The economic landscape hasn’t changed much since the fighting in the Ukraine broke out. Inflation is still at record high levels, oil and gas prices are pinching the pockets of American’s and liberal leaders won’t let go of control of the Covid 19 pandemic. So what is an investor to do at times like these? One place to turn is to dividends and a means of investing in them through profitable ETFs. In this piece we’ll take a look at some of the top producing dividend ETFs that you can put into your portfolio now.
So what exactly is a dividend ETF and what does it invest in? They are generally designed to invest in a basket of dividend-paying stocks. Stable, attractive dividends tend to be associated with bigger, less risky blue-chip companies, although any company can share their earnings with shareholders, and some of the highest yields are offered by smaller, less established names.
Dividend ETFs are often favored by more risk-averse, income-seeking investors. Investors also use them to balance riskier investments in their portfolios. In addition to offering a regular income stream, dividend ETFs generally offer much lower expense ratios than dividend-focused mutual funds. As far as the size of the market, there are currently 91 ETFs that fall into the dividend category, so we’ll try to give you a little help in selecting a few.
Like any other investment, you’ll want to do a bit of research before diving into any ETF, whether it’s focused on generating high dividend payments, generating growth, investing in value stocks, or following any other investment model. At the end of the day, not all investments in any category will produce the same returns. When researching high-yield dividend ETFs, you should pay close attention to several factors.
Cost – As with any investment there are usually associated expenses. You can compare funds by looking at what is known as the expense ratio, which basically is your cost on a percentage basis. For example, a $100 investment in an ETF with a 1% expense ratio will cost you $1 per year, or 1% of $100. According to the Wall Street Journal, the average expense ratio among ETFs is 0.44%.
Dividend Yield – Dividend yield describes the amount of money in dividends you stand to earn in relation to a single share of the ETF. For example, if the ETF costs $25 per share and you earn $2.50 per share in dividends annually on your investment, the dividend yield for that ETF is 10%.
Assets Under Management – Generally bigger is better in regard to assets under management, which usually also equates to a lower expense ratio. It’s a good idea to look at the assets under management to see just how much money is flowing through the ETF before buying shares. The more assets the ETF has under management, the more popular the fund is.
Performance – Finally, you want to invest in ETFs that are known for performing well, both from a dividend growth standpoint and from a price appreciation standpoint.
VictoryShares US Large Cap High Dividend Volatility Weighted (CDL)
• Performance over One-Year: 25.60%
• Expense Ratio: 0.35%, or $35 annually for every $10,000 invested
• 30-Day Yield: 2.92%
• Three-Month Average Daily Volume: 1.3 k
VictoryShares US Large Cap High Dividend Volatility Weighted ETF provides investors with exposure to dividend-yielding, Large Cap US stocks without subjecting investors to the inherent limitations of traditional market-cap or yield weighting. It seeks to provide investment results that track the performance of the Nasdaq Victory US Large Cap High Dividend 100 Volatility Weighted Index before fees and expenses. This was the best performing dividend ETF in 2021.
WisdomTree U.S. High Dividend ETF (DHS)
• Performance over One-Year: 24.42%
• Expense Ratio: 0.38%, or $38 annually for every $10,000 invested
• 30-Day Yield: 3.40%
• Three-Month Average Daily Volume: 63.3 k
WisdomTree U.S. High Dividend ETF (DHS) is an exchange-traded fund that seeks to track the performance of the WisdomTree U.S. High Dividend Index, which is a fundamentally weighted index that measures performance of companies with high dividend yields. Its top holdings include Exxon Mobil Corp, Chevron Corp, and Pfizer. According to analysts at WisdomTree, benefits of the ETF include, to gain targeted exposure to U.S. equity from high dividend yielding companies. Use to complement or replace large cap value and dividend oriented active and passive strategies, and to satisfy demand for growth potential and income focus.
Legg Mason Low Volatility High Dividend ETF (LVHD)
• Performance over One-Year: 21.95%
• Expense Ratio: 0.27%, or $27 annually for every $10,000 invested
• 30-Day Yield: 3.16%
• Three-Month Average Daily Volume: 24.7 k
The Legg Mason Low Volatility High Dividend ETF (LVHD) seeks to track the investment results of an underlying index composed of equity securities of U.S. companies with relatively high yield and low price and earnings volatility.
LVHD may benefit investors who want income but are concerned about the volatility that can come from traditional equity income investments. This is something that might benefit you in a market with high current volatility.
Fidelity High Dividend ETF (FDVV)
• Performance over One-Year: 21.90%
• Expense Ratio: 0.29%, or $29 annually for every $10,000 invested
• 30-Day Yield: 2.97%
• Three-Month Average Daily Volume: 178.9 k
The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity High Dividend IndexSM. 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. This was one of the top 5 dividend ETFs recommended recently by analysts at Seeking Alpha.
