What ETFs Pay Dividends? These 5 Funds Are Stellar
Want to increase your passive income while remaining diversified? Here are five exchange-traded funds that pay dividends. Dividends are a crucial element for many investors.
May 31 2022, Published 1:36 p.m. ET
ETFs are a simple way for investors to stay diversified. Having an array of stocks in your portfolio can increase your chances of seeing a profit. However, there's one crucial element in individual stock trading many investors love — dividends.
Fortunately for retail traders, there are high-dividend ETFs to choose from. Some ETFs focus specifically on stocks that pay dividends, but most ETFs offer some sort of dividend based on the stocks in its basket. Here are five high-dividend ETFs to consider for diversified investing income.
1. Vanguard Dividend Appreciation ETF (VIG)
The Vanguard Dividend Appreciation ETF (VIG) tracks the S&P U.S. Dividend Growers Index. Focused on large-cap companies, VIG yields a 1.7 percent dividend. Because it’s a passively managed fund, VIG boasts a low expense ratio of 0.06 percent, thus reducing fees and increasing profit.
VIG's top holdings as of May 31 include Microsoft Corp. (MSFT), UnitedHealth Group Inc. (UNH), Johnson & Johnson (JNJ), Procter & Gamble Co. (PG), and JPMorgan Chase & Co. (JPM).
2. SPDR S&P Dividend ETF (SDY)
The SPDR S&P Dividend ETF (SDY) tracks the S&P High Yield Dividend Aristocrats Index, which “screens for companies that have consistently increased their dividend for at least 20 consecutive years, and weights the stocks by yield,” according to State Street Global Advisors.
SDY maintains a reasonable expense ratio of 0.35 percent and pays out a 2.79 percent dividend yield.
SDY's top holdings as of May 31 include Leggett & Platt Inc. (LEG), IBM Co. (IBM), ExxonMobil Corp. (XOM), Amcor PLC (AMCR), and National Retail Properties Inc. (NNN).
3. iShares Select Dividend ETF (DVY)
The iShares Select Dividend ETF (DVY) is a BlackRock fund focused on broad-cap U.S. companies that show a clear commitment to dividend payouts. The fund has a standard 0.38 percent expense ratio and maintains a 2.71 percent dividend yield.
DVY's top holdings as of May 31 include Altria Group Inc. (MO), Valero Energy Corp. (VLO), IBM Co. (IBM), Oneok Corp. (OKE), and Philip Morris International Inc. (PM).
4. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) tracks the top 51 stocks in the S&P 500 that have high dividends and low volatility, making it a more honed version of the broad index. The fund clusters in the utilities, consumer stables, and healthcare industries. SPHD maintains a 0.3 percent expense ratio and an approximately 3.33 percent dividend yield.
SPHD's top holdings as of May 31 include PPL Corp. (PPL), Pinnacle West Capital Corp. (PNW), Consolidated Edison Inc. (ED), Edison International (EIX), and The Southern Co. (SO).
5. First Trust Morningstar Dividend Leaders Index ETF (FDL)
The First Trust Morningstar Dividend Leaders Index ETF (FDL) tracks the Morningstar Dividend Leaders Index, which identifies the 100 leading high-dividend stocks with a consistent, sustainable dividend history. The expense ratio is on the higher side at 0.46 percent, and the dividend yield is around 3.68 percent.
FDL's top holdings as of May 31 include AT&T Inc. (T), AbbVie Inc. (ABBV), Chevron Corp. (CVX), Verizon Communications Inc. (VZ), and Pfizer Inc. (PFE).
Pro tip: Automatically reinvest dividends to increase the efficiency of your compounding ETF gains.