Exchange-traded funds, known simply as ETFs, are an incredibly popular investment vehicle. Since the first retail ETF — the SPDR S&P 500 ETF (ticker: SPY) — was launched in January 1993, ETFs have only grown in prominence. Today there are about 3,200 ETFs on the market, covering almost every conceivable asset class and investment strategy. Some examples include stock ETFs in many sectors and market caps, bond ETFs encompassing all credit qualities, real estate investment trust (REIT) ETFs, precious metals ETFs and cryptocurrency funds. These, however, are just a small sampling of the ETF universe.
[Sign up for stock news with our Invested newsletter.]
The popularity of ETFs can be attributed to their ease of use and seemingly endless versatility. The concept behind them can be understood even by novice investors; they can be traded as easily as any common stock, the cost structure is reasonable and there seems to be an ETF out there for just about any investor of any taste or temperament.
High-dividend ETFs especially appeal to income-oriented investors, such as retired people or others who appreciate a steady cash flow from their investments. The income high-dividend ETFs produce can be used to pay current expenses, can be saved for the future or reinvested into the market to fuel future growth. As an additional benefit, many high-dividend ETFs offer the potential for excellent long-term capital appreciation.
If the idea of owning ETFs that pay a high current income and have the possibility of growth over time appeals to you, you’ll want to review this timely list of the best high-dividend ETFs to buy now:
| High Dividend ETF | Expense Ratio | Forward Dividend Yield* |
| SPDR Blackstone High Income ETF (ticker: HYBL) | 0.70% | 8.2% |
| Alerian MLP ETF (AMLP) | 0.85% | 7.7% |
| SPDR Portfolio S&P 500 High Dividend ETF (SPYD) | 0.07% | 4.1% |
| VanEck BDC Income ETF (BIZD) | 13.3% | 11.0% |
| Invesco Preferred ETF (PGX) | 0.50% | 5.7% |
| SPDR DoubleLine Total Return Tactical ETF (TOTL) | 0.55% | 5.0% |
| Invesco High Yield Equity Dividend Achievers ETF (PEY) | 0.53% | 4.7% |
*As of Oct. 31 close.
SPDR Blackstone High Income ETF (HYBL)
HYBL is an actively managed fixed-income ETF owned and administered by State Street Global Advisors but managed by Blackstone Credit Advisors, a company known for its innovative approach to bond investing.
This $172 million fund invests in a variety of fixed-income securities that include high-yield corporate bonds (commonly called junk bonds), floating- and fixed-rate senior loans (often called bank loans), and collateralized loan obligations (CLOs). According to the fund’s marketing material, HYBL could invest 100% of its assets in junk bonds or in bank loans. For this reason, the fund does not technically qualify as a diversified ETF according to SEC rules. That is not, however, the way the fund is typically invested and would only happen under extraordinary circumstances.
HYBL uses a top-down approach to asset class allocation, meaning the portfolio managers look at big macroeconomic and value trends when deciding which asset classes to invest in. Conversely, it uses a bottom-up, or fundamentals-based, selection process when picking individual issues for the portfolio.
The expense ratio of this fund is 0.70% owing to the fact that it is sub-advised by Blackstone. HYBL is currently yielding 8.2%.
Alerian MLP ETF (AMLP)
AMLP is one of the relatively few high-dividend ETFs that invest in master limited partnerships, or MLPs. The fund’s assets top $8.7 billion.
AMLP tracks the Alerian MLP Infrastructure Index. It buys and holds MLPs from the midstream segment of the crude oil and natural gas energy industry. When energy investors talk about midstream companies, they are referring to firms in the refining, transportation and storage aspect of the business.
AMLP is a cap-weighted, float-adjusted fund. This results in larger and more liquid MLPs having a bigger influence on the ETF’s overall performance.
MLPs are not a traditional asset class but they are gaining popularity with income investors as they become more widely known. Like REITs and business development companies, or BDCs, MLPs are required by law to distribute at least 90% of taxable income to shareholders as dividends.
The specialized nature of MLP investing necessitates somewhat higher costs than those associated with stock or bond index funds. The expense ratio for AMLP comes in at 0.85%.
The current yield for this ETF is 7.7%.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
SPYD is an income-focused variation on SPY, which, as previously noted, was the very first retail ETF.
