What are the best Dividend ETFs?
6 min read
By Ron Koren, ETF Insider

What are the best Dividend ETFs?

The best Dividend ETFs are those that offer a healthy yield, low expense ratios, and a diversified portfolio of companies known for their consistent and potentially growing dividend payments. These ETFs typically invest in businesses with strong financial health and a long-standing history of returning capital to shareholders. The specific "best" Dividend ETF can vary based on an investor's individual goals, risk tolerance, and investment horizon. It's recommended that investors thoroughly research and consider several factors including the ETF's underlying holdings, sector diversification, and historical performance before making an investment decision.

Understanding Dividend ETFs

Dividend ETFs are investment vehicles that focus on providing investors with exposure to dividend-paying stocks. These ETFs typically hold a basket of dividend stocks, allowing investors to benefit from regular income distributions while also participating in the potential growth of the underlying companies. Dividend ETFs are particularly attractive to income-oriented investors who seek consistent cash flow from their investments.

A Comparison of Dividend ETFs: SPHD and VYM

When looking for the best dividend ETF, two popular options that investors often consider are the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) and the Vanguard High Dividend Yield ETF (VYM).

SPHD tracks the performance of the S&P 500 Low Volatility High Dividend Index, which consists of 50 securities with historically high dividend yields and low volatility. This ETF aims to provide investors with a high dividend yield and potentially lower volatility compared to the broader market.

On the other hand, VYM seeks to track the performance of the FTSE High Dividend Yield Index. This index includes stocks of companies with higher-than-average dividend yields. VYM aims to provide investors with exposure to high-quality dividend-paying stocks while maintaining a diversified portfolio.

Both SPHD and VYM offer investors the opportunity to gain exposure to dividend-paying stocks, but they have different underlying indexes and investment strategies. Investors should consider their investment goals, risk tolerance, and desired dividend yield when choosing between these two ETFs.

The Benefits of Dividend ETFs

Dividend ETFs offer several benefits to investors. Firstly, they provide a convenient way to invest in a diversified portfolio of dividend-paying stocks. By holding a basket of stocks, these ETFs help reduce individual stock risk and provide broad exposure to different sectors and industries.

Secondly, dividend ETFs can provide a steady stream of income. The dividends distributed by the underlying stocks are passed through to the investors of the ETF. This regular income can be attractive for investors seeking cash flow or those looking to reinvest the dividends to compound their returns.

Additionally, dividend ETFs can offer the potential for capital appreciation. While the primary focus is on generating income, dividend-paying companies are often well-established and financially stable, which can lead to long-term growth opportunities.

Dividend ETF,SPHD,VYM overlap What are the best Dividend ETFs?Dividend ETF,SPHD,VYM overlap What are the best Dividend ETFs?

Factors to Consider when Investing in Dividend ETFs

When evaluating dividend ETFs or any financial instrument, it's essential to consider various factors. Some key considerations for dividend ETFs include:

Dividend Yield: The dividend yield indicates the annual dividend payout as a percentage of the ETF's share price. A higher dividend yield may be more appealing for income-oriented investors.

Expense Ratio: The expense ratio represents the annual cost of owning an ETF. Lower expense ratios can potentially improve overall returns over the long term.

Performance History: Analyzing the historical performance of an ETF, including its dividend payments and capital appreciation, can provide insights into its potential for future returns.

Index Methodology: Understanding the index methodology and the underlying stocks included in the ETF is crucial. It helps investors assess the quality of the dividend-paying companies and the diversification of the portfolio.


Dividend ETFs can be attractive investment options for those seeking a combination of income and potential capital appreciation. Two notable dividend ETFs to consider are SPHD and VYM, each with its own investment strategy and underlying index. However, investors should carefully evaluate their investment goals, risk tolerance, and the specific characteristics of the ETF before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not provide any investment advisory services.



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  • What are Dividend ETFs?

    Dividend ETFs are exchange-traded funds that focus on investing in stocks or other assets that pay regular dividends. These funds aim to provide investors with a steady income stream from dividend payments.

  • What are the advantages of investing in Dividend ETFs?

    Investing in Dividend ETFs offers several advantages. They provide a convenient way to gain exposure to a diversified portfolio of dividend-paying stocks. Dividends can provide a consistent income stream, making these ETFs suitable for income-oriented investors. Additionally, dividend-paying stocks have historically shown resilience during market downturns.

  • What factors should I consider when choosing Dividend ETFs?

    When selecting Dividend ETFs, consider factors such as the fund's dividend yield, dividend growth rate, expense ratio, diversification, and the underlying index or strategy. It's also essential to assess the fund's performance, historical dividend payments, and the stability and consistency of the companies in the fund's portfolio.

  • What are some popular Dividend ETFs?

    Some popular Dividend ETFs include the iShares Select Dividend ETF (DVY), Vanguard Dividend Appreciation ETF (VIG), Schwab U.S. Dividend Equity ETF (SCHD), SPDR S&P Dividend ETF (SDY), and Invesco Dividend Achievers ETF (PFM).

  • How can I invest in Dividend ETFs?

    To invest in Dividend ETFs, you can open an account with a brokerage firm that offers access to ETFs. Once you have an account, you can search for the specific Dividend ETF you are interested in and purchase shares of the fund through the stock market using its ticker symbol.