In a climate marked by rising interest rates, swelling inflation and slowing economic growth, many investors are questioning their portfolio allocations. Heightened market volatility and steep growth stock valuations are consequently making dividend stocks, often seen as beacons of stability, a much more attractive option.
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Companies paying high dividends typically hail from mature industries and have more established business models that can support dividend payments even in economic slowdowns. Their stark contrast to growth stocks in these respects supports their comparatively modest valuations — a defensive stance amid economic uncertainties.
However, building a portfolio of high-dividend stocks carries significant research burdens. For those looking for stable income without spending your weekends researching stocks, these seven dividend ETFs are worth a look to boost your portfolio’s income:
| ETF | Assets | Trailing Dividend Yield |
| Global X SuperDividend ETF (ticker: SDIV) | $760.9 million | 12.9% |
| SPDR Portfolio S&P 500 High Dividend ETF (SPYD) | $6.5 billion | 4.8% |
| YieldMax TSLA Option Income Strategy ETF (TSLY) | $591.4 million | 49.8% |
| iShares Commodity Curve Carry Strategy ETF (CCRV) | $25.8 million | 31.1% |
| VanEck BDC Income ETF (BIZD) | $673.6 million | 10.7% |
| WisdomTree US Small-Cap Dividend Fund (DES) | $1.9 billion | 2.9% |
| Cambria Shareholder Yield ETF (SYLD) | $839.7 million | 2.7% |
Global X SuperDividend ETF (SDIV)
SDIV casts a wide net across international markets to hold a basket of 100 global firms boasting the highest yields, supporting its 12.9% dividend yield. The fund’s international focus has the advantage of international choice and reduces correlation with a portfolio concentrated in U.S.-based assets. Managed by Global X, the fund has consistently paid investors dividends since its 2011 inception.
Yet, the allure of high yields comes with high risks. A significant portion of SDIV’s holdings are concentrated in the real estate and lending industries — particularly within the Chinese and Hong Kong markets, both of which have navigated turbulent waters in recent years. That’s not to mention other risks like foreign exchange concerns or geopolitical volatility. These risks are underscored by the fund’s nearly -65% five-year total return.
Of course, any investment is a balance between risk and reward. While SDIV offers an attractive 12.9% dividend yield, it calls on investors to tread outside the comfortable waters of the U.S. stock market.
Assets: $760.9 million Dividend yield: 12.9%
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
In stark contrast to SDIV, the SPDR Portfolio S&P 500 High Dividend ETF offers investors stable dividend income within the comparatively comfortable market of U.S. equities. SPYD offers income investors a twist on S&P 500 exposure, investing in the 80 highest-yielding companies in the S&P 500.
With an impressive dividend yield of 4.8%, SPYD hits a sweet spot for investors looking for yield without veering into riskier regions and sectors. Managed by State Street Global Advisors, this fund has some of the lowest fees among dividend ETFs, with an expense ratio of just 0.07%.
Sitting at a P/E ratio of just 14, it’s evident that this ETF not only caters to those seeking income but also to value-oriented investors.
Assets: $6.5 billion Dividend yield: 4.8%
YieldMax TSLA Option Income Strategy ETF (TSLY)
While most ETFs focus on a basket of securities, TSLY offers an unconventional income opportunity. By writing covered calls on Tesla Inc. (TSLA), a stock known for its wild price swings, this ETF is on the radar of many income investors.
The pitch is simple: Tesla’s call options demand hefty premiums due to their volatility, creating lucrative income for those selling calls, which frequently expire worthless and allow the seller to pocket the entire premium.
However, there’s no free lunch on Wall Street. With its core strategy closely tethered to Tesla’s stock price, TSLY represents a concentrated play, in stark contrast to traditional dividend ETFs. Its dividends are less predictable as well, as they sway with Tesla’s stock price and the particular options the fund holds at a given time. Adding to its peculiarities is a 0.99% expense ratio, far higher than most dividend ETFs.
Nevertheless, TSLY has rewarded those willing to embrace additional risk. That’s evident from its staggering year-to-date total return (including dividends) of more than 60%, blowing away most of the other ETFs on this list.
