7 Best Dividend ETFs to Buy Now

Tap into income as a hedge to get through uncertain times.

Income investing is one of the most powerful strategies that an individual investor can deploy. If you can generate reliable dividends from your portfolio, you have a kind of insurance policy, or hedge, against modest declines in tough times like the present. And best of all for folks who are at or near retirement, income from your investment portfolio can reduce or even offset any need to “harvest” from your individual retirement account or 401(k) by selling into a downturn to generate ready cash. The following seven dividend exchange-traded funds, or ETFs, offer diversified, one-stop funds that allow investors to easily and affordably access these kinds of investments.

Vanguard Dividend Appreciation ETF (ticker: VIG)

The largest and most popular dividend ETF on Wall Street, the Vanguard VIG fund boasts an amazing $59 billion in assets under management. That makes it one of the largest funds of any flavor, not just the leading dividend ETF. As is typical of low-cost index funds from Vanguard, it’s also incredibly affordable, at just 0.06% in annual expenses or only $6 per year on every $10,000 you invest. The yield is admittedly a bit lower than other, more generous dividend funds out there, in part because of its relatively simple portfolio that holds about 300 of the largest dividend stocks and weights them by market cap. That means companies like $480 billion insurer UnitedHealth Group Inc. (UNH) and $1.8 trillion icon Microsoft Corp. (MSFT) alone represent about 7% of the portfolio — even though they pay relatively stingy yields of 1.3% and 1.2%, respectively.

Dividend yield: 2.1%

Schwab U.S. Dividend Equity ETF (SCHD)

Though not as big as the leading Vanguard offering, this Schwab fund is certainly well established with $37 billion in assets — and it, too, is super cheap at just 0.06% in annual expenses. Perhaps most importantly, it yields significantly more by taking a slightly different approach to large-cap dividend stocks. SCHD has just 100 or so total holdings and a bias toward more generous payers instead of simply the largest stocks on the list. That means pharmaceutical stock Merck & Co. Inc. (MRK) and semiconductor giant Texas Instruments Inc. (TXN) come in first instead of the stingier megacaps. And interestingly enough, this more focused list has actually helped SCHD to post slightly narrower losses than VIG in 2022, proving that you don’t necessarily take on extra risk with this more selective approach.

Dividend yield: 3.7%

iShares Core Dividend Growth ETF (DGRO)

This $22 billion iShares fund is a dividend ETF that may not blow the doors off when it comes to total yield, but it delivers over the long term through a focus on companies that have a history of sustained dividend growth over the last five years. Furthermore, there’s a qualitative screening methodology that requires all components to pay out only 75% or less of total earnings to ensure that these stocks aren’t spreading themselves too thin. There are more than 400 stocks on the list, spanning a wide array of sizes and industries, but they all share a serious commitment to future dividend growth in addition to paying back shareholders in the near term.

Dividend yield: 2.6%

First Trust Value Line Dividend Index Fund (FVD)

First Trust isn’t a top-tier ETF shop like Vanguard or iShares, but it has managed to connect with investors in a big way via this $11 billion dividend ETF. That’s because unlike all of the other funds discussed previously, this is as close to an “equal weight” offering as you’ll find; there are about 190 total stocks in the portfolio and no single component represents more than 0.6% at present. Obviously, this ensures you’re not overly reliant on just one or two big-name stocks — so picks like $10 billion heating and cooling specialist Watsco Inc. (WSO) and insurer Erie Indemnity Co. (ERIE) stand shoulder-to-shoulder with big banks, tech stocks and the like. And with a decline that is roughly 10% less than losses recorded by the S&P 500 this year, that diversification can provide serious peace of mind in a rocky market.

Dividend yield: 2.2%

Global X SuperDividend ETF (SDIV)

The flip side of that deep and diversified First Trust fund is this Global X offering, which takes a go-big-or-go-home approach. SDIV has by far the largest yield on this list, relying on a portfolio that has roughly 130 holdings — all of which have to deliver big-time dividends to make the cut. Of course, that strategy comes with significant risk because there’s not a lot of concern for share prices. Case in point: SDIV is down a gut-wrenching 37% this year as of Oct. 6 to underperform even the disappointing returns of the major stock market indexes. Furthermore, it’s heavy on real estate with about a third of all assets in that sector. But if you want to focus on yield regardless of these risk factors, SDIV certainly has that in spades. And with about $680 million in total assets, it’s clear that plenty of investors see the appeal in this strategy.

Dividend yield: 15.9%

Alerian MLP ETF (AMLP)

Looking beyond broad-based dividend ETFs, this Alerian fund focuses on the energy sector and master limited partnerships, or MLPs. Unlike Big Oil giants such as Exxon Mobil Corp. (XOM) or small and aggressive production companies, MLPs are among the most reliable income investments because they are mostly midstream infrastructure stocks. These pipeline and storage companies are relatively insulated from commodity price volatility and can depend on steady baseline demand regardless of macroeconomic trends. AMLP has a focused list of less than 20 holdings, including Energy Transfer LP (ET) and Plains All American Pipeline LP (PAA). But it’s also up about 14% so far this year thanks to the strength of the energy sector, with a juicy dividend on top of that.

Dividend yield: 8%

Vanguard Real Estate ETF (VNQ)

Another sector-focused dividend ETF is this Vanguard fund, the largest real estate ETF on Wall Street. VNQ is built wholly out of REITs, or real estate investment trusts, which are a special class of corporation that must deliver 90% of its income back to shareholders in exchange for preferential tax treatment. With more than $32 billion in total assets and about 170 holdings, this dividend ETF is the go-to option for investors looking to access yield in this sector. Landlords are naturally a great source of regular and reliable revenue to fuel dividends, but keep in mind that VNQ isn’t just built with apartment or mall operators. Top picks also include telecom infrastructure play American Tower Corp. (AMT) and warehouse operator Prologis Inc. (PLD) for a diversified approach to the entire real estate sector.

Dividend yield: 3.9%

7 best dividend ETFs to buy now:

— Vanguard Dividend Appreciation ETF (VIG)

— Schwab U.S. Dividend Equity ETF (SCHD)

— iShares Core Dividend Growth ETF (DRGO)

— First Trust Value Line Dividend Index Fund (FVD)

— Global X SuperDividend ETF (SDIV)

— Alerian MLP ETF (AMLP)

— Vanguard Real Estate ETF (VNQ)

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