There is more than one way to get your investment returns. Many institutional investors prefer price appreciation, so they look for companies that use excess free cash flow for buybacks.
When management chooses to buy back its own stock rather than reinvest every dollar into the business, it is often a sign that they believe retiring shares is the best way to create value. Buying shares back therefore increases each shareholder’s claim on future earnings in a tax-efficient manner.
Many boring industrial sector names have compounded this way for years. In the automotive industry, O’Reilly Automotive Inc. (ticker: ORLY), AutoZone Inc. (AZO) and Copart Inc. (CPRT) are well-known examples that pay no dividends, but have a strong history of buybacks.
[Sign up for stock news with our Invested newsletter.]
On the other hand, some businesses are structurally different and make dividends the center of their shareholder return program. This is a periodic cash payment to shareholders, usually paid quarterly by U.S. companies, and often taxed favorably if it meets qualified dividend rules.
Companies often choose this path when they have matured to the point where they cannot reinvest all their excess cash at returns above their cost of capital. A classic case is blue-chip consumer staple Coca-Cola Co. (KO), a dividend king that has raised its payout for more than 50 straight years.
There are also firms that pay out high dividends because their business models may have an expiration date. Industries facing long-term secular decline often fall into this category, with tobacco being the clearest example. For example, Altria Group Inc. (MO) pays a 7.4% dividend and targets an 80% payout ratio because management recognizes the efficient, but shrinking, nature of the business.
Retail investors’ love of high yields means a large portion of the dividend exchange-traded fund (ETF) universe uses this metric as a key part of its screening criteria. Choosing a high-yield dividend ETF gives investors built-in diversification, automated rebalancing and routine portfolio updates.
These funds also tend to lean toward value stocks because the math behind dividend yields often reflects lower valuations. A high dividend yield comes from either a larger cash payout in the numerator or a suppressed stock price in the denominator. When the yield is driven more by the denominator than by an unsustainably large payout, it can indicate that the stock may be undervalued.
Here are seven of the best high-dividend ETFs to buy today:
| ETF | Expense ratio | 30-day SEC yield |
| Vanguard High Dividend Yield ETF (VYM) | 0.06% | 2.5% |
| SPDR Portfolio S&P 500 High Dividend ETF (SPYD) | 0.07% | 4.8% |
| iShares Core High Dividend ETF (HDV) | 0.08% | 3.4% |
| WisdomTree U.S. High Dividend Fund (DHS) | 0.38% | 3.5% |
| Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) | 0.30% | 4.8% |
| Amplify CWP International Enhanced Dividend Income ETF (IDVO) | 0.66% | 1.7% |
| Amplify Natural Resources Dividend Income ETF (NDIV) | 0.59% | 7.8% |
Vanguard High Dividend Yield ETF (VYM)
One of the most widely used high-dividend ETFs is VYM, with $66 billion in assets under management (AUM). Like most Vanguard products, it is a passive fund that tracks an index. Its benchmark is the FTSE High Dividend Yield Index, which screens out real estate investment trusts (REITs), removes companies that have not paid a regular dividend in the past 12 months and excludes firms that are not expected to pay one.
From the remaining universe, the index ranks stocks by forward dividend yield and includes the top 55th percentile. The portfolio is then weighted by market capitalization, which tilts exposure toward established blue-chip companies and adds stability compared to mid- and small-cap heavy ETFs. VYM pays a 2.5% 30-day SEC yield with quarterly distributions and charges a 0.06% expense ratio.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
SPYD takes a narrower approach by starting with the S&P 500. Those companies have already been screened for size, liquidity and positive earnings. From that group, SPYD selects the 80 highest-yielding stocks based on dividend yield. The holdings are equally weighted and rebalanced twice a year. It is a straightforward way to target the highest-yielding U.S. large caps using a rules-based strategy.
