What Are The Best Dividend ETFs Right Now?
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Ready to start collecting dividend checks? Then you need to look into an ETF (exchange traded fund) that focuses on a collection of dividend paying stocks.
An ETF is a fund that trades on the stock market.
It is more like a stock than a mutual fund because it trades real time and usually costs an investor less in fees. An ETF typically has a lower expense ratio than a mutual fund.
One of the reasons why: mutual funds need to keep cash on hand to pay investors who redeem their shares. ETFs, which trade differently, do not. Mutual fund expenses are typically in the 1-3% range: ETF expenses are typically less than 1%.
ETF Benefits
Because of their lower expenses, ETFs have become quite popular. And with this popularity, the number of new ETFs is exploding! For dividend investors, this provides an ideal way to target different types of investments. It is a simple way to create a “portfolio within a portfolio” of dividend stocks that are designed to achieve different objectives.
For example, you may wish to allocate a certain amount of money to low yield, safe dividend stocks, and another amount of money to stocks that pay higher yields, but come with a higher risk.
Here are some for you to look at for your own portfolio.
Leading Dividend ETFs
State Street High Yield Dividend Aristocrats (SDY)
This ETF tracks the S&P High Yield Dividend Aristocrats Index. It follows roughly 60 stocks, all high-quality companies where the dividend has been increased for at least 25 years in a row.
iShares Select Dividend (DVY)
This ETF tracks the Dow Jones U.S. Select Dividend Index. It can be considered a mid-cap value fund.
Vanguard Dividend Appreciation Index ETF (VIG)
This ETF, an exchange traded fund, focuses on NASDAQ stocks that are “dividend achievers”. The Dividend Achievers was launched by Moody’s Investor Service (now Mergent) in 1979 to identify leading dividend-paying companies.
Vanguard High Dividend Yield Index ETF (VYM)
This tracks the performance of the FTSE High Dividend Yield Index. This index reflects the performance of common stocks where dividends are typically above average.
iShares S&P U.S. Preferred Stock Index Fund (PFF)
This ETF tracks 220 preferred stocks from 44 U.S. companies. It is for the dividend investor who is focused on capturing a high yield. Many of these companies are in the financial sector. Keep in mind that preferred stocks are different from common stocks, and are actually very similar to bonds. Their value goes up when interest rates go down, and vice versa.
WisdomTree SmallCap Dividend Fund (DES)
This fund tracks the price and yield performance of the WisdomTree SmallCap Dividend Index.
First Trust Morningstar Dividend Leaders Index Fund (FDL)
This ETF tracks the Morningstar Dividend Leaders Index. The index offers investors a benchmark for dividend portfolios by focusing on stocks that deliver a consistent record of growing and maintaining dividends.
There are opportunities beyond the US…
Global Dividend ETFs
Arrow Dow Jones Global Yield ETF (GYLD)
The world’s top 150 highest yielding stocks… these are what the Dow Jones Global Composite Yield Index tracks. There are five different “baskets” of stocks in this index: The Dow Jones Global Equity Yield Index, The Dow Jones Global Real Estate Yield Index, The Dow Jones Global Alternative Yield Index which tracks preferred shares, MLPs, and royalty trusts, The Credit Suisse Yield Enhanced Global Corporate Index, and The Credit Suisse Yield Enhanced Sovereign Index.
Wisdom Tree Emerging Markets Equity Income Fund (DEF)
This ETF tracks roughly 1,000 companies that pay dividends and are part of the WisdomTree Emerging Markets Dividend Index. These stocks trade on 19 different exchanges in developing countries. The ETF tracks the top 300 of these companies based on the highest yields.
First Trust DJ Global Select Dividend Index Fund (FGD)
This ETF gives global investors broader exposure and tracks established global markets such as those in Germany, Japan, and the UK, not just developing nations. The ETF stocks are concentrated in North America and Western Europe.
Of course, there are specialty Dividend ETFs too…
Specialized Dividend ETFs
Guggenheim Multi-Asset Income ETF (CVY)
What does “multi-asset” mean? Investors in this ETF get a hodgepodge of holdings to track everything from limited partnerships and closed-end funds to real estate investment trusts (REITs) and foreign stocks that trade on U.S. markets (ADRs). This ETF is designed for the investor who is interested in appreciation along with high yield.
Dreyfus Brazilian Real Fund (BZF)
This is not your mainstream investment opportunity, but it’s not exactly “exotic” either.
The Dreyfus Brazilian Real Fund tracks money market rates in Brazil and follows the real, Brazil’s currency. The goal of the ETF is to deliver Brazilian money market rates that may be legally paid to foreign investors. It also tries to provide returns based on the value of the Brazilian real to the U.S. dollar. Not exactly a pure play dividend ETF, but when you look at how ETFs that pay dividends perform, this one has its moments in the sun.
SPDR S&P International Telecommunications Sector ETF (IST)
This tracks the S&P Developed Ex-U.S. BMI Telecommunication Services Sector Index. The companies are in developed global markets outside the United States.
Your Dividend ETF Strategy
So what’s your next step? Determine how you want to structure your portfolio. Based on your investment objectives and your asset allocation, determine what types of ETF investments are most appropriate.
Then pick the best opportunities and start adding them a little at a time to your portfolio. In a few years, you’ll be seeing nothing but a steady stream of dividends flowing your way.
Category: Dividend Stocks To Buy?
