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The stock market has been struggling this year on Russia’s invasion of Ukraine, skyrocketing inflation and Fed’s rate hike bets. Many investors are therefore looking for safe and defensive bets, raising the appeal for dividend investing. Though it does not offer dramatic price appreciation, dividend stocks are a major source of consistent income for investors in any type of market. These stocks tend to outperform during volatile markets and can reduce the volatility of a portfolio.
The dividend-focused products offer safety through payouts and stability in the form of mature companies that are less volatile amid large swings in stock prices. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis (read: ETF Areas to Consider as Fed Remains Super Hawkish).
Additionally, dividend-paying stocks attract income-focused investors in a rising rate environment, which is quite negative for bonds. Investors have been betting on the steepest Fed tightening in almost three decades. The central bank is expected to follow a more aggressive path to fight the 40-year high inflation after raising rates by 25 bps in the latest FOMC meeting.
Speaking at a panel hosted by the International Monetary Fund on Apr 21, Jerome Powell signaled a half percentage point rate increase at the May meeting and indicated similar rate rises after that to lower inflation. With inflation running roughly three times the Fed's 2% target," it is appropriate to be moving a little more quickly," Powell said.
Here, we have highlighted the 10 most-popular dividend ETFs for investors seeking steady income irrespective of stock market directions.
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space with AUM of $65.2 billion. The fund follows the S&P U.S. Dividend Growers Index, which is composed of stocks of companies that have a record of increasing dividends over time. Vanguard Dividend Appreciation ETF holds 288 securities in the basket with none accounting for more than 4.1% share. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Top-Ranked ETFs That Can Shine Bright in April).
Vanguard High Dividend Yield ETF provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 445 securities, the product is pretty well spread out across components as each holds no more than 4% of the assets. Vanguard High Dividend Yield ETF has amassed $44.9 billion in its asset base while trading in volumes of 2 million shares a day on average. The expense ratio is 0.06%. VYM has a Zacks ETF Rank #1 with a Medium risk outlook.
Schwab U.S. Dividend Equity ETF offers exposure to 104 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. Schwab U.S. Dividend Equity ETF is well spread across components with none holding more than 4.4% of the assets. It charges 6 bps in annual fees and trades in a solid volume of about 3.3 million shares a day. Schwab U.S. Dividend Equity ETF has AUM of $34.9 billion and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares Core Dividend Growth ETF provides exposure to companies having a history of history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. It holds 418 stocks in its basket with each accounting for less than 3% share. iShares Core Dividend Growth ETF has AUM of $22.9 billion and trades in solid volumes of about 2.3 million shares. It charges 8 bps in fess per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: Bet on These ETFs as Fed Might Turn Super Hawkish in 2022).
iShares Select Dividend ETF provides exposure to the high dividend-paying U.S. equities with a five-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 99 securities in its basket with each accounting for less than 2.6% of assets. iShares Select Dividend ETF has AUM of $22 billion and an average daily volume of around 1.2 million shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
With AUM of $21.2 billion and an average daily volume of 548,000 shares, SPDR S&P Dividend ETF provides a well-diversified exposure to 119 U.S. stocks that have been consistently increasing dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.8% of the assets. SPDR S&P Dividend ETF charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust Value Line Dividend Index Fund (FVD - Free Report)
First Trust Value Line Dividend Index Fund tracks the Value Line Dividend Index, which is a modified equal-dollar weighted index comprised of U.S. exchange-listed securities of companies that pay above-average dividends and have the potential for capital appreciation. It is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. First Trust Value Line Dividend Index Fund holds 207 securities in its basket and has accumulated $12.8 billion in its asset base. It sees a solid volume of about 1.6 million shares a day on average. First Trust Value Line Dividend Index Fund has a Zacks ETF Rank #3 with a Medium risk outlook.
ProShares S&P 500 Aristocrats ETF focuses exclusively on the S&P 500 Dividend Aristocrats—high-quality companies that have not just 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 65 securities in its basket with each accounting for no more than 1.2% share. ProShares S&P 500 Aristocrats ETF has amassed $10.3 billion in its asset base and trades in a volume of around 718,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Safe ETF Bets to Consider After a Dull Market Last Week).
iShares Core High Dividend ETF offers exposure to 75 high-quality and high dividend stocks by tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms with each making up for no more than 7.7% share. iShares Core High Dividend ETF has AUM of $9.7 billion and trades in a solid volume of around 1.3 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust NASDAQ Rising Dividend Achievers ETF provides exposure to a diversified portfolio of 51 companies with a history of paying dividends. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. First Trust NASDAQ Rising Dividend Achievers ETF has amassed $9.3 billion in its asset base and sees a good volume of 1.5 million shares a day on average. It has a Zacks ETF Rank #2 with a Medium risk outlook.
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A Guide to the 10 Most-Popular Dividend ETFs
The stock market has been struggling this year on Russia’s invasion of Ukraine, skyrocketing inflation and Fed’s rate hike bets. Many investors are therefore looking for safe and defensive bets, raising the appeal for dividend investing. Though it does not offer dramatic price appreciation, dividend stocks are a major source of consistent income for investors in any type of market. These stocks tend to outperform during volatile markets and can reduce the volatility of a portfolio.