SPYD pays a high 4.8% 30-day SEC yield and carries minimal fee drag, with a 0.07% expense ratio. However, the methodology creates a notable overweighting to real estate at about 21.7%, which can make dividends less tax efficient since REIT payouts are usually treated as ordinary income. SPYD currently has just over $7 billion in AUM and trades with a low 0.02% 30-day median bid-ask spread.
iShares Core High Dividend ETF (HDV)
HDV is another popular high-dividend ETF with about $11.6 billion in AUM. It tracks the Morningstar Dividend Yield Focus Index, which combines yield screens with Morningstar’s proprietary, analyst-based assessments of competitive quality and financial stability. These include the “Economic Moat Rating,” the “Uncertainty Rating” and a balance sheet-based “Distance to Default” score.
From this process, the index selects 75 stocks and weights them by the cash dividends paid over the past 12 months. The result is a portfolio with meaningful overweights to consumer staples, health care and energy at 24.4%, 22.5% and 21.6%. HDV pays a 3.4% 30-day SEC yield and charges a 0.08% expense ratio. The ETF has historically been about half as volatile as the S&P 500, with a three-year beta of 0.5.
WisdomTree U.S. High Dividend Fund (DHS)
WisdomTree is known for alternative indexing methods that weight portfolios by company fundamentals instead of market cap. Many of its products focus on dividend growth or dividend quality. For high yield, the firm offers DHS. The fund draws from the broader WisdomTree U.S. Dividend Index and weights companies by the total cash dividends they are expected to pay over the next year.
This estimate is then adjusted by a composite risk score that blends value, quality and momentum factors. Current exposure tilts toward health care, financials and consumer staples. DHS pays a 3.5% 30-day SEC yield with monthly distributions. However, it charges a higher 0.38% expense ratio. Liquidity is also slightly worse than VYM, SPYD and HDV, at a 0.07% 30-day median bid-ask spread.
[Read: 7 Best Monthly Dividend ETFs to Buy Today]
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
SPHD builds on the relatively one-dimensional high-yield screen used by SPYD. It selects the 50 stocks in the S&P 500 with both the highest dividend yields and the lowest trailing-12-months volatility. The result still includes a large real estate overweight at about 22.6% of the portfolio, but the next largest allocations are classic defensive sectors such as consumer staples, utilities and health care.
“This low-volatility filter helps avoid ‘dividend traps,’ where high yields may signal financial stress,” explains Nick Kalivas, head of factor and core equity product strategy at Invesco. “As of Nov. 16, SPHD delivered a SEC 30-day yield of 4.8%, and its 12-month trailing distribution has grown at a 4.5% annualized rate since October 2013, outpacing the 2.9% CPI growth over the same period.”
Amplify CWP International Enhanced Dividend Income ETF (IDVO)
Yields above the 2% to 4% range seen in most dividend ETFs can be reached by targeting high-yield international stocks, or via a covered call strategy. IDVO uses both methods. The ETF targets roughly 3% to 4% of its yield from dividends and adds another 2% to 4% through call option premiums. Both the stock selection and options selling are actively managed at a 0.66% expense ratio.
“Valuations in the U.S. remain elevated, and benchmark equity exposure is concentrated in a handful of mega-cap names,” explains Nathan Miller, vice president of product development at Amplify ETFs. “International equities, by contrast, offer more attractive valuations, higher dividend yields and the ability to broaden portfolio diversification.” IDVO has a relatively low 1.7% 30-day SEC yield (which excludes option income), but it has a 6.1% distribution yield with monthly payouts.
Amplify Natural Resources Dividend Income ETF (NDIV)
Certain sectors naturally offer higher dividends, and energy is a leading example. Companies in this space often generate strong free cash flow and run generous shareholder return programs. They also tend to trade at lower valuations than technology and other growth-oriented sectors. NDIV provides exposure to this sector with a 7.8% 30-day SEC yield and monthly payouts.
“Targeting firms with strong balance sheets and disciplined capital allocation, the ETF aligns with sectors benefiting from structural supply constraints and global demand for reliable energy and essential materials,” Miller says. “With a dividend-focused approach and roughly one-quarter of its portfolio in international names, NDIV offers diversified access to natural resource leaders.”
More from U.S. News
7 Dividend Stocks to Buy and Hold Forever
10 Stocks That Have Doubled Their Dividends in 10 Years
8 Top-Rated Income Funds to Buy in 2025
The 7 Best High-Dividend ETFs to Buy Today originally appeared on usnews.com
Update 11/25/25: This story was published at an earlier date and has been updated with new information.
