As the title suggests this article is primarily catering to new Dividend investors. Having decided to go the dividend investing route, how do we pick stocks? There are multitudes of factors considered in selecting dividends stocks. For e.g. P/E ratio, dividend payout ratio, dividend yield, dividend history and free cash flow to name a few. Almost every dividend investor has his or her own screen for dividend stocks. It takes time and experience to come up with a dividend stock screener. Alternatively, you could follow one of the established dividend investors.
Tom@dividendsdiversify has his Model Portfolios which cater to different types of investors. Similarly, the dividend diplomats have the Top 5 foundation stocks for dividend investors.
Without enough capital it is very difficult to build a diversified portfolio. Even to build a portfolio of 5 stocks is not trivial. What is a good time to buy a stock? ETFs provide a low cost exposure to a diversified set of stocks.
There are about 170 dividends themed ETFs. In this article I am going to look at the top 10 dividend ETFs based on AUM. Assets under Management (AUM) measures market value of all the assets an ETF manages on behalf of its clients. It is similar to market capitalization of a stock. Each dividend ETF has a theme associated with it. Some ETFs might be investing based on dividend quality and some might be based on dividend yield. To get a better feel for investing with ETFs I would recommend my article on ETF/Mutual fund investing.
#1 Vanguard Dividend Appreciation ETF (VIG)
It’s no surprise that Vanguard owns the largest dividend ETF. I have already written a detailed article on this ETF. It’s definitely worth a read if you are considering VIG as a part of your core portfolio.
| Price | $101.86 |
| Assets Under Management | $27.513 billion |
| Annualized Dividend | $1.853 |
| Yield | 1.819% | 50-day moving average | $101.257 |
| 200-day moving average | $98.708 |
| 52 week range | $89.9 - $108.99 |
| Expense ratio | 0.08% |
Sector Diversification: Basic Materials 4.20%, Consumer Goods 10.80%, Consumer Services 19.70%, Financials 8.80%, Health Care 12.20%, Industrials 32.30%, Oil & Gas 0.00%, Technology 8.70%, Utilities 3.20% and Telecommunications 0.10%.
Top 10 Holdings: Microsoft Corp., Walmart Inc., Johnson & Johnson, PepsiCo Inc., McDonald's Corp., 3M Co., Medtronic plc, Union Pacific Corp., Abbott Laboratories and Texas Instruments Inc.
#2 Vanguard High Dividend Yield ETF (VYM)
Vanguard again! I am not surprised at all. VYM is an excellent fund and I own it as a part of my dividend portfolio. I have already written a detailed post on this fund. Give it a read to get a better understanding of VYM.
| Price | $84.31 |
| Assets Under Management | $21.01 billion |
| Annualized Dividend | $2.45 |
| Yield | 2.903% | 50-day moving average | $83.274 |
| 200-day moving average | $82.476 |
| 52 week range | $76.07 - $90.93 |
| Expense ratio | 0.08% |
Sector Diversification: Basic Materials 3.80%, Consumer Goods 11.70%, Consumer Services 6.10%, Financials 14.10%, Health Care 13.00%, Industrials 12.50%, Oil & Gas 10.10%, Technology 16.90%, Telecommunications 4.30% and Utilities 7.50%.
Top 10 Holdings: Microsoft Corp., JPMorgan Chase & Co., Johnson & Johnson, Exxon Mobil Corp., Intel Corp., Chevron Corp., Wells Fargo & Co., Cisco Systems Inc., Pfizer Inc. and Verizon Communications Inc.
#3 iShares Select Dividend ETF (DVY)
DVY is from Blackrock. BlackRock is the world's largest asset manager with $6.3 trillion in assets under management as of 2017. This ETF invests in stocks with at least 5-years of dividend payments. Among the stocks with at least 5-years of dividend payment it picks the top 100 based on dividend yield. It provides a combination of dividend quality and income.
| Price | $97.4 |
| Assets Under Management | $16.831 billion |
| Annualized Dividend | $3.035 |
| Yield | 3.117% | 50-day moving average | $95.886 |
| 200-day moving average | $94.746 |
| 52 week range | $89.53 - $102.32 |
| Expense ratio | 0.39% |
Sector Diversification: Utilities 29.27%, Consumer Discretionary 14.97%, Energy 12.07%, Financials 9.74%, Materials 7.15%, Consumer Staples 6.92%, Industrials 6.09%, Information Technology 5.86%, Telecommunications 3.97% and Health Care 3.57%.
