7 Best Dividend ETFs to Buy Now

A reliable income stream can offer a hedge against market declines.

The stock market seems to be on the upswing in the short term, as least when compared to its June lows. However, the major stock market indexes, like the S&P 500, Nasdaq-100 or Dow Jones Industrial Average, are still down significantly from where they started the year. That means it may be premature to start cheering a return of the bull market just yet. Instead, many investors may be better served by looking to low-risk dividend stocks as they grapple with the risks of inflation and rising interest rates in the months ahead. If you want stock market exposure to play any potential upswing but want to lock in consistent paydays as a hedge against any trouble, the following seven dividend ETFs are worth a look. Each takes a different approach but all prioritize regular income, either to keep your portfolio balanced or to hedge against future declines. Dividend yields are calculated based on their trailing-12-month, TTM, payouts, unless otherwise stated.

Vanguard Dividend Appreciation ETF (ticker: VIG)

Any list of dividend ETFs has to start with Vanguard’s VIG fund, which is the runaway leader with roughly $66 billion in assets under management. It’s also among the cheapest dividend ETFs on Wall Street, charging just 0.06% in annual expenses or only $6 per year on every $10,000 you invest. It’s not particularly complex in its approach, holding almost 300 large-cap dividend payers in the U.S., including mega-insurer UnitedHealth Group Inc. (UNH) and Big Tech icon Microsoft Corp. (MSFT), among others. Every stock in the portfolio pays a dividend, but as you can see by its rather modest yield of less than 2%, that doesn’t necessarily mean big-time paydays. Still, as a simple replacement for the typical large-cap stock holdings, this dividend ETF is the most popular and liquid option out there.

Dividend yield: 1.8%

Vanguard High Dividend Yield ETF (VYM)

The next-largest dividend ETF is another Vanguard offering, which simultaneously expands the portfolio to nearly 450 stocks while raising the dividend yield more than 50% over the prior fund. At roughly $58 billion in assets at present and a similarly cheap 0.06% expense ratio, this is a very attractive upgrade over the prior fund for those folks looking for a bit more income out of their dividend ETFs. You’ll see a lot of the same large-cap stocks, but also a bunch of midsized dividend payers, too. You’ll also see a lot more stocks outside tech, as VIG has roughly 24% of its assets in information technology stocks like Apple Inc. (AAPL) that pay small, nominal dividends while VYM has just 7% of the portfolio in tech as it looks for bigger yield in smaller banking stocks, consumer staples and health care instead.

Dividend yield: 3%

iShares Core Dividend Growth ETF (DGRO)

Another major player among dividend ETFs is this iShares offering, which currently holds $25 billion in investor assets. It doesn’t have an awe-inspiring yield, but the strategy behind DGRO is to seek out companies that have a very good chance of paying bigger dividends down the road. The portfolio of more than 400 stocks includes companies like Coca-Cola Co. (KO), which currently pays about 2.7% but just notched its 60th consecutive year of dividend increases after a bump in payouts back in February. This kind of long-term commitment to dividend growth will ensure generous paydays going forward, even if the current yield of this dividend ETF isn’t particularly jaw-dropping.

Dividend yield: 2.1%

Global X SuperDividend ETF (SDIV)

With the largest yield among dividend ETFs on this list so far, SDIV is a focused fund that has roughly 100 holdings. A lot of the larger names that populate the prior funds are absent, and instead this list is focused on companies that are very generous with their payouts. For instance, top holdings include $8 billion U.S. health care real estate investment trust Omega Healthcare Investors Inc. (OHI) that yields about 8% at present instead of the typical blue-chip stocks. There’s also global players like Brazilian Utility CPFL Energia and Hong Kong’s Yuexiu Property Co. The list is eclectic and a bit riskier than the typical core dividend ETF, however it’s hard to argue with the mammoth yield SDIV offers because of this strategy.

Dividend yield: 13%

iShares International Select Dividend ETF (IDV)

If you like the prospect of bigger dividend payouts thanks to an overseas focus but would prefer to not have too much of an emerging-market bent like SDIV, this more modest iShares alternative could be a dividend ETF worth a look. With almost $5 billion in assets under management, it’s still quite established even if it’s not as big as some of the first funds on this list. And thanks to a focus on only elite non-U.S. stocks that pay big dividends, it offers a much more generous yield than domestic-only funds. Representative holdings at present include $120 billion London-based mining giant Rio Tinto Group (RIO) and Japanese shipping giant Nippon Yusen (NPNYY). Developed markets make up the vast majority of holdings in IDV, including the U.K. stocks leading the portfolio with 20% of assets, followed by Australia (9%), South Korea (8%) and Japan (8%) for a well-rounded take on top dividend stocks outside the U.S.

Dividend yield: 7%

Global X MLP ETF (MLPA)

Just as focusing on higher-yielding geographies is one way to unlock big paydays, another way to tap into larger yield in the dividend ETF universe is to take an industry-specific approach. And right now, master limited partnerships, or MLPs, are an incredibly attractive industry within the energy sector that’s worth a look. These energy infrastructure stocks operate pipelines, processing plants and storage facilities, making them much more reliable income investments than energy stocks dependent on the day-to-day movement of oil prices. This Global X fund admittedly has a very focused list of less than 20 total holdings including Enterprise Products Partners LP (EPD) and Energy Transfer LP (ET), as there aren’t that many MLPs out there to choose from. That means a bit more risk due to a relative lack of diversification. However these “midstream” energy stocks offer up big and reliable dividends that make them attractive to dividend investors willing to take a different approach in pursuit of yield.

Dividend yield: 7%

Global X NASDAQ 100 Covered Call ETF (QYLD)

Covered calls are an investing strategy that allow dividend-oriented investors to harvest additional yield by selling options on underlying stocks they already own. This can be complicated or time-consuming if you own individual companies, but QYLD offers a unique way for investors to regularly sell covered calls on the companies that make up the Nasdaq 100 index. In other words, you’ll participate modestly in any upside to big-name stocks like Microsoft and Apple — but more importantly, QYLD will sell options against those stocks to generate consistent and generous dividends. The strategy is complicated and can involve a bit more risk, but the roughly $7 billion in assets in this dividend ETF prove it’s a popular approach. And, of course, the double-digit yield speaks for itself.

Dividend yield: 14.9%

7 best dividend ETFs to buy now:

— Vanguard Dividend Appreciation ETF (VIG)

— Vanguard High Dividend Yield ETF (VYM)

— iShares Core Dividend Growth ETF (DGRO)

— Global X SuperDividend ETF (SDIV)

— iShares International Select Dividend ETF (IDV)

— Global X MLP ETF (MLPA)

— Global X NASDAQ 100 Covered Call ETF (QYLD)

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