Thanks to a steady rise in stock prices, the average yield across S&P 500 components right now is 1.2%. Dividend yield is a simple calculation that divides the annual payout per share by the current share price, and as prices march significantly higher, yield naturally lags as payouts can’t keep up.
That means investors looking for above-average payouts need to either seek out companies that are aggressive in sharing the wealth, or simply branch out beyond common stocks into other higher-yield assets.
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The following funds are the best dividend ETFs to buy now for regular income, all offering more than 2.5% yield through varied and sometimes unconventional approaches:
Dividend ETF | Assets Under Management | Expense Ratio | 30-Day SEC Yield* |
Vanguard Total Bond Market ETF (ticker: BND) | $122 billion | 0.03% | 4.4% |
Schwab US Dividend Equity ETF (SCHD) | $63.9 billion | 0.06% | 3.8% |
Vanguard High Dividend Yield ETF (VYM) | $62 billion | 0.06% | 2.5% |
JPMorgan Equity Premium Income ETF (JEPI) | $36.7 billion | 0.35% | 8.0% |
iShares Preferred & Income Securities ETF (PFF) | $14.6 billion | 0.46% | 5.8% |
iShares International Select Dividend ETF (IDV) | $3.9 billion | 0.49% | 5.8% |
Global X SuperDividend ETF (SDIV) | $747 million | 0.58% | 8.2% |
*As of Dec. 19 market close.
Vanguard Total Bond Market ETF (BND)
Assets under management: $122 billion SEC yield: 4.4% Expenses: 0.03%, or $3 annually for every $10,000 invested
One of the most popular ETFs out there, BND is among the 10 largest exchange-traded funds as measured by assets under management. The reason for its popularity is its broad and simple approach to the bond market, with an enormous portfolio of almost 12,000 investment-grade bonds. This includes debt securities from top corporations like Bank of America Corp. (BAC), U.S. Treasury bonds, and other issuances that are at a comparatively lower risk of default. Right now, about 68% of total assets are in government bonds and government mortgage-backed securities, with the remainder in corporate debt. Together, the bonds in this fund add up to drive a yield that is more than three times the average dividend among S&P 500 stocks right now.
Schwab US Dividend Equity ETF (SCHD)
Assets under management: $63.9 billion SEC yield: 3.8% Expense ratio: 0.06%
A popular ETF focused on high-paying dividend stocks, SCHD is invested in a selective list of about 100 blue-chip stocks. This allows it to boost the yield of this top dividend stock ETF when compared with other funds that simply look for any dividend, no matter how small the payout. Top holdings at present include leading asset manager BlackRock Inc. (BLK), enterprise tech giant Cisco Systems Inc. (CSCO) and home improvement retailer Home Depot Inc. (HD). The technology sector is underrepresented at only about 9% of the portfolio, but that’s in large part because a lot of leading Silicon Valley companies are stingy with their dividends. Instead, leading sectors for SCHD include financial services (18%) and health care (16%).
Vanguard High Dividend Yield ETF (VYM)
Assets under management: $62 billion SEC yield: 2.5% Expense ratio: 0.06%
Similar to the prior fund in both size and expenses, VYM offers a deeper bench of components to spread around the risk in the portfolio. The lineup tops 500 total positions that span major dividend stocks along with some mid-sized payers that help fill out the portfolio. The yield isn’t quite as impressive, of course, because you’re getting some lower-paying firms like top component Broadcom Inc. (AVGO) that only yields about 1% at present. Still, if you truly want a diversified list of income providers then this wide-reaching dividend stock ETF may be a good alternative to consider.
[READ: 7 Best Russell 2000 ETFs to Buy]
JPMorgan Equity Premium Income ETF (JEPI)
Assets under management: $36.7 billion SEC yield: 8.0% Expense ratio: 0.35%
The JPMorgan Equity Premium Income ETF seeks to deliver consistent income to shareholders via a unique approach that holds common stocks but sells covered call options on those stocks to supercharge the yield. These options contracts admittedly cap the upside from a share price perspective, as evidenced by the fact that JEPI is only up about 6% in the last 12 months while the broader market is up multiples of that amount. That said, the yield is a whopping six times what you’ll find in your typical S&P 500 index fund. The list of stocks is similar to many large-cap funds, with 110 or so positions including Amazon.com Inc. (AMZN) and Meta Platforms Inc. (META). But these tech titans don’t offer dividends, meaning the options contracts are a critical part of the income-oriented strategy.
iShares Preferred & Income Securities ETF (PFF)
Assets under management: $14.6 billion SEC yield: 5.8% Expense ratio: 0.46%
Another approach to dividend income that looks to alternative asset classes is this “preferred stock” fund. Preferred stocks are a kind of hybrid between stocks and bonds, offering the stability and income potential of conventional bond offerings while also carrying a bit more risk as they aren’t protected in the event of default in the same way stocks are excluded from bankruptcy proceedings.
Owning preferred stock directly is very difficult for smaller investors, so this iShares fund is a great way to provide accessibility into this more exclusive asset class. Just keep in mind that preferred stocks, much like bonds, are often issued by large enterprises to raise capital — and as a result PFF is skewed toward the financial sector, with more than 70% of its assets tied up in issuances from financial institutions such as Wells Fargo & Co. (WFC), Citigroup Inc. (C) and Bank of America. But considering the yield, this may be a more income-rich way to play these kinds of stocks if you’re not afraid of outsized exposure to the financial sector.
iShares International Select Dividend ETF (IDV)
Assets under management: $3.9 billion SEC yield: 5.8% Expense ratio: 0.49%
IDV is another appealing fund that thinks outside the box. Specifically, it looks outside of the U.S. and is built exclusively on international companies that offer generous dividends. This allows investors to layer on this iShares fund to an existing portfolio without worries over duplicating positions in other index funds, and also provides an important layer of geographic diversification to lower your risk profile. International dividend stocks can be quite generous, but it isn’t always easy to invest in them as they may not be listed on major U.S. exchanges, or offer irregular payouts that vary in size and frequency. This Vanguard dividend ETF solves for all that with a 100-stock portfolio of leading dividend stocks in developed markets including British American Tobacco PLC (BTI), Italian utility Enel S.p.A. (OTC: ENLAY) and Australian megaminer BHP Group Ltd. (BHP), among others.
Global X SuperDividend ETF (SDIV)
Assets under management: $747 million SEC yield: 8.2% Expense ratio: 0.58%
As you probably guessed from the name, SDIV looks to cover all corners of the market to harness the highest possible yield for investors via a stock-based approach. It is admittedly not very diversified despite this unconstrained approach, as there are a limited number of high-yield corners of the equities market right now. Furthermore, the broader a fund is, the more low-yield stocks drag down the overall return of the ETF as a whole. That’s why this Global X fund sticks to a tight list of about 100 stocks, with more than 40% of those companies in the real estate sector. That makes this high-dividend ETF good for aggressive investors who want high income potential, or for folks who have other assets to balance out their overall portfolio. Just keep in mind there is a relationship between risk and return, and you don’t get a yield like this without a similar boost in potential volatility.
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7 Best Dividend ETFs to Buy Now originally appeared on usnews.com
Update 12/20/24: This story was previously published at an earlier date and has been updated with new information.