holding trillions of dollars in assets, ETFs are often chosen for providing investors with the ability to invest in a wide variety of stocks and other assets in just one fund, with typically low expenses.
And while you can further slice and dice by opting for all sorts of ETFs, ranging from market cap to emerging markets and everything in between, dividend ETFs are an easy way to gain exposure to a basket of dividend-paying stocks, often associated with large and well-established, blue-chip companies that have a strong history of dividend increases and which span a range of economic sectors and industries.
With choices abounding and serving as an excellent stream of income, below are five top players in the dividend ETF space.
What are dividend ETFs’ main objective?
Some dividend ETFs target companies that have steadily increased their dividend payouts for a number of years. Others may centre on companies paying the highest yield. If you’re wondering what a dividend ETFs’ main objective is, its name may be an indication of this, alternatively, go through its prospectus, which is filled with all sorts of information about the ETF’s objectives and purpose, dividend yield, annual return and other important information that will help you decide whether it aligns with your goals.
An important element of dividend ETFs is their annualised yield. The Annual Percentage Yield, often abbreviated as APY, is the actual rate of return that will be earned in one year if the interest is compounded. This is typically displayed on the prospectus and/or factsheet, however, if you need to calculate the historical dividend yield yourself, all you need to do is divide the most recent dividend payment by the net asset value or share price of the ETF. To calculate whether the annualised yield of your selected ETF is bigger than average, compare it to that of the S&P 500, which is often used as a benchmark.
Top dividend ETFs
Vanguard Dividend Appreciation ETF (VIG)
YTD returns (NAV): 15.32% (as of August 11, 2021)
Net Assets: $74.8 billion (as of July 31, 2021)
Dividend yield: 1.78%
Total expense ratio: 0.06% (as of May 28, 2021)
Focused on dividend growth, the Vanguard Dividend Appreciation ETF selects large-cap companies that have increased their annual dividends for 10 or more consecutive years, while it tracks the performance of the Nasdaq US Dividend Achievers Select Index which measures the investment return of stocks with a record of increasing dividends over time. Providing a well-balanced mix of long-term capital appreciation, the ETF has an investment portfolio that combines the largest companies in the U.S. without being overweight in any one particular sector. At the same time, its holdings means that the ETF invests in companies that are most likely to continue to pay out dividends in the future, making it a solid pick for dividend-focused investors. What's more, it is passively managed, employing a full-replication strategy, while it remains fully invested.
From Visa (V) and Walmart (WMT) to Unitedhealth (UNH) and Home Depot (HD), the ETF invests in top industry names, with consumer discretionary, industrials and healthcare among the top sectors it covers.
Below is a breakdown of the ETF’s top 5 holdings:
| TICKER | COMPANY | WEIGHT (%) |
| MSFT | Microsoft Corp. | 4.18 |
| JPM | JP Morgan Chase & Co. | 3.79 |
| JNJ | Johnson & Johnson | 3.67 |
| WMT | Walmart Inc. | 3.38 |
| UNH | UnitedHealth Group Inc. | 3.22 |
Is the Vanguard Dividend Appreciation ETF a buy?
According to the MSCI ESG Fund Rating which measures the resiliency of portfolios to long-term risks and opportunities arising from environmental, social and governance factors, the Vanguard Dividend Appreciation ETF has an MSCI ESG Fund Rating of A based on a score of 6.25 out of 10. This means that the companies it invests in can adapt to any disruptions that can arise from these issues.
Since its 2006 inception, the ETF has generated annualised total returns of 8.75%, which translates to an overall total return of 193% in a 13-year time frame. To put things into perspective, if you had invested $10,000 in the ETF 10 years ago, by July 2021, your investment would be worth $33,973.13, marking a 239.73% increase.
Interestingly, on the first trading day of this month, the ETF saw around 2.68 million shares exchange hands when its average volume traded on a given day is 1.26 million, witnessing more than double the amount of daily trade volume that it usually does on a given day. At the same time, August 2’s peak in trade volume is the ETF’s seventh-highest volume traded day of the year.
Bearing in mind that dividend growth stocks have performed well, the Vanguard Dividend Appreciation ETF is a great way for long-term investors to achieve strong returns.
Head over to Moneybase Invest to add Vanguard Dividend Appreciation ETF (VIG) to your portfolio.
Schwab U.S. Dividend Equity ETF (SCHD)
YTD Daily Total Return: 20.26% (as of June 30, 2021)
Net Assets: $27 billion (as of August 11, 2021)
Dividend yield: 2.89% (as of June 30, 2021)
Total expense ratio: 0.06% (as of June 30, 2021)
A straightforward, low-cost fund, the Schwab U.S. Dividend Equity ETF tracks the total return of the Dow Jones U.S. Dividend 100 index before fees and expenses, which centres on U.S. stocks with high dividend yields and a strong track record of paying dividends consistently. The ETF invests at least 90% of its net assets in stocks that are included in the index, which are selected based on their fundamental strength relative to their peers and based on financial ratios, whereas more than 20% of its holdings are financial stocks.