The dividend-focused products offer safety through payouts and stability in the form of mature companies that are less volatile amid large swings in stock prices. This is because the companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis (read: ETF Areas to Consider as Fed Remains Super Hawkish).
Additionally, dividend-paying stocks attract income-focused investors in a rising rate environment, which is quite negative for bonds. Investors have been betting on the steepest Fed tightening in almost three decades. The central bank is expected to follow a more aggressive path to fight the 40-year high inflation after raising rates by 25 bps in the latest FOMC meeting.
Speaking at a panel hosted by the International Monetary Fund on Apr 21, Jerome Powell signaled a half percentage point rate increase at the May meeting and indicated similar rate rises after that to lower inflation. With inflation running roughly three times the Fed's 2% target," it is appropriate to be moving a little more quickly," Powell said.
Here, we have highlighted the 10 most-popular dividend ETFs for investors seeking steady income irrespective of stock market directions.
Vanguard Dividend Appreciation ETF (VIG - Free Report)
Vanguard Dividend Appreciation ETF is the largest and the most popular ETF in the dividend space with AUM of $65.2 billion. The fund follows the S&P U.S. Dividend Growers Index, which is composed of stocks of companies that have a record of increasing dividends over time. Vanguard Dividend Appreciation ETF holds 288 securities in the basket with none accounting for more than 4.1% share. The fund charges 6 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 5 Top-Ranked ETFs That Can Shine Bright in April).
Vanguard High Dividend Yield ETF (VYM - Free Report)
Vanguard High Dividend Yield ETF provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 445 securities, the product is pretty well spread out across components as each holds no more than 4% of the assets. Vanguard High Dividend Yield ETF has amassed $44.9 billion in its asset base while trading in volumes of 2 million shares a day on average. The expense ratio is 0.06%. VYM has a Zacks ETF Rank #1 with a Medium risk outlook.
Schwab U.S. Dividend Equity ETF (SCHD - Free Report)
Schwab U.S. Dividend Equity ETF offers exposure to 104 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. Schwab U.S. Dividend Equity ETF is well spread across components with none holding more than 4.4% of the assets. It charges 6 bps in annual fees and trades in a solid volume of about 3.3 million shares a day. Schwab U.S. Dividend Equity ETF has AUM of $34.9 billion and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares Core Dividend Growth ETF (DGRO - Free Report)
iShares Core Dividend Growth ETF provides exposure to companies having a history of history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. It holds 418 stocks in its basket with each accounting for less than 3% share. iShares Core Dividend Growth ETF has AUM of $22.9 billion and trades in solid volumes of about 2.3 million shares. It charges 8 bps in fess per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: Bet on These ETFs as Fed Might Turn Super Hawkish in 2022).
iShares Select Dividend ETF (DVY - Free Report)
iShares Select Dividend ETF provides exposure to the high dividend-paying U.S. equities with a five-year history of dividend growth. It follows the Dow Jones U.S. Select Dividend Index and holds 99 securities in its basket with each accounting for less than 2.6% of assets. iShares Select Dividend ETF has AUM of $22 billion and an average daily volume of around 1.2 million shares. It charges 38 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR S&P Dividend ETF (SDY - Free Report)
With AUM of $21.2 billion and an average daily volume of 548,000 shares, SPDR S&P Dividend ETF provides a well-diversified exposure to 119 U.S. stocks that have been consistently increasing dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.8% of the assets. SPDR S&P Dividend ETF charges 35 bps in fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust Value Line Dividend Index Fund (FVD - Free Report)
First Trust Value Line Dividend Index Fund tracks the Value Line Dividend Index, which is a modified equal-dollar weighted index comprised of U.S. exchange-listed securities of companies that pay above-average dividends and have the potential for capital appreciation. It is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. First Trust Value Line Dividend Index Fund holds 207 securities in its basket and has accumulated $12.8 billion in its asset base. It sees a solid volume of about 1.6 million shares a day on average. First Trust Value Line Dividend Index Fund has a Zacks ETF Rank #3 with a Medium risk outlook.
ProShares S&P 500 Aristocrats ETF (NOBL - Free Report)
ProShares S&P 500 Aristocrats ETF focuses exclusively on the S&P 500 Dividend Aristocrats—high-quality companies that have not just 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 65 securities in its basket with each accounting for no more than 1.2% share. ProShares S&P 500 Aristocrats ETF has amassed $10.3 billion in its asset base and trades in a volume of around 718,000 shares a day on average. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Safe ETF Bets to Consider After a Dull Market Last Week).
iShares Core High Dividend ETF (HDV - Free Report)
iShares Core High Dividend ETF offers exposure to 75 high-quality and high dividend stocks by tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms with each making up for no more than 7.7% share. iShares Core High Dividend ETF has AUM of $9.7 billion and trades in a solid volume of around 1.3 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook.
First Trust NASDAQ Rising Dividend Achievers ETF (RDVY - Free Report)
First Trust NASDAQ Rising Dividend Achievers ETF provides exposure to a diversified portfolio of 51 companies with a history of paying dividends. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. First Trust NASDAQ Rising Dividend Achievers ETF has amassed $9.3 billion in its asset base and sees a good volume of 1.5 million shares a day on average. It has a Zacks ETF Rank #2 with a Medium risk outlook.