The 2024 Listing Of Dividend Trade-Traded Funds

Up to date on September twenty fifth, 2024 by Bob Ciura

We consider dividend progress traders can generate superior long-term returns by investing in high-quality dividend shares, such because the Dividend Aristocrats.

The Dividend Aristocrats are a bunch of 66 shares within the S&P 500 Index, which have every raised their dividends for at the least 25 years, together with quite a few buying and selling and liquidity necessities.

Buyers should buy high-quality dividend progress shares such because the Dividend Aristocrats individually, or by exchange-traded funds.

ETFs have grow to be way more in style up to now 5 years, particularly when in comparison with dearer mutual funds.

With this in thoughts, we created a downloadable Excel checklist of dividend ETFs that we consider are essentially the most enticing for revenue traders.

We’ve additionally included the dividend yield, expense ratio, and common price-to-earnings ratio of the ETF (if accessible).

You possibly can obtain your full checklist of 20+ dividend-focused ETFs by clicking on the hyperlink beneath:

Dividend ETFs could possibly be a worthwhile addition to a dividend progress investor’s portfolio, particularly for traders on the lookout for diversification and ease.

This text will focus on why revenue traders who don’t need to purchase particular person shares, ought to think about dividend ETFs. We additionally focus on our high picks among the many main dividend ETFs.

Desk Of Contents

ETF Fundamentals

First, traders ought to get to know the fundamentals of exchange-traded funds. ETFs are just like mutual funds, in that they permit traders to buy shares of a basket of shares directly.

On this approach, ETFs and mutual funds each present on the spot diversification advantages. ETFs usually observe an index, however can tackle a wide range of funding methods.

ETFs are available all sizes and styles–together with small-caps, mid-caps, and large-caps; progress ETFs, worth ETFs, or revenue ETFs; and ETFs that spend money on particular market sectors or industries. Some ETFs spend money on U.S.-based corporations, whereas different ETFs spend money on the worldwide markets.

There are additionally ETFs throughout varied asset courses, together with fairness ETFs, bond ETFs, forex ETFs, or ETFs that spend money on Grasp Restricted Partnerships (MLPs) or Actual Property Funding Trusts (REITs).

Sure ETFs additionally deploy using leverage, to amplify returns. Nevertheless, traders ought to perceive that use of leverage can backfire. There are additionally inverse ETFs that enable traders to take an reverse place of a given index or sector.

The most important ETF by way of property beneath administration is the SPDR S&P 500 ETF (SPY), which had AUM of simply over $573 billion as of September twenty fourth, 2024. ETFs like SPY present traders with instant diversification advantages, which some traders want to investing in particular person shares.

Shopping for particular person shares requires traders conduct correct due diligence of that particular firm’s enterprise mannequin, progress potential, and inventory valuation.

Previous to the ETF increase over the previous decade, traders seeking to maintain baskets of shares bought mutual funds. However many mutual funds had exorbitant charges related to investing, resembling front-end charges, and excessive annual charges of 1% or extra.

These charges serve no goal for the investor, and may considerably eat away at returns through the years. ETFs turned extremely in style, as many carried a lot decrease charges than comparable mutual funds.

SPY has an annual expense ratio of simply 0.0945%, which may also help traders save quite a lot of cash over time.

Think about the next instance of an investor who purchases $10,000 in SPY, and earns a mean charge of return of 8% per 12 months for 30 years. Together with the 0.0945% annual price, this investor would find yourself with a portfolio worth of simply over $98,000.

Now assume the investor as an alternative positioned the unique $10,000 right into a comparable mutual fund with the identical holdings, however the mutual fund charged an annual expense ratio of 1%. In 30 years, this investor would have a portfolio price simply over $76,000 after annual charges are accounted for–roughly $22,000 lower than if the investor had bought SPY as an alternative.

Along with decrease charges, ETFs additionally enable traders larger liquidity. ETFs are traded all through the day, similar to shares. This compares favorably to mutual funds, that are priced solely as soon as per day, after the market shut.