Among the ETFs holdings include Coca-Cola (KO), Cisco Systems (CSCO) and others, whereas in terms of sectors, the ETF is mainly focused on the financial sector, information technology, industrials and consumer staples, amongst others. Offering an excellent stream of income, this is an ETF that can serve as the core of a diversified portfolio or to complement one alongside your other assets.
Here is a breakdown of the ETF’s top 5 holdings:
| TICKER | COMPANY | WEIGHT (%) |
| PFE | Pfizer Inc. | 4.60 |
| HD | Home Depot | 4.33 |
| PEP | Pepsico Inc. | 4.19 |
| BLK | Blackrock Inc. | 4.16 |
| AVGO | Broadcom Inc. | 4.12 |
Is the Schwab U.S. Dividend Equity ETF a buy?
The ETF has an MSCI ES Fund Rating of AA based on a score of 7.28 out of 10. An excellent rating, this means that the ETF consists of companies that show strong and improving management of financially relevant environmental, social and governance issues and as a result, they may be more resilient to any disruptions arising from these events. Meanwhile, its Peer Rank, which reflects its ranking of the MSCI ESG Fund Quality Score against the scores of other ETFs within the same peer group is in the 80th percentile and in the 91st percentile within the global universe of all funds covered by the MSCI ESG Fund Ratings.
For investors looking for dividend growth, the Schwab U.S. Dividend Equity ETF has done a good job of delivering above-market dividend income to shareholders, with the ETF being quite consistent at boosting its dividend payouts over time. For instance, in 2013, it paid out just over $0.90, but by 2018 this had increased to more than $1.28 per share, marking an increase of more than 40%.
Offering both diversification and value, the Schwab U.S. Dividend Equity ETF has the potential to offer good total returns and a generous dividend income.
Click here to buy the Schwab US Dividend Equity ETF (SCHD).
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
YTD return (NAV): 14.56% (as of June 30, 2021)
Net Assets: $8.59 billion (as of June 30, 2021)
Dividend yield: 2.32% (as of June 30, 2021)
Total expense ratio: 0.35% (as of June 30, 2021)
One of the very few ETFs that offer investors exposure to the S&P 500 Dividend Aristocrats, the ProShares S&P 500 Dividend Aristocrats ETF invests in large-cap U.S. stocks that pay out the very best in dividends and have been doing so for at least 25 consecutive years, some even doing so for 40 years or so. The ETF does this by tracking the performance of the S&P 500 Dividend Aristocrats Index. In addition, it weights its holdings equally and as a result, it doesn’t allow any one sector to exceed more than 30%, a move that helps it remain diversified across most segments of the economy.
Would you like to find out more about dividend aristocrats? Have a look at our guide on dividend aristocrats, kings and zombies.
From household names like Procter & Gamble (PG) to Chevron (CVX), Walmart (WMT), Johnson & Johnson (JNJ) and others, the ETF has 65 holdings as of June 30, with top sectors including industrials, followed by consumer staples, financials, healthcare and others.
Below is a breakdown of the ETF’s top 5 holdings:
| TICKER | COMPANY | WEIGHT (%) |
| NUE | Nucor Corp. | 1.88 |
| TGT | Target Corp. | 1.79 |
| EXPD | Expeditors International of Washington Inc. | 1.74 |
| XOM | Exxon Mobil Corp. | 1.73 |
| WST | West Pharmaceutical Services . | 1.69 |
Is the ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
High-quality companies that have had stable earnings, solid fundamentals and strong histories of profit and growth, coupled with investment strategies that are focused on consistent dividend growth, have exhibited strong performance characteristics under a wide range of market conditions and the ProShares S&P 500 Dividend Aristocrats ETF is no different. Since its inception on October 2013, the ETF’s strategy has allowed investors to capture most of the gains of rising markets, while managing risk by potentially limiting losses in falling markets. In fact, in terms of performance, the investment has been doing well and has been on a positive trajectory, with the exception of March 20, 2020 when the ETF dipped to $52.23. However, since the COVID-10 pandemic lows, it has recovered, trading at $92.92 on August 6, 2021.
So how much would an investment in the ETF generate? An initial $10,000 investment at the time of its inception, would today be worth $26,534 as of the second quarter of 2021, while the ETF’s NAV (net asset value) total return year to date is 14.56%. Offering instant sector and market cap diversification at a reasonable expense ratio of 0.35%, for investors looking for an easy way to build a diversified portfolio of high-quality dividend stocks, the ProShares S&P 500 Dividend Aristocrats ETF is worth a closer look.
Click here to add ProShares S&P 500 Dividend Aristocrats ETF (NOBL) to your portfolio.
SPDR S&P Dividend ETF (SDY)
YTD return (NAV): 17.44% (as of August 11, 2021)
Net Assets: $19 million (as of August 11, 2021)
Dividend yield: 2.64%
Total expense ratio: 0.35% (as of June 30, 2021)
The ETF tracks the yield-weighted index of dividend-paying companies from the S&P High Yield Dividend Aristocrats index, which in turn measures the performance of companies within the S&P 1500 Composite Index. As a result, stocks included in the index have both capital growth and dividend income characteristics, as opposed to stocks that are pure yield. Designed to measure the performance of the highest dividend yielding index constituents which have consistently increased dividends every year for at least 20 consecutive years, the SPDR S&P Dividend ETF weighs stocks by indicated yield, which are then weight-adjusted each quarter.
