What ETFs pay the best dividends?
Research dividend funds: When selecting dividend ETFs, pay attention to factors like dividend history, dividend yield, the fund's performance, expense ratios, top holdings and assets under management.
Research dividend funds: When selecting dividend ETFs, pay attention to factors like dividend history, dividend yield, the fund's performance, expense ratios, top holdings and assets under management.
| Fund | Expense Ratio | 30-day SEC Yield |
|---|---|---|
| Fidelity Real Estate Income Fund (ticker: FRIFX) | 0.68% | 5.8% |
| American Funds Conservative Growth and Income Portfolio (INPFX) | 0.65% | 3.6% |
| American Funds Capital Income Builder (CIBFX) | 0.66% | 3.4% |
| JPMorgan Equity Premium Income Fund (JEPAX) | 0.85% | 6% |
Dividend ETFs are passively managed, meaning the fund manager follows an index and does not have to make trading decisions often. Dividend ETFs are good investment options for investors that are risk-averse and income-seeking.
| ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Vanguard Information Technology ETF (VGT) | $70 billion | 0.10% |
| VanEck Semiconductor ETF (SMH) | $16.3 billion | 0.35% |
| Invesco S&P MidCap Momentum ETF (XMMO) | $1.6 billion | 0.34% |
| SPDR S&P Homebuilders ETF (XHB) | $1.8 billion | 0.35% |
To have a perfect portfolio to generate $1000/month in dividends, one should have at least 30 stocks in at least 10 different sectors. No stock should not be more than 3.33% of your portfolio. If each stock generates around $400 in dividend income per year, 30 of each will generate $12,000 a year or $1000/month.
Cons. No guarantee of future dividends. Stock price declines may offset yield. Dividends are taxed in the year they are distributed to shareholders.
- Vanguard Dividend Growth VDIGX.
- Vanguard High Dividend Yield ETF VYM.
- Vanguard High Dividend Yield Index VHYAX.
- WisdomTree U.S. LargeCap Dividend ETF DLN.
- WisdomTree U.S. MidCap Dividend ETF DON.
- WisdomTree U.S. SmallCap Dividend ETF DES.
| Symbol Symbol | ETF Name ETF Name | 1 Year 1 Year |
|---|---|---|
| VIG | Vanguard Dividend Appreciation ETF | 12.78% |
| VYM | Vanguard High Dividend Yield Index ETF | 9.91% |
| VYMI | Vanguard International High Dividend Yield ETF | 9.03% |
| VIGI | Vanguard International Dividend Appreciation ETF | 5.16% |
| Stock | Trailing annual dividend yield* |
|---|---|
| Crown Castle Inc. (CCI) | 5.9% |
| Pfizer Inc. (PFE) | 5.9% |
| Boston Properties Inc. (BXP) | 6.2% |
| Kinder Morgan Inc. (KMI) | 6.2% |
Is it better to buy dividend stocks or ETFs?
Dividend ETFs and dividend stocks can both generate income and provide long-term growth for investors. However, they both carry similar degrees of market risk. Therefore, the choice of ETFs versus stocks comes down to an investor's personal preferences, investing goals and tolerance for risk.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
| ETF | Ticker | Assets Under Management (AUM) |
|---|---|---|
| Vanguard S&P 500 ETF | (NYSEMKT:VOO) | $435.2 billion |
| Invesco QQQ Trust | (NASDAQ:QQQ) | $259.6 billion |
| Vanguard Growth ETF | (NYSEMKT:VUG) | $118.8 billion |
| iShares Core S&P Small-Cap ETF | (NYSEMKT:IJR) | $79.8 billion |
| Fund (ticker) | YTD performance | Expense ratio |
|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 10.4 percent | 0.03 percent |
| SPDR S&P 500 ETF Trust (SPY) | 10.4 percent | 0.095 percent |
| iShares Core S&P 500 ETF (IVV) | 10.4 percent | 0.03 percent |
| Invesco QQQ Trust (QQQ) | 8.6 percent | 0.20 percent |
| Symbol | Name | 5-Year Return |
|---|---|---|
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 43.94% |
| TECL | Direxion Daily Technology Bull 3X Shares | 34.92% |
| SMH | VanEck Semiconductor ETF | 30.83% |
| ROM | ProShares Ultra Technology | 29.51% |
A well-constructed dividend portfolio could potentially yield anywhere from 2% to 8% per year. This means that to earn $3,000 monthly from dividend stocks, the required initial investment could range from $450,000 to $1.8 million, depending on the yield.
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
- ARMOUR Residential REIT – 20.7%
- Orchid Island Capital – 17.8%
- AGNC Investment – 14.8%
- Oxford Square Capital – 13.7%
- Ellington Residential Mortgage REIT – 13.2%
- SLR Investment – 11.5%
- PennantPark Floating Rate Capital – 10%
- Main Street Capital – 7%
Over time, the cash flow generated by those dividend payments can supplement your Social Security and pension income. Perhaps, it can even provide all the money you need to maintain your preretirement lifestyle. It is possible to live off dividends if you do a little planning.
What ETF is better than the S&P 500?
The S&P 500's track record is impressive, but the Vanguard Growth ETF has outperformed it. The Vanguard Growth ETF leans heavily toward tech businesses that exhibit faster revenue and earnings gains. No matter what investments you choose, it's always smart to keep a long-term mindset.
ETFs and index mutual funds tend to be generally more tax efficient than actively managed funds. And, in general, ETFs tend to be more tax efficient than index mutual funds. You want niche exposure. Specific ETFs focused on particular industries or commodities can give you exposure to market niches.
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
The majority of individual investors should, however, seek to hold 5 to 10 ETFs that are diverse in terms of asset classes, regions, and other factors. Investors can diversify their investment portfolio across several industries and asset classes while maintaining simplicity by buying 5 to 10 ETFs.
Vanguard is a large investment advisor offering mutual funds and ETFs, many of which pay dividends. Most of Vanguard's ETF products pay monthly or quarterly dividends.
