Wise investors understand the risks involved with their investments. Diversification can do well to save their money during the most trying economic periods. Still, each investment vehicle has its respective, top-performing abilities capable of unlocking potentially high-paying dividends. A Dividend ETF (exchange-traded fund) is a collection of high-dividend stocks that can pay investors an adequate sum per share they own.

Is a dividend ETF an excellent addition to your portfolio? Will you face added risk or possibly slowed earning capacities? If you do plan to buy dividend ETFs, which are the best to choose among them? We’ll answer all your questions plus show you the 8 best dividend ETFs you can start with this coming 2021.

What Are Dividend ETFs?

A dividend ETF is a collection of stocks that pay shareholders dividends. Companies issuing these public stock appoint the dividend amount shareholders can earn. Businesses issue dividends not because they have surplus profit but to encourage investors to hold and purchase much more business stock. Think of it as an incentive, which is rewarding when the business’ value continues to increase

However, dividend ETFs are quite expensive, especially with their minimum pricing depending on the fund manager and investing company. Local US-only dividend ETFs cost relatively less than their global dividend ETF counterparts. Global dividend ETFs pay higher because of their blue-chip, low-risk stocks, but the payment entry is much more expensive.

How Do Dividend ETFs Work?

All dividend ETFs are passive investments. Plus, they use indexes with above-market dividend with high liquidity levels for easier payout. Fund managers survey and research all reference indexes in-depth, locating companies with the highest dividend payouts in the past. In most cases, fund managers will always include blue-chip stocks because of their low risk and high dividend payouts (if any).

Additionally, fund managers take note of expense ratios in all their fiscal decisions. Dividend ETFs have no specific expense ratio percentages. Still, it has to be lower or equal to the value of no-load mutual funds, which have no commissions or sales percentage during purchases or sales.

Dividend ETF’s Performance Vs. Other ETFs

While ETFs have no share minimums, an ETF costs higher than the average ETF. However, you can purchase just one dividend ETF share and allow it to grow passively. If your purpose is to earn short-term profits plus portfolio profits you might earn after selling high and buying low, then dividend ETFs are a perfect addition to your portfolio.

On the other hand, virtually every investment vehicle, including a dividend ETF, is only a part of a whole. A diversified portfolio will explore and look into other ETFs to see whether its performance can work for their portfolio’s enrichment and profit-making synergy. Here are other ETFs that you might want to consider adding with your dividend stocks.

Versus IPO ETF

Initial public offering exchange-traded funds allow investors high IPO profits, especially during their first day with a high and warm reception from other investors. IPO assets under management are useful for short-term investments.

Versus Index ETFs

The keyword to this ETF is “index.” Fund managers of Index ETFs prioritize monitoring high-performing indexes in the market, such as the S&P 500. Index ETFs grow fast because it mimics top-notch funds, including domestic, global, blue-chip, and small-caps stocks.

Versus ETF of ETFs/ETF Collection

As its name implies, an ETF of ETFs or an ETF collection is an actively-managed fund that a fund manager oversees and tracks hourly per day. In doing so, they provide additional flexibility, such as variable risk level and short-term investment opportunities.

8 Best Dividend ETFs for 2021

1. Invesco S&P 500 Quality ETF (SPHQ)

• Expense Ratio: 0.15%
• Annual Dividend Yield: 1.73%
• 3-Month Average Daily Volume: 516,514
• Assets Under Management: $2.2 billion
• Inception: December 6, 2005

SPHQ feels like an index ETF than a dividend fund. It closely tracks the S&P 500 High-Quality Rankings Index, which focuses on the most stable earnings and dividends. Unlike a typical index fund that chases accuracy over profit, SPHQ focuses on finding quality with a certain critical-thought application.

