7 Best Dividend ETFs to Buy Now

Consistent dividends can provide peace of mind.

Many investors in 2022 are feeling a bit worried about the state of their portfolio. That means “risk off” investments are in favor, including dividend stocks that offer a steady flow of income to shareholders and generally have more stable outlooks than small companies focused on aggressive growth. Dividend exchange-traded funds offer a diversified way to play this low-risk group of investments, and the following seven funds are leading examples of how to deploy this strategy in one single investment fund. All also offer better or similar payouts to the S&P 500 index’s current 1.4% yield, and have at least $3 billion in assets under management.

Vanguard Dividend Appreciation Index Fund ETF (ticker: VIG)

The best option, if measured simply by assets under management, is this flagship dividend ETF from Vanguard. It currently boasts a value of just under $79 billion in assets, and is incredibly popular. Part of that popularity comes from its very low fee structure, with just 0.06% in annual expenses, or a mere $6 per year on every $10,000 you invest. This fund is fairly straightforward in its strategy, and is focused on the largest 250 or so dividend payers in the U.S., led by tech giant Microsoft Corp. (MSFT) and health care icon Johnson & Johnson (JNJ), with a median market cap of $160 billion across its holdings. This reliance on big-name stocks may not be a bad thing for investors who want to reduce their risk and focus on entrenched income investments, however.

Dividend yield: 1.6%

Vanguard High Dividend Yield Index Fund ETF (VYM)

Next in line is this slightly smaller Vanguard dividend ETF, which “only” commands about $55 billion in assets. As the name implies, it differs by prioritizing dividend stocks that are a bit more generous. The result is a deeper list of stocks that totals just over 400 holdings, and a yield that is roughly a full percentage point more than the prior VIG fund. That means some massive but stingy companies like Microsoft are out. Instead you’ll find smaller names with bigger yields like regional bank Hope Bancorp Inc. (HOPE) or specialty retailer Big Lots Inc. (BIG), which both pay more than 3% each at present.

Dividend yield: 2.8%

Schwab US Dividend Equity ETF (SCHD)

Another leading dividend ETF worth a look is this Schwab fund, which offers a nice yield but achieves this payout with only 100 or so stocks. Right now, those leading dividend payers include soft drinks giant Coca-Cola Co. (KO) and telecom behemoth Verizon Communications Inc. (VZ). These are prime examples of the kind of dividend stocks investors flock to in a risk-off environment given their entrenched operations and steady payouts. Just be aware that with a short list of holdings, you’re less diversified in this dividend ETF. As of this writing, 40% of SCHD’s roughly $33 billion in assets are in the top 10 positions alone. But as these stocks are a bit more generous than the typical dividend payer, you get a slightly larger yield as the tradeoff.

Dividend yield: 2.9%

iShares Select Dividend ETF (DVY)

A bit smaller, this iShares offering “only” has $18 billion or so in assets. However, it takes a more qualitative approach by screening for high-yield dividend stocks that have paid five years or more consistently to shareholders. This is particularly important right now, when some troubled companies may have a high yield on paper thanks to a COVID-19 flop over the last year or two or some companies with a history of dividend cuts have only recently reinstated payouts as their business has normalized. The yield isn’t just larger than other dividend ETFs on this list, but also perhaps a bit more sustainable based on this screening methodology.

Dividend yield: 3.3%

Invesco FTSE RAFI US 1000 ETF (PRF)

Taking a much different tack than the prior funds, PRF is based on the FTSE RAFI US 1000 Index — a massive portfolio of roughly 1,000 stocks, all of which pay dividends. Some of these picks admittedly don’t pay a ton from a yield perspective, like top holding Apple Inc. (AAPL), which only pays about 0.5% at present. However, there are also a lot of higher-yielding picks to even things out, pushing the total up above the average yield for the market at large. Most importantly, however, this tremendously deep and broad portfolio is by far the most diversified U.S. dividend ETF on the list.

Dividend yield: 1.6%

First Trust Rising Dividend Achievers ETF (RDVY)

This First Trust fund focuses on “dividend achievers”: companies that have rock-solid dividends based on a number of qualitative metrics. Specifically, RDVY includes stocks that have paid a dividend recently that is larger than the one paid both three and five years prior, as well as stocks which maintain strong balance sheets based on earnings metrics, debt ratio and payout ratios of the dividends as a percentage of profits. There are only 50 components to this dividend ETF, but they are all high-quality as a result of this methodology. Picks right now include finance icon American Express Co. (AXP) and insurance giant Metlife Inc. (MET), two examples of steady names that are the kind of dividend stocks you’ll find here.

Dividend yield: 1.1%.

Vanguard International High Dividend Yield ETF (VYMI)

Last but not least, this Vanguard fund offers global exposure for investors who don’t want to limit themselves only to domestic dividend payers. Some 1,200 stocks make up this fund, including familiar names such as Swiss consumer products giant Nestle SA (NSRGY) and Japanese automaker Toyota Motor Corp. (TM). Thanks to a focus on high-yield stocks, too, this international dividend ETF offers a dividend more than three times the typical S&P 500 component. That’s good not just for diversification, but for providing substantial long-term income, too.

Dividend yield: 3.5%

The 7 best dividend ETFs to buy now:

— Vanguard Dividend Appreciation Index Fund ETF (VIG)

— Vanguard High Dividend Yield Index Fund ETF (VYM)

— Schwab US Dividend Equity ETF (SCHD)

— iShares Select Dividend ETF (DVY)

— Invesco FTSE RAFI US 1000 ETF (PRF)

— First Trust Rising Dividend Achievers ETF (RDVY)

— Vanguard International High Dividend Yield ETF (VYMI)

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