ETFs
A Guide to the 10 Most Popular Dividend ETFs – June 5, 2024
Wall Street has seen a remarkable rally so far in 2024, with all three major exchanges recently hitting new milestones. However, high valuations and the uncertain timing of Fed rate cuts are expected to weigh on investor confidence. These factors have increased the appeal of dividend investing.
Although dividend stocks don’t offer dramatic price appreciation, they are a major source of consistent income for investors in any type of market. These stocks tend to outperform when markets are volatile. Dividend-focused products provide safety and stability by investing in mature companies that are less volatile during sharp stock price fluctuations. That’s because companies that pay dividends typically act as a hedge against economic uncertainty and provide downside protection by regularly offering outsized payouts or large returns.
Dividend-paying stocks are often found in sectors considered “defensive,” such as utilities, consumer staples, and healthcare. These sectors can better withstand economic downturns because they produce essential goods and services that are in demand regardless of economic conditions.
Additionally, dividend-paying stocks can also serve as a hedge against inflation. The Fed’s latest minutes highlight concerns about stubborn inflation. Although inflation has eased over the past year, it has failed to move toward the Fed’s 2% target in recent months. The disinflation process will therefore likely take longer than previously thought. Companies that can pass on increased costs to their customers can maintain or even increase their profitability during periods of inflation, which can support their ability to pay dividends (read: Focus on interest rate hedging ETFs after Fed minutes).
Here we’ve highlighted the 10 most popular dividend ETFs for investors looking for stable income, regardless of where the stock markets are heading.
Vanguard Dividend Appreciation ETF (VIG – Free report)
The Vanguard Dividend Appreciation ETF is the largest and most popular ETF in the dividend space, with $78.1 billion in assets under management and an average daily volume of 762,000 shares. The fund tracks the S&P US Dividend Growers Index, which is comprised of stocks of companies that have a history of increasing their dividends over time. The Vanguard Dividend Appreciation ETF holds 340 stocks in the basket, none of which represents more than 4% of the shares. The fund charges 6 basis points in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium Risk Outlook.
Schwab US Dividend Stock ETF (SCHD – Free report)
The Schwab US Dividend Equity ETF provides exposure to 103 high dividend yielding US companies that have a history of consistent dividend payments supported by fundamental strength based on financial ratios and abundant liquidity. This can be easily done by tracking the Dow Jones US Dividend 100 Index. The Schwab US Dividend Equity ETF is well distributed across constituents, with none holding more than 5% of assets. It charges 6 basis points in annual fees and trades a solid volume of around 3 million shares per day. The Schwab US Dividend Equity ETF has $55.2 billion in assets under management and a Zacks ETF Rank #3 (Hold) with a Medium Risk Outlook.
Vanguard High Dividend Yield ETF (VYM – Free report)
The Vanguard High Dividend Yield ETF provides exposure to high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 557 securities, the proceeds are fairly well distributed between the components, each holding no more than 3.5% of assets. The Vanguard High Dividend Yield ETF has amassed $53.5 billion in its asset base while trading volumes of 860,000 shares per day on average. The spending rate is 0.06%. VYM has a Zacks ETF Rank #2 with a Medium Risk Outlook (read: AI and the Fed boosting the stock market? ETFs to bet on).
iShares Core Dividend Growth ETF (DGRO – Free report)
The iShares Core Dividend Growth ETF provides exposure to companies with a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. He holds 419 stocks in his basket, each representing less than 3.3% of the shares. The iShares Core Dividend Growth ETF has $27 billion in assets under management and trades in a solid volume of approximately 1.2 million shares. It charges 8 basis points in fees per year and has a Zacks ETF Rank #1 with a Medium Risk Outlook.
SPDR S&P Dividend ETF (SDY – Free report)
With $20.3 billion in assets under management and an average daily volume of 261,000 shares, the SPDR S&P Dividend ETF provides well-diversified exposure to 133 U.S. stocks whose dividends have increased consistently every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each company represents less than 2.6% of assets. The SPDR S&P Dividend ETF charges 35 basis points in fees and has a Zacks ETF Rank #3 with a Medium Risk Outlook.
iShares Select Dividend ETF (DVY – Free report)
The iShares Select Dividend ETF provides exposure to high dividend-paying U.S. stocks with a five-year history of dividend growth. It tracks the Dow Jones US Select Dividend Index and holds 98 stocks in its basket, each representing no more than 3% of assets. The iShares Select Dividend ETF has $18.6 billion in assets under management and average daily volume of approximately 427,000 shares. It charges 38 basis points in fees per year to investors and has a Zacks ETF Rank #3 with a Medium Risk Outlook.
First Trust Value Line Dividend Index Fund (FVD – Free report)
The First Trust Value Line Dividend Index Fund tracks the Value Line Dividend Index, which is a modified equal dollar-weighted index comprising U.S. publicly traded securities of companies that pay above-average dividends and have potential for capital appreciation. It’s a bit more expensive than many other products in the dividend space, charging investors 60 basis points per year in fees. The First Trust Value Line Dividend Index Fund holds 191 securities in its basket and has accumulated $9.6 billion in its asset base. It sees solid volume of around 1 million shares per day on average. First Trust Value Line Dividend Index Fund has a Zacks ETF Rank #3 with a Medium Risk Outlook.
iShares Core High Dividend ETF (HDV – Free report)
The iShares Core High Dividend ETF provides exposure to 74 high-quality, high-dividend stocks tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the largest companies, each of which represents only an 8.3% share. The iShares Core High Dividend ETF has $10.4 billion in assets under management and trades in a solid volume of around 284,000 shares per day. It charges 8 basis points in fees per year and has a Zacks ETF Rank #3 with a Medium Risk Outlook.
WisdomTree American Quality Dividend Growth Fund (DGRW – Free report)
The WisdomTree US Quality Dividend Growth Fund tracks the WisdomTree US Quality Dividend Growth Index and provides diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics, such as long-term earnings growth expectations and three-year historical averages of ROE and ROE. assets. It has amassed $12.8 billion in assets and charges 28 basis points in fees per year to its investors. The WisdomTree US Quality Dividend Growth Fund holds 299 stocks in its basket, each representing no more than 8% of the shares. It trades in volume of 486,000 per share on average and has a Zacks ETF Rank #2 with a Medium Risk Outlook (read: Why Dividend ETFs Deserve a Place in Your Portfolio).
ProShares S&P 500 Aristocrats ETF (NOBL – Free report)
The ProShares S&P 500 Aristocrats ETF focuses exclusively on the S&P 500 Dividend Aristocrats – high-quality companies that have not only paid dividends, but grown them for at least 25 consecutive years, with most doing so for 40 years or more. It tracks the S&P 500 Dividend Aristocrats Index and holds 67 stocks in its basket, each representing no more than 2% of the shares. The ProShares S&P 500 Aristocrats ETF has amassed $11.6 billion in its asset base and trades a volume of about 440,000 shares per day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium Risk Outlook.
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