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Dividends can be a great source of income for investors during different market cycles, especially downturns. There are many companies which have continued to pay out dividends to shareholders even during hard times, and this has benefited investors by providing both reliability and growth over time. A report suggests that from 1930 to 2021, dividend income contribution to the total return of the S&P 500 Index averaged 40%.
When market volatility, inflation or rising rates cause uneasiness, dividend-paying companies can provide comfort and a reliable income to investors. A convenient way to add dividend stocks can be via dividend Exchange Traded Funds (ETFs), which are made up of dividend-paying stocks. The primary aim of such ETF is to pay dividends to investors, which can be qualified or nonqualified dividends. Further, the dividend payout may be done monthly or at some other interval, depending on the ETF.
Here’s a look at the top three dividend ETFs in two different ways: in terms of highest year-to-date returns, and maximum assets under management.
Top 3 ETFs by YTD Returns
1. VanEck Energy Income ETF (EINC)
The VanEck Energy Income ETF is a 10-year-old ETF providing exposure to companies in North America that are involved in the midstream energy segment, which includes MLPs (master limited partnerships) and corporations involved in oil and gas storage and transportation. The ETF tracks the MVIS North America Energy Infrastructure Index (MVEINCTG), which is a measure of the largest and most liquid companies in the energy infrastructure industry. Historically, MLPs and energy infrastructure companies have exhibited attractive yield characteristics. The fund has $33.2 million as assets under management and an expense ratio of 0.46%. The sectoral focused nature of the index makes it volatile. The ETF has delivered 22.81% year-to-date returns.
- TC Energy Corporation (TRP)
- Enbridge, Inc. (ENB)
- Cheniere Energy, Inc. (LNG)
- Kinder Morgan, Inc. (KMI)
- Williams Companies, Inc. (The) (WMB)
- ONEOK, Inc. (OKE)
- Pembina Pipeline Corporation (PBA)
- DT Midstream, Inc. (DTM)
- Energy Transfer LP (ET)
- Targa Resources, Inc. (TRGP)
2. Invesco S&P Ultra Dividend Revenue ETF (RDIV)
Launched in 2013, the Invesco S&P Ultra Dividend Revenue ETF is based on the S&P 900 Dividend Revenue-Weighted Index. The S&P 900 Dividend Revenue-Weighted Index is an investable index that seeks to measure 60 of the highest-yielding stocks among those with relatively lower payout ratios from the S&P 900 and weights them by their revenues based on pre-defined rules. The fund has a value bias with 52% assets in large caps, 37% in mid-caps, and the remaining in small caps. The ETF has $892 million as assets under management with an expense ratio of 0.39%. In the current market conditions, its year-to-date returns are at 8.41%.
- Walgreens Boots Alliance, Inc. (WBA)
- Best Buy Co., Inc. (BBY)
- Intel Corporation (INTC)
- Citibank Group, Inc. (C)
- Philips 66 (PSX)
- Valero Energy Corp (VLO)
- Chevron Corporation (CVX)
- Exxon Mobil Corporation (XOM)
- Duke Energy Corporation (DUK)
- The Kraft Heinz Company (KHC)
3. WisdomTree U.S. High Dividend Fund (DHS)
Launched in 2006, the WisdomTree U.S. High Dividend Fund tracks the WisdomTree U.S. High Dividend Index, which constitutes high-dividend-yielding companies in the U.S. equity market. The WisdomTree U.S. High Dividend Index is a fundamentally weighted index constituted by selecting high dividend yield companies from the WisdomTree U.S. Dividend Index. More than 90% of its assets are in large caps (> $10 billion), with around 7% in mid-caps and a very small percentage in small caps. The ETF has $1.32 billion as assets under management and an expense ratio of 038%. The fund is up 7.76% year-to-date.
- Exxon Mobil Corporation (XOM)
- Chevron Corporation (CVX)
- AbbVie, Inc. (ABBV)
- Philip Morris International (PM)
- Pfizer, Inc. (PFE)
- Coca-Cola Company (KO)
- Merck & Company, Inc. (MRK)
- Altria Group, Inc. (MO)
- Verizon Communications, Inc. (VZ)
- Gilead Sciences, Inc. (GILD)
Top 3 ETFs by Asset Size
1. Vanguard Dividend Appreciation ETF (VIG)
Launched in April 2006, Vanguard Dividend Appreciation ETF is the largest dividend ETF with $74.6 billion as assets under management and a low expense ratio of 0.06%. The fund tracks the S&P U.S. Dividend Growers Index, which constitutes the U.S. companies that have consistently increased dividends every year for at least 10 consecutive years. The index excludes the top 25% highest-yielding eligible companies from the index. Thus, the fund is a way to hold large cap equity with a record of growing their dividends year over year. VIG follows a blend approach and is currently down by 9.06% year-to-date.
- UnitedHealth Group, Inc. (UNH)
- Johnson & Johnson (JNJ)
- Microsoft Corporation (MSFT)
- JP Morgan Chase & Co. (JPM)
- Visa, Inc. (V)
- Procter & Gamble Company (The) (PG)
- Home Depot, Inc. (The) (HD)
- Mastercard Incorporated (MA)
- PepsiCo, Inc. (PEP)
- Coca-Cola Company (KO)
2. Vanguard High Dividend Yield Index ETF (VYM)
Next is the Vanguard High Dividend Yield Index ETF, which provides a convenient way to track the performance of stocks that are forecasted to have above-average dividend yields. The fund tracks the FTSE All-World High Dividend Yield Index, which is designed to represent the performance of companies after implementing a forecast dividend yield ranking process. The index comprises stocks that are characterized by higher-than-average dividend yield based on the FTSE All-World Index. The fund has $50.5 billion as assets under management and has shown resistance in the current market conditions. The scheme is flat in terms of year-to-date returns.
- Exxon Mobil Corporation (XOM)
- Johnson & Johnson (JNJ)
- JP Morgan Chase & Co. (JPM)
- Chevron Corporation (CVX)
- Procter & Gamble Co. (PG)
- Home Depot, Inc. (The) (HD)
- Eli Lilly and Company (LLY)
- Pfizer, Inc. (PFE)
- AbbVie, Inc. (ABBV)
- Merck & Company, Inc. (MRK)
3. Schwab U.S. Dividend Equity ETF (SCHD)
Launched in October 2011, Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index. The index is designed to measure the performance of high-dividend-yielding stocks in the U.S. with a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios. The fund has $43.24 billion as assets under management and an expense ratio of 0.06%. The fund is down by 3% year-to-date.
- Merck & Company, Inc. (MRK)
- Amgen, Inc. (AMGN)
- International Business Machines Corporation (IBM)
- PepsiCo, Inc. (PEP)
- Lockheed Martin Corporation (LMT)
- Cisco Systems, Inc. (CSCO)
- Pfizer, Inc. (PFE)
- Home Depot, Inc. (The) (HD)
- Texas Instruments Incorporated (TXN)
- Coca-Cola Company (KO)
Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. ETF data based on factsheets as on October 31 and November 19, 2022. ETNs are not considered. There is a difference in taxation for qualified and nonqualified dividends. Investors should check the schedule of dividend payout for the specific ETF before investing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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