This explains the ETF increase over the previous 10 years, which isn’t anticipated to sluggish any time quickly. Asset managers have engaged in a worth conflict of types for the previous a number of years, being pressured to slash charges so as to retain shoppers.

For revenue traders on the lookout for the next yield, there are additionally dividend-focused ETFs which are extremely enticing.

The Dividend Aristocrats ETF

There are a lot of good causes for revenue traders to contemplate the Dividend Aristocrats. Investing naturally carries threat, however the Dividend Aristocrats have maintained lengthy observe data of constant dividend will increase.

They’ve additionally exhibited decrease threat than the benchmark, as measured by customary deviation. This makes the Dividend Aristocrats usually extra immune to downturns within the broader market indexes.

We consider it’s because Dividend Aristocrats broadly possess sturdy aggressive benefits, management positions of their particular industries, and long-term progress potential.

These qualities enable them to boost their dividends annually with out interruption. The Dividend Aristocrats checklist is diversified throughout market sectors.

We suggest traders buy particular person Dividend Aristocrats with anticipated returns above 10% per 12 months over the subsequent 5 years.

However for a lot of traders, ETFs could possibly be an appropriate different. If an investor would relatively personal all of the Dividend Aristocrats directly, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is your best option.

NOBL is the key ETF that particularly tracks the Dividend Aristocrats. NOBL presently has internet property of roughly $11.48 billion.

As beforehand talked about, one of many large promoting factors for ETFs is their low expense ratios. Certainly, NOBL has a really affordable annual expense ratio of 0.35%.

Not surprisingly, NOBL has a diversified checklist of holdings. NOBL appears like a horny ETF for traders seeking to buy a dividend-growth directed ETF.

An ETF For Even Greater Earnings

One potential draw back of NOBL is that the dividend yield of the fund is 2.5%; whereas this beats the ~1.7% common dividend yield of the S&P 500, traders can discover many particular person Dividend Aristocrats with considerably larger yields.

Buyers prepared to take the dangers related to shopping for particular person shares can generate a lot larger portfolio revenue by specializing in the highest-yielding Dividend Aristocrats.

Buyers on the lookout for the next yield than what NOBL gives might think about SPDR Portfolio S&P 500 Excessive Dividend ETF (SPYD). This ETF has a a lot larger yield of 4.7%, and it additionally has a really low annual expense ratio of 0.07%.

The ETF is diversified, however the true property, utilities, and monetary sectors signify a big portion of holdings.

The fund goal is to carry ~80 of the highest-yielding shares within the S&P 500. This ETF has larger enchantment for worth and revenue traders than NOBL, resulting from its larger yield and decrease common P/E ratio.

That mentioned, the holdings of SPYD are usually not fairly the blue-chip dividend shares that comprise NOBL’s holdings.

Most shares held by SPYD don’t possess the identical observe document of annual dividend will increase because the Dividend Aristocrats.

For instance, the highest 5 holdings of SPYD are Iron Mountain (IRM), Public Providers Enterprise Group (PEG), Williams Cos. (WMB), Hasbro (HAS), and Worldwide Paper (IP)–none of that are Dividend Aristocrats.

Due to this fact, the final takeaway for SPYD is that traders can acquire the next dividend yield, however are sacrificing enterprise high quality and diversification in return.

Remaining Ideas

We’re large proponents of selectively buying high-quality dividend progress shares, such because the Dividend Aristocrats and Dividend Kings (which have raised dividends for 50+ years), significantly when they’re undervalued.

However shopping for particular person shares requires thorough analysis into the corporate’s particular enterprise mannequin, progress outlook, and varied company-specific dangers.

For traders who need to simplify the method of shopping for dividend progress shares, ETFs could possibly be a horny possibility. Buyers can attain on the spot diversification advantages by buying an ETF, though the trade-off is that ETFs cost annual charges that scale back shareholder returns.

And, many ETFs have decrease yields than could be generated by investing in particular person shares.

Buyers who resolve to go the ETF route might discover NOBL to be a great way to spend money on all of the Dividend Aristocