5 High Dividend ETFs To Buy

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Investors often turn to high-dividend ETFs to create another avenue for passive income through the dividends that can be collected as the company makes profits. ETFs can simplify the invesm\entprocess; rather than hand-picking individual stocks, an ETF gives you access to companies that share similar investment profiles. Here’s five of these high-dividend ETFs you might want to consider.

1. SPDR S&P 500 ETF Trust

Formed in 1993, SPDR S&P 500 ETF Trust is the oldest ETF in the United States — and perhaps the best-recognized It generally displays the highest asset under management rankings and the most significant trading volume. 

SPY is a unit investment trust that boasts one of the most liquid and diverse trading pools on the planet. It must entirely replicate its index and cannot reinvest portfolio dividends between distributions. This high dividend ETF tracks the S&P 500 index, representing the U.S. large-cap space with 500 of the largest corporations in America.

Data Details
Ticker SPY
Dividend Yield 1.31%
Top Holdings Apple Inc., Microsoft Corporation, Amazon.com Inc., Tesla Inc.
Expense Ratio 0.09%
AUM $385.69 billion

2. Vanguard Russell 2000 ETF

Although smaller than SPY, Vanguard Russel 2000 ETF still has great benefits. This high dividend ETF gives exposure to small and mid-size organizations that typically reap the benefits faster than their larger counterparts.

Building Wealth

Based on the Russell 2000 index, VTWO excludes the top 1,000 companies in America. This option builds its portfolio by focusing on the following 2000 stocks in line. In other words, it contains the 1001st through the 3000th securities from the Russell 3000 index.

Data Details
Ticker VTWO
Dividend Yield 1.10%
Top Holdings US Dollar, AMC Entertainment Inc. Class A, Asana Inc, Class A, Crocs Inc.
Expense Ratio 0.10%
AUM $6.76 billion

3. Vanguard Total Stock Market ETF

This high dividend ETF offers investors thorough equity exposure and a complete look at the stock market. Additionally, it offers neutral coverage — including micro-caps — with a comprehensive list of domestic corporations of over 3,500 total positions currently. A passively managed fund, the Vanguard Stock Market ETF remains entirely invested at all times.

VIT is a great option for beginners since it takes out the guesswork with its widely diversified list of holdings. This could make it one of the simplest ways to enter the stock market next year. However, it’s important to note that portfolio disclosure is reported monthly, so investors who like tracking the performance of their stocks every day may not enjoy this option as much.

Data Details
Ticker VTI
Dividend Yield 1.25%
Top Holdings Microsoft Corporation, Apple Inc., Amazon.com Inc., Alphabet Inc. Class A.
Expense Ratio 0.03%
AUM $272.08 billion
Building Wealth

Good To Know

Contrary to what some might believe, sometimes the lower the payout ratio is, the better and more sustainable the investment is. A company with higher payout ratios may be returning more money than it’s making. A slow but steady payout ratio increase is an excellent indicator of an organization’s overall health and reliability.

4. iShares ESG Aware MSCI USA ETF

A great thing about this high dividend ETF is that it takes a different approach to climate issues. It tracks an index of selected U.S. corporations with solid environmental, social and governance traits. While ESGU focuses on large and mid-cap organizations in the MSCI USA Index, it still maintains a comprehensive market-like portfolio. 

The iShares ESG Aware MSCI USA ETF excludes companies with business controversies and those involved with tobacco, unsustainable energy resources, and as of June 2018, controversial weapons. It also uses portfolio optimization technologies to stay true to market-like exposure and maximize the fund’s stake in highly-rated organizations.

Data Details
Ticker ESGU
Dividend Yield 1.31%
Top Holdings Apple Inc., Microsoft Corporation, Amazon.com Inc., Teslat Inc.
Expense Ratio 0.15%
AUM $23.14 billion

5. Vanguard FTSE Emerging Markets ETF

This high dividend ETF is a great option for tactical investors. Although it primarily focuses on emerging market stocks and offers a vast list of securities from China, India and Brazil (among other regions) that are not readily available in the U.S.

While investors should always be aware of the risks of putting their money in emerging market economies, it’s forecasted that they’ll grow above trend rates sometime next year. 

Data Details
Ticker VWO
Dividend Yield 2.51%
Top Holdings Taiwan Semiconductor Manufacturing, Tencent Holdings Ltd., Alibaba Group Holding Ltd., U.S. Dollar
Expense Ratio 0.08%
AUM $74.76 billion

How To Invest in Dividend ETFs

Dividend investment is often less risky than other investment methods as it delivers steady returns. And while earlier dividend investor generations benefitted from higher yields, a good dividend investment strategy can still offer shareholders an excellent passive income. Additionally, many alternatives take pride in regularly increasing their dividend payouts.

Before you choose the right ETF, investors must:

  • Set financial goals
  • Research dividend funds, stock markets and macroeconomic factors
  • Determine the right asset mix
  • Review all current investments

Once strategy prep is done, investors should look for the right ETF for them. Some of the main aspects they should keep in mind to find the best alternatives in the market are:

  • ETF Fees: Understanding the expense ratio of an ETF is crucial when figuring out which options yield the best returns. 
  • Overall Yield: This is a solid indicator of the type of income investors can expect from their ETFs. It gives them a clearer idea of what to expect even when dividends aren’t guaranteed over time. 
  • Asset Liquidity: If an ETF has less asset availability, it could become a challenge to sell it when the time comes. 

It’s important to remember that all investment types could lead to losses. That’s why it’s vital to evaluate which funds invest in riskier assets and which stay on the safer side. Although dividend yield is a great tool to pick the best dividend-paying stocks, it’s not all there is to dividend investing. Investors should also evaluate share prices to avoid getting involved with struggling companies.

Final Take

High dividend ETFs are an excellent choice for veteran and beginner investors alike, depending on their short and long-term financial goals. They offer shareholders a passive income that can increase over time.

However, as with any other investing type, investors should be careful when selecting their high-dividend ETF to avoid incurring significant losses. The alternatives mentioned above are worth keeping an eye on during the first quarter of 2022.

High Dividend ETF FAQs

Are you considering a high dividend ETF investment but still want to learn more? Here are some of the most commonly asked questions about high dividend ETFs.
  • What ETFs pay a monthly dividend?
    • If you're looking for a consistent income from your investments, the following ETFs do payouts on a monthly schedule: Vanguard Total Bond Market Index Fund ETF Shares, iShares MBS ETF, Nuveen Municipal Value Fund, DNP Select Income Fund, First Trust Senior Loan Fund, PIMCO High Income Fund.
  • Are high dividend ETFs worth it?
    • As always, it depends on what investors want in their investments and what their financial goals are. With dividends, companies distribute their earnings to their shareholders. This could be a good way for investors to build wealth over time. Unlike other investment types, dividends generate passive income. This is a perfect investment for retirees and others looking to receive passive income.
  • Are high dividend ETFS taxed?
    • High dividend ETF payments receive a similar treatment to income and must be reported on your 1099 statement. Profits from selling ETFs are taxed like the underlying stocks or bonds inside them.

Information is accurate as of March 14, 2022.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Daniela Rivera is a bilingual freelance content creator with an advertising and media background. She has a degree in Communication Science and over 10 years of work experience as a copywriter. She specializes in generating engaging and creative concepts and texts for advertising, e-commerce, blogs, podcasts and social media.

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