Quick Read
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The Vanguard Dividend Appreciation ETF (VIG) charges just 0.05% in fees and yields 1.64%.
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The iShares Core High Dividend ETF (HDV) offers over 3% yield and trades at 20x earnings.
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The S&P 500 Dividend Aristocrats ETF (NOBL) holds companies with 25+ years of dividend growth.
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Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.
For investors like myself who believe that dividend investing is a strategy that will outperform in the years and decades to come (largely because companies that pay dividends tend to be much more solidly-positioned than unprofitable companies), finding top dividend exchange-traded funds (ETFs) to consider buying is a time-tested strategy worth considering.
In this piece, I’m going to dive into three of the top dividend ETFs I think long-term investors can bank on for significant yield and upside over the long-term. Combining capital appreciation upside with dividend yield is what separates many dividend-payers from other fixed income assets. Indeed, this is the attribute of dividend investing in the equity market I like the most.
Without further ado, here are three of my top dividend ETF picks I think investors should consider in November and beyond.
Vanguard Dividend Appreciation ETF (VIG)
Vanguard remains one of my primary ETF providers I focus on, mainly due to this company’s track record and its historical focus on bringing the lowest-cost ETFs in the market to investors. The Vanguard Dividend Appreciation ETF (VIG) is one such low-cost ETF I tend to lean toward, due in part to this fund’s expense ratio of just 0.05% (five basis points).
That’s about as cheap as such dividend ETFs come. And with a current dividend yield of 1.64% at the time of writing, it’s clear that this ETF provides not only the diversification investors are after, but a dividend tilt. That’s more than 50% higher yield than what many other index funds will provide.
That’s because this ETF tracks the performance of the S&P U.S. Dividend Growers Index, meaning it’s the same exposure to many high-quality U.S. stocks, but mostly those companies that pay dividends. That means that a lot of unprofitable (and some profitable) tech is taken off the table. Thus, investors may not see the kind of upside with this pick they may otherwise get in a more traditional index fund, but they’ll see steadier performance.
In this market environment, I think many investors would opt for such a strategy. With a reasonable overall portfolio multiple and plenty of growth upside, this is a great option for investors looking to stay invested in the tech trend, but look for a little more yield in their portfolios.
iShares Core High Dividend ETF (HDV)
Investors looking for higher-yielding dividend stocks do have a plethora of ETF options to choose from. Among my top picks I continue to watch closely right now is the iShares Core High Dividend ETF (HDV) — a fund which holds fewer stocks than the other picks on this list. However, this ETF’s overall price-earnings multiple of around 20-times is much more attractive than that of the overall market (valued at around 25x forward earnings), with a greater focus on more defensive sectors.
Again, I’m taking a more defensive perspective on my own portfolio, and assuming readers are doing the same. You may not be, in which case there are other growth-oriented ETFs out there to choose from.
But this ETF’s strategy in focusing on dividend stability and quality within its core holdings is one I think is worth the relative premium. With an expense ratio of 8 basis points (higher than the first ETF I highlighted), that’s one factor to consider. But with a divided yield in excess of 3%, I’d argue this ETF is the better way to go for investors seeking meaningful yield and quality at a reasonable price.
S&P 500 Dividend Aristocrates ETF (NOBL)
Last, but certainly not least on this list of dividend ETFs I think investors can consider for the long-haul is S&P 500 Dividend Aristocrats ETF (NOBL).
As its name suggests, this ETF focuses on investing in the largest U.S.-traded companies with a track record of raising their dividends for more than 25 consecutive years. Readers who follow my content will know that I’m partial to such companies. That’s because those with such track records tend to be large-cap blue-chip players in mature industries, with a historical precedent of raising their dividends that’s hard to get away from.
No company with a dividend growth streak of 25 years or more will want to break that trend. In fact, doing so could result in significant capital flight and downgrades from the Street.
Thus, these companies have the impetus to continue to provide higher dividends over time, something I’d argue investors should be after. With an expense ratio of 0.35%, this is the most expensive ETF on this list (partly due to the fact this ETF is semi-actively managed). That said, NOBL’s 2.1% dividend yield is meaningful, as is the quality of its holdings.