An important factor of this ETF is that it takes dividend sustainability screens to new heights and it only holds companies that have increased their payouts for the past 20 years. The highest yielding firms are then weighted by dividend yield. With around 112 holdings as of August 4, 2021, among the big names it invests in include AbbVie (ABBV), Pepsico (PEP) and many others, whereas, sector exposure varies to a great extent, with financials at 16.32%, then consumer staples at 14.99%, followed by industrials and utilities, each occupying 14.61%, in addition to other sectors.
Here is a breakdown of the ETF’s top 5 holdings:
| TICKER | COMPANY | WEIGHT (%) |
| T | AT&T Inc. | 2.89 |
| XOM | Exxon Mobil Corporation | 2.25 |
| CVX | Chevron Corporation | 2.12 |
| SJI | South Jersey Industries Inc. | 1.86 |
| IBM | IBM | 1.86 |
Is the SPDR S&P Dividend ETF (SDY) a buy?
Within the high dividend space, the SPDR S&P 500 Dividend ETF has a long track record and has held well over the past year. Dividend yield, as well as large and mid-cap U.S. equity exposures were primary drivers of the ETF’s performance during the period ending June 30, 2020. With its focus on higher yielding, dividend companies, the ETF does tend to own securities which operate in defensive industries, however, technology and healthcare firms performed best, which have helped to offset traditional defensive sectors which have lagged. In effect, the ETF’s YTD NAV performance at the quarter end as of June 30, 2021 has been that of 17.01%, almost at par with that of the S&P High Dividend Aristocrats Index at 17.26%.
And just as was the case with its other counterparts above, the ETF has a good MSCI ESG Fund Rating, currently an A, which is based on a score of 6.76 out of 10 and reflects that the companies in which it invests in have shown more resilience to disruptions arising from environmental, social and governance events, while they have strong and improving management of these issues.
Interested to add the SPDR S&P Dividend ETF (SDY) to your portfolio? Head over to Moneybase Invest.
iShares Select Dividend ETF (DVY)
YTD Return: 23.92% (as of August 9, 2021)
Net Assets: $18 billion (as of August 11, 2021)
Dividend yield: 3.24%
Total expense ratio: 0.39%
A good choice for those looking for some additional income, the iShares Select Dividend ETF offers exposure to broad-cap U.S. companies with a consistent history of five-year records of paying dividends. On the other hand, its investment objective is to track the investment results of the Dow Jones U.S. Select Dividend Index, which as its name implies, it is a dividend-weighted index of relatively high dividend paying U.S. companies.
With around 100 holdings as of August 6, 2021 the iShares Select Dividend ETF boasts well-known names such as Pfizer (PFE), Exxon Mobil (XOM), Fidelity National Financial (FIS) and many others. On the other hand, the ETF invests heavily on the utilities sector, while financials, consumer staples and energy are other industries with the largest share.
Here is a breakdown of the ETF’s top 5 holdings:
| TICKER | COMPANY | NET ASSETS % |
| OKE | Oneok Inc. | 2.31 |
| MO | Altria Group Inc. | 2.26 |
| T | AT & T Inc. | 2.01 |
| PPL | PPL Corp | 1.93 |
| PM | Philip Morris International Inc. | 1.88 |
Is iShares Select Dividend ETF (DVY) a buy
According to the ETF’s prospectus, during the most recent fiscal year, the fund’s portfolio turnover rate was 6% of the average value of its portfolio. So how much would a hypothetical investment of $10,000 generate? Assuming the reinvestment of dividends and any capital gains, while deducting fund expenses, including management fees, a $10,000 investment on November 3, 2003 would have likely grown to $43,574.18 on August 9, 2021, representing an increase of over 335.74%.
Moreover, the fund’s dividend yield is considered sustainable when considering that the ETF’s methodology has a robust sustainability screen and is designed to ensure companies pay steady and rising dividends by using criteria such as five-year dividend growth, payout ratio and payment history.
Meanwhile, in terms of the MSCI ESG Fund rating, the iShares Select Dividend ETF has an A rating based on a score of 6.97 out of 10. As mentioned earlier on, this means that highly rated ETFs consist of companies that tend to show strong and improving management of financially relevant environmental, social and governance issue, while they tend to be more resilient to disruptions arising from these events. On the other hand, the ETF ranks in the 72nd percentile within its peer group on the MSCI ESG Fund Quality Score and in the 77th percentile within the global universe of all funds covered by the Ratings.
Click here to add the iShares Select Dividend ETF (DVY) to your portfolio.
How to invest in Dividend ETFs with Moneyabse Invest
Ready to invest in these top dividend ETFs? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The ETF has been added to your portfolio.
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The contents of this article are not intended to be taken as a personal recommendation to invest but strictly based on research and for information purposes only. Retail investors should contact their financial adviser for a suitability assessment prior to taking any investment decisions.