Top 10 Holdings: CENTURYLINK INC, ONEOK INC, OCCIDENTAL PETROLEUM CORP, F MOTOR, PPL CORP, SEAGATE TECHNOLOGY PLC, AT&T INC, ENTERGY CORP, FIRST ENERGY CORP and CHEVRON CORP.
#4 SPDR S&P Dividend ETF (SDY)
SPDR S&P Dividend ETF invests in stocks with at least 20-years of consecutive dividend increases. The stocks weights are based on dividend yield. SDY is definitely a quality first ETF. In addition it provides good dividend income thanks to its tilt towards higher yield.
| Price | $92.03 |
| Assets Under Management | $15.333 billion |
| Annualized Dividend | $2.118 |
| Yield | 2.302% | 50-day moving average | $91.478 |
| 200-day moving average | $89.512 |
| 52 week range | $86.385 - $98.29 |
| Expense ratio | 0.35% |
Sector Diversification: Financials 15.54%, Consumer Staples 15.36%, Industrials 13.44%, Utilities 13.06%, Consumer Discretionary 10.55%, Materials 9.15%, Real Estate 8.28%, Health Care 6.04%, Energy 3.15%, Information Technology 2.72% and Telecommunication Services 2.70%.
Top 10 Holdings: Realty Income Corporation, AT&T Inc., National Retail Properties Inc., Tanger Factory Outlet Centers Inc., AbbVie Inc., Exxon Mobil Corporation, Chevron Corporation, Meredith Corporation, International Business Machines Corporation and Kimberly-Clark Corporation.
#5 Schwab U.S. Dividend Equity ETF (SCHD)
Schwab U.S. Dividend Equity ETF mimics the Dow Jones U.S. Dividend 100™ Index. SCHD uses three screening rules. 10-Years of consecutive dividend payments, Market capitalization of at least 500 million dollars and Minimum three-month average daily volume trade of US$ 2 million.
| Price | $49.54 |
| Assets Under Management | $7.421 billion |
| Annualized Dividend | $1.286 |
| Yield | 2.595% | 50-day moving average | $49.051 |
| 200-day moving average | $48.679 |
| 52 week range | $44.121 - $54.6 |
| Expense ratio | 0.07% |
Sector Diversification: Consumer Staples 24.94%, Information Technology 20.11%, Industrials 18.95%, Consumer Discretionary 11.37%, Energy 7.09%, Health Care 5.27%, Financials 5.21%, Telecommunication Services 4.50%, Materials 1.87% and Utilities 0.69%.
Top 10 Holdings: EXXON MOBIL CORP, INTEL CORP, HOME DEPOT , PFIZER INC, VERIZON COMMUNICATIONS INC, WALMART INC, PROCTER & GAMBLE CO, International Business Machines CORP, PEPSICO INC and MMM.
#6 iShares Core High Dividend ETF (HDV)
iShares Core High Dividend ETF invests in top (dividend yield) 75 stocks that have been screened for financial health, quality and dividend sustainability as determined by Morningstar, Inc.’s proprietary index methodology. The Morningstar index methodology determines “company quality” in accordance with the Morningstar Economic Moat rating system. Additionally, companies are screened for financial health using Morningstar’s Distance to Default measure.
| Price | $84.91 |
| Assets Under Management | $5.969 billion |
| Annualized Dividend | $2.998 |
| Yield | 3.531% | 50-day moving average | $84.906 |
| 200-day moving average | $85.168 |
| 52 week range | $82.071 - $94.2 |
| Expense ratio | 0.08% |
Sector Diversification: Energy 20.98%, Consumer Staples 18.27%, Health Care 17.74%, Telecommunications 12.83%, Utilities 8.77%, Information Technology 7.17%, Financials 5.47%, Industrials 4.10%, Consumer Discretionary 4.09% and Materials 0.07%.