SPYD tracks the S&P 500 High Dividend Index. After the fund’s expense ratio of 0.07% is subtracted, investors can expect SPYD to perform in line with its benchmark.
The 80 holdings in the SPYD portfolio represent the highest-yielding stocks in the S&P 500. The goal of this strategy is to provide investors with growth that is comparable to that of the S&P 500 while distributing a substantially higher dividend yield.
The fund is suitable for investors looking for a core equity holding that puts an emphasis on income. Over time, the fund should strike a nice balance between high dividends and growth potential.
SPYD has a yield of just over 4.1%.
[READ: 7 Best Electric Vehicle ETFs to Buy]
VanEck BDC Income ETF (BIZD)
BIZD is a $1.2 billion index ETF designed to mirror the performance of the MVIS Business Development Company Index. The fund was developed to be a general proxy for the domestic, publicly traded business development company (BDC) market.
A BDC is a type of closed-end investment company that lends money and makes other investments in small- and medium-sized companies. Most companies a BDC invests in will be private entities but some will be smaller, thinly traded public companies.
The fund is cap-weighted. Larger BDCs will have an outsized influence on performance.
BIZD provides investors with a way to gain exposure to the private credit market while earning exceptional dividend income.
The fund has an expense ratio of 13.3% but most of those costs are due to a category of expenses called acquired fund fees and expenses, which must by law be reported as part of the expense ratio but are not necessarily incurred by the fund itself.
BIZD has a superior current yield of 11.0%.
Invesco Preferred ETF (PGX)
Preferred stocks are primarily income vehicles. Preferred stock can appreciate in value when interest rates are falling but, from an investor’s standpoint, the objective is income.
PGX is an ETF with assets of $4.4 billion. The fund tracks the ICE BofAML Core Plus Fixed Rate Preferred Securities index. The fund invests exclusively in U.S. dollar-denominated preferred stocks with fixed rather than a variable income. Fixed-rate preferred securities tend to be more sensitive to interest rates than the variable rate variety. This will be a benefit when rates are falling but could hurt price performance when rates are going up.
Because the portfolio managers buy significant amounts of below-investment-grade stocks, investors should consider PGX an aggressive ETF. No stock in the fund, however, will have a credit rating of less than “B3” based on the averages of S&P, Fitch and Moody’s.
The expense ratio of PGX is 0.50%. The fund boasts a yield of 5.7%.
SPDR DoubleLine Total Return Tactical ETF (TOTL)
TOTL is unique among fixed-income ETFs in that it invests in income securities of any credit quality from government bonds to investment-grade corporates to high-yield junk bonds. The fund also takes advantage of opportunities in foreign bonds as well as bonds denominated in foreign currencies.
SPDR uses the Bloomberg U.S. Aggregate Bond Index as a benchmark but it is not an index ETF. The objective of SPDR is to outperform, not to match, the index.
TOTL is an actively managed fund that, based on its wide diversification, can be used as a core fixed-income holding. The portfolio managers use a variety of traditional and non-traditional fixed-income securities to maximize total return for shareholders. It’s designed to work in any interest rate environment and through all market cycles.
The fund has an expense ratio of 0.55% and a current yield of 5%.
Invesco High Yield Equity Dividend Achievers ETF (PEY)
PEY is a $1.2 billion ETF that uses a classic dividend growth approach to investing for income and capital appreciation. The fund has an expense ratio of 0.53% and is currently yielding 4.7%.
Dividend growth investing is based on the commonsense assumption that if a company can afford to increase its dividend the stock price should eventually increase as well. PEY tracks the Nasdaq Dividend Achievers 50 Index. The fund holds the 50 highest-yielding U.S. stocks that have increased annual dividends for a minimum of 10 years consecutive years.
PEY is an attractive option for investors with a total return perspective looking for a fund with the potential for an increasing income stream. Also, an increasing income can act as a hedge against inflation because rising dividends will, to at least some extent, offset the loss of purchasing power that inflation will cause.
More from U.S. News
7 Best Vanguard Index Funds to Buy
7 Best Electric Vehicle ETFs to Buy
7 Best Fidelity ETFs to Buy Now
7 of the Best High-Dividend ETFs to Buy Now originally appeared on usnews.com
Update 11/01/24: This story was previously published at an earlier date and has been updated with new information.