2. WisdomTree Global ex-U.S. Quality Dividend Growth Fund (DNL)

• Expense Ratio: 0.58%
• Annual Dividend Yield: 2.10%
• 3-Month Average Daily Volume: 21,539
• Assets Under Management: $230.1 million
• Inception: June 16, 2006

The WisdomTree Global ex-U.S. Quality Dividend Growth Fund includes all dividend-paying, large-cap companies in markets across developing and developed markets. Its pre-set global nature selects the top 300 of 1,000 companies it collects from the markets we’ve mentioned earlier. Truthfully, most notable stocks are non-blue-chip brands, which include British American Tobacco PLC, Fortescue Metals Group, and Novo Nordisk, to name a few.

3. Vanguard Dividend Appreciation ETF (VIG)

• Expense Ratio: 0.06%
• Annual Dividend Yield: 1.78%
• 3-Month Average Daily Volume: 1,114,565
• Assets Under Management: $47.0 billion
• Inception: April 27, 2006

If you’re an investor looking for an established, long-term position, the 180-stock collection of the Vanguard Dividend Appreciation ETF is perfect for you. The ETF and its managers track funds that have continuously upgraded its dividend values over the last decade. While the profits go slower here if you compare its performance with other funds, VG offers undeniably great dividend figures. It includes Microsoft, Walmart, and Procter & Gamble as part of its stock.

4. iShares Broad USD High Yield Corporate Bond ETF (USHY)

• Expense Ratio: 0.15%
• Annual Dividend Yield: 5.52%
• 3-Month Average Daily Volume: 785,165
• Assets Under Management: $689 Million
• Inception: October 26, 2017

The iShares Broad USD High-Yield Corporate Bond focuses on eponymous bonds that have high-interest rates. Their argument: the interest itself is enough to propel the fund despite the low borrower credit scores. It includes T-Mobile and Ford Motor Co. in its company roster.

5. Global X U.S. Preferred ETF [PFFD]

• Expense Ratio: 0.23%
• Annual Dividend Yield: 9.22%
• 3-Month Average Daily Volume: 518,224
• Assets Under Management: $913 Million
• Inception: Sept 13, 2017

Having a hybrid stocks and bonds portfolio sounds great to have on any portfolio, and preferred stocks give you just that. The Global X U.S. Preferred ETF is much more stable than regular stock. On the other hand, if your goal is to maximize mid to short-term profits, you’ll find yourself limited with preferred stocks.

6. SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

• Expense Ratio: 0.07%
• Annual Dividend Yield: 9.22%
• 3-Month Average Daily Volume: 518,224
• Assets Under Management: $1 Billion
• Inception: October 21, 2015

If you’re one to think the S&P 500 index has many non-dividend-paying companies, you’re not alone. The SPYD focuses on removing all those non-dividend payers to give you exactly what you want, high returns.

7. Energy Select Sector SPDR ETF (XLE)

• Expense Ratio: 0.13%
• Annual Dividend Yield: 13.92%
• 3-Month Average Daily Volume: 34,326,275
• Assets Under Management: $1 Billion
• Inception: December 16, 1998

Dependent on energy sector companies, which often pay good dividends per share, investors get mostly the lion’s share of dividends. Energy and oil companies need all the support, and XLE is perfect if you want long-term stability with great dividends.

8. Vanguard Global ex-U.S. Real Estate ETF (VNQI)

• Expense Ratio: 0.12%
• Annual Dividend Yield: 7.75%
• 3-Month Average Daily Volume: 458,377
• Assets Under Management: $4.8 Billion
• Inception: November 11, 2010

Real estate keeps on growing as long as it isn’t in a bubble. VNQI focuses on investing in non-US real estate investment trusts and companies, prioritizing Japan, and Hong Kong as its top markets. It includes Germany’s Vonovia SA and Japan’s Mitsui Fudosan, two companies with hard properties to back up their value.

Which One Can Give You The Best Yield?

Dividend ETFs cannot guarantee anything except risk figures and percentages. While they’re a great addition to your portfolio, they include risks that involve possible enormous gains and expenses. Think of it like this: ETFs are individuals who let you ride on their investment bets. If they mirror your investing values, you can get the best yield.

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