Assets: $591.4 million Dividend yield: 49.8%
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iShares Commodity Curve Carry Strategy ETF (CCRV)
CCRV offers a novel way for investors to add commodity exposure to their portfolios. This ETF, managed by iShares, doesn’t just give investors the inflation-protecting qualities of commodity exposure — it’s designed to make money from the intricacies of the futures market. In layman’s terms, the fund takes positions in long-dated futures contracts, which are often priced below spot prices and can produce “roll” yield when the contract is rolled forward.
The fund isn’t your average dividend ETF, as the income comes purely from roll yield and price appreciation. While the high yield might be tantalizing, it’s completely dynamic in the same fashion as TSLY. However, the ETF’s strategy is like a highly simplified version of the basis trade performed by many hedge funds and active traders to create income.
Despite commodities being known for their wild price swings, CCRV has delivered a 13.9% return in 2023, while many commodity indexes are flat in the same time frame. Yet, like with all things commodities, investors should be cautious. While the high past returns might be tantalizing, this ETF is best as a complementary piece, rather than a main act, in a diversified portfolio.
Assets: $25.8 million Dividend yield: 31.1%
VanEck BDC Income ETF (BIZD)
The VanEck BDC Income ETF invests in several business development companies (BDCs). These companies lend money to small and midsize businesses, particularly those that don’t have easy access to traditional bank financing or capital markets. This niche positioning allows them to earn premium interest rates on their loans, but not without absorbing a higher risk of default. As a result, BDCs tend to offer double-digit dividend yields, much to the delight of income investors.
But, due to the high-risk lending of BDCs, they tend to be quite volatile, making individual stock selection a challenging feat. This is where BIZD comes in. With a reasonable 0.4% management fee, BIZD gives investors a diversified portfolio of high-profile BDCs, including the likes of Ares Capital Corp. (ARCC) and FS KKR Capital Corp. (FSK).
While providing diversification, this ETF also manages the nuances of dividend distributions and rebalancing, making it hassle-free compared to self-managing a portfolio of BDC stocks.
With its dividend yield hovering around 10.7%, BIZD stands out as an enticing prospect for income investors willing to take on some risk.
Assets: $673.6 million Dividend yield: 10.7%
WisdomTree US Small-Cap Dividend Fund (DES)
Despite its relatively low dividend yield of 2.9%, the WisdomTree US Small-Cap Dividend Fund strikes an interesting balance for investors. DES offers a blend of the high-potential growth of small-cap stocks complemented by consistent dividend income.
With a portfolio heavily diversified across various sectors, DES uses quality filters to avoid the much-vilified “yield traps,” which are stocks that dangle the carrot of high dividends only to later trim them. The fund’s broad portfolio of more than 600 stocks results in low concentration, where its top 10 holdings amount to less than 10% of the fund. This degree of spread is noteworthy when even the S&P 500’s top five stocks account for nearly a quarter of the index.
Small-cap stocks have underperformed their large-cap counterparts in recent years, which is reflected in DES’ total year-to-date return of 4.1%, including dividends. However, history suggests that small caps, as suggested by scholars, outpace large caps, making this an opportune time to add small-cap exposure.
Assets: $1.9 billion Dividend yield: 2.9%
Cambria Shareholder Yield ETF (SYLD)
Instead of solely concentrating on dividends, the Cambria Shareholder Yield ETF takes a refreshing approach. SYLD looks to maximize what is known as “shareholder yield” — which emphasizes a blend between stock buybacks and dividends.
The rationale behind this focus is clear: Share buybacks act as de facto dividends by decreasing the total number of shares, thus increasing earnings per share. The preference for buybacks has found many proponents like Warren Buffett, who prefer buybacks to dividends for their tax advantages.
Managed by Meb Faber’s Cambria, SYLD selects stocks based on a rigorous screening process that pinpoints stocks that offer the most net distributions to shareholders. This strategy inevitably pushes the fund toward sectors like energy and industrials, and some of the firm’s top holdings are Chevron Corp. (CVX), McKesson Corp. (MCK) and Toll Brothers Inc. (TOL).
SYLD’s divergence from the norm has borne fruit, boasting a cumulative 246% (or 12.9% annualized) return since its inception in 2013, a testament to the strength of the approach.
Assets: $839.7 million Dividend yield: 2.7%
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7 of the Best High-Dividend ETFs originally appeared on usnews.com
Update 09/15/23: This story was previously published at an earlier date and has been updated with new information.
