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5 Dividend ETFs Enjoying Huge Investor Love

·4-min read

Dividend ETFs have become the most popular and fastest-growing category this year given the market turmoil. This is especially true as these are major sources of consistent income for investors in any type of market though they do not offer dramatic price appreciation. These stocks tend to outperform during volatile markets and can reduce the volatility of a portfolio.

Dividend-focused ETFs have attracted $45 billion in inflows, according to research by Morningstar. Vanguard High Dividend Yield ETF VYM led the way higher, pulling in $1.9 billion in capital. This was followed by inflows of $985 million for Schwab U.S. Dividend Equity ETF SCHD, $577 million for iShares Core High Dividend ETF HDV, $393 million for SPDR S&P Dividend ETF SDY and $347 million for Morningstar Dividend Leaders Index Fund FDL.

The dividend-focused products offer safety through payouts and stability in the form of mature companies that are less volatile amid large swings in stock prices. This is because the companies that pay out dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.

Additionally, dividend-paying stocks are gaining appeal in a rising rate environment, which is quite negative for bonds. Federal Reserve announced the biggest interest-rate increase since 1994 to quell four-decade high inflation last month. The central bank raised interest rates by 75 bps, pushing the federal funds rate between 1.5% and 1.75% and is expected to lift-off further by 75 bps later this month (read: Play Dirt-Cheap Dividend ETFs to Fight More Fed Rate Hikes).

Let’s delve deeper into the above-mentioned ETFs:

Vanguard High Dividend Yield ETF (VYM)

Vanguard High Dividend Yield ETF provides exposure to the high-yielding dividend stocks by tracking the FTSE High Dividend Yield Index. Holding 443 securities, the product is pretty well spread out across components as each holds no more than 3.5% of the assets.

Vanguard High Dividend Yield ETF has amassed $45.2 billion in its asset base while trading in volumes of 2 million shares a day on average. The expense ratio is 0.06%. VYM has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Schwab U.S. Dividend Equity ETF (SCHD)

Schwab U.S. Dividend Equity ETF offers exposure to 104 high-dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. Schwab U.S. Dividend Equity ETF is well spread across components with none holding more than 4.5% of the assets. It charges 6 bps in annual fees and trades in a solid volume of about 3 million shares a day.

Schwab U.S. Dividend Equity ETF has AUM of $35.6 billion and a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Core High Dividend ETF (HDV)

iShares Core High Dividend ETF offers exposure to 75 high-quality and high-dividend stocks by tracking the Morningstar Dividend Yield Focus Index. It is slightly concentrated on the top firms with each making up for no more than 7.3% share.

iShares Core High Dividend ETF has AUM of $12.6 billion and trades in a solid volume of around 1.7 million shares a day. It charges 8 bps in fees per year and has a Zacks ETF Rank #3 with a Medium risk outlook (read: ETF Mid-Year Outlook & Investing Strategies).

SPDR S&P Dividend ETF (SDY)

With AUM of $21.1 billion and an average daily volume of 638,000 shares, SPDR S&P Dividend ETF provides a well-diversified exposure to 119 U.S. stocks that have been consistently increasing dividends every year for at least 20 years. This can be done by tracking the S&P High Yield Dividend Aristocrats Index. Each firm accounts for less than 2.2% of the assets.

SPDR S&P Dividend ETF charges 35 bps in fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

First Trust Morningstar Dividend Leaders Index Fund (FDL)

First Trust Morningstar Dividend Leaders Index Fund offers exposure to stocks that have shown the highest dividend consistency and dividend sustainability by tracking the Morningstar Dividend Leaders Index. It holds 100 stocks in its basket, with each accounting for less than 9.3% share (read: Market-Beating Dividend ETFs of 1H).

With AUM of $3 billion, First Trust Morningstar Dividend Leaders Index Fund charges 45 bps in annual fees from investors and trades in a solid volume of about 1.5 million shares a day. It has a Zacks ETF Rank #2 with a Medium risk outlook.


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SPDR S&P Dividend ETF (SDY): ETF Research Reports
 
First Trust Morningstar Dividend Leaders ETF (FDL): ETF Research Reports
 
iShares Core High Dividend ETF (HDV): ETF Research Reports
 
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
 
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
 
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