Top 10 Holdings: EXXON MOBIL CORP, AT&T INC, CHEVRON CORP, VERIZON COMMUNICATIONS INC, JOHNSON & JOHNSON, PFIZER INC, WELLS FARGO, PROCTER & GAMBLE, MERCK & CO INC and CISCO SYSTEMS INC.
#7 iShares International Select Dividend ETF (IDV)
I was shocked to see an international ETF make it to the top 10. This ETF mimics the holdings of Dow Jones EPAC Select Dividend Index. To be included in this index the stock should have payed dividends for at least 3-years, previous year’s dividend must be greater than or equal to its three-year average annual dividend-per-share, five-year average dividend coverage ratio must be greater than or equal to two-thirds of the five-year average dividend coverage ratio of the corresponding Dow Jones Global Indexes® country index, or greater than 118%, whichever is greater, must have a three month average daily dollar trading volume of at least $3 million, must have a non-negative trailing 12-month EPS must have a float-adjusted market capitalization of at least $1 billion. Phew!
| Price | $34.04 |
| Assets Under Management | $4.936 billion |
| Annualized Dividend | $1.506 |
| Yield | 4.425% | 50-day moving average | $33.605 |
| 200-day moving average | $33.255 |
| 52 week range | $32.19 - $35.93 |
| Expense ratio | 0.50% |
Country Diversification: United Kingdom 25.03%, Australia 15.62%, France 8.46%, Canada 6.33%, Sweden 6.19%, Italy 6.09%, Spain 5.64%, Finland 4.08%, Norway 3.81%, Switzerland 3.15%, Germany 3.04%, Hong Kong 2.59%, New Zealand 2.12%, Portugal 1.41% and Korea (South) 1.18%.
Top 10 Holdings: ASTRAZENECA PLC, MACQUARIE GROUP LTD DEF, ROYAL DUTCH SHELL PLC CLASS A, COMMONWEALTH BANK OF AUSTRALIA, GALLIFORD TRY PLC, VTECH HOLDINGS LTD, SSE PLC, ENI, TOTAL SA and SALMAR ASA.
#8 First Trust Value Line Dividend Index Fund (FVD)
First Trust Value Line Dividend Index Fund invests in stocks that are part of Value Line Dividend Index. FVD uses set of complex criteria to shortlist stocks. I would recommend reading there selection criteria here.
| Price | $29.99 |
| Assets Under Management | $4.057 billion |
| Annualized Dividend | $0.626 |
| Yield | 2.088% | 50-day moving average | $29.897 |
| 200-day moving average | $29.835 |
| 52 week range | $28.537 - $31.85 |
| Expense ratio | 0.70% |
Sector Diversification: Utilities 22.24%, Financials 17.64%, Consumer Staples 14.28%, Industrials 13.53%, Consumer Discretionary 7.84%, Health Care 6.26%, Information Technology 6.14%, Real Estate 4.27%, Energy 3.11%, Materials 3.11% and Telecommunication Services 1.58%.
Top 10 Holdings: QUALCOMM Incorporated, Texas Instruments Incorporated, WPP Plc (ADR), T. Rowe Price Group, Inc., Automatic Data Processing, Inc., El Paso Electric Company, Phillips 66, Analog Devices, Inc., Diageo Plc (ADR) and Intel Corporation.
#9 iShares Core Dividend Growth ETF (DGRO)
iShares Core Dividend Growth ETF invests in companies with at least 5-years of continuous dividend increases and a payout ratio of at most 75%.
| Price | $34.6 |
| Assets Under Management | $3.546 billion |
| Annualized Dividend | $0.718 |
| Yield | 2.075% | 50-day moving average | $34.21 |
| 200-day moving average | $33.522 |
| 52 week range | $30.3 - $37.22 |
| Expense ratio | 0.70% |
Sector Diversification: Financials 18.99%, Health Care 16.90%, Information Technology 16.56%, Industrials 14.06%, Consumer Staples 11.46%, Consumer Discretionary 10.00%, Utilities 5.24%, Materials 4.55%, Energy 1.82%, Real Estate 0.01% and Telecommunications 0.00%.
Top 10 Holdings: APPLE INC, MICROSOFT CORP, PFIZER INC, JOHNSON & JOHNSON, JPMORGAN CHASE & CO, WELLS FARGO, PROCTER & GAMBLE, MERCK & CO INC, CISCO SYSTEMS INC and COCA-COLA.
#10 ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
ProShares S&P 500 Dividend Aristocrats ETF invests in companies with at least 25-years of continuous dividend increases.
| Price | $62.76 |
| Assets Under Management | $3.505 billion |
| Annualized Dividend | $1.163 |
| Yield | 1.852% | 50-day moving average | $62.402 |
| 200-day moving average | $61.392 |
| 52 week range | $56.15 - $67.98 |
| Expense ratio | 0.35% |
Sector Diversification: Consumer Staples 24.74%, Industrials 21.39%, Materials 11.29%, Health Care 11.07%, Consumer Discretionary 10.78%, Financials 9.49%, Energy 3.47%, Utilities 1.99%, Telecommunication Services 1.96% and Information Technology 1.91%.
Top 10 Holdings: McCormick & Co. Inc., S&P Global Inc., W.W. Grainger Inc., Cintas Corp., Archer Daniels Midland Co., Roper Technologies Inc., General Dynamics Corp., Ecolab Inc., Hormel Foods Corp. and Aflac Inc.
| Ticker | Consumer Staples | Consumer Discretionary | Financials | Health Care | Industrials | Materials | Real Estate | Technology | Telecommunications | Utilities |
| VIG | 10.8% | 19.7% | 8.8% | 12.2% | 32.3% | 4.2% | 0.0% | 8.7% | 0.1% | 3.2% |
| VYM | 11.7% | 6.1% | 14.1% | 13.0% | 12.5% | 3.8% | 0.0% | 16.9% | 4.3% | 7.5% |
| DVY | 15.19% | 6.97% | 9.76% | 3.55% | 6.13% | 7.24% | 0.0% | 5.91% | 3.93% | 28.68% |
| SDY | 10.55% | 15.36% | 15.54% | 6.04% | 13.44% | 9.15% | 8.28% | 2.72% | 2.7% | 13.06% |
| SCHD | 11.37% | 24.94% | 5.21% | 5.27% | 18.95% | 1.87% | 0.0% | 20.11% | 4.5% | 0.69% |
| HDV | 4.09% | 18.27% | 5.47% | 17.74% | 4.1% | 0.07% | 0.0% | 7.17% | 12.83% | 8.77% |
| FDV | 8.53% | 13.9% | 16.83% | 6.75% | 13.44% | 3.13% | 4.26% | 6.54% | 1.52% | 21.82% |
| DGRO | 10.0% | 11.46% | 18.99% | 16.9% | 14.06% | 4.55% | 0.01% | 16.56% | 0.0% | 5.24% |
| NOBL | 10.78% | 24.74% | 9.49% | 11.07% | 21.39% | 11.29% | 0.0% | 1.91% | 1.96% | 1.99% |
It’s hard to pick and choose a winner. Each ETF caters to a specific investment paradigm. I own VIG and VYM. They provide me a combination of quality and high yield dividend stocks. Additionally they are really cheap and trade for free on Vanguard. Interestingly most of the ETFs exclude REITs. SDY & FDV are the only ETFs with exposure to REITs. Almost all the ETFs have a strong affinity to Consumer Staples & Consumer Discretionary stocks.
Dividend ETFs provide a low cost exposure to a diversified set of stocks. Most of the holdings are regulars in the dividend community. They provide a lazy approach to dividend investing. I am not averse to investing in individual stocks. However, I don’t find the time to perform due diligence. Hence, I prefer the dividend ETF approach. Dividend ETFs is not for everyone. Understand the risk/rewards associated with each of the ETFs before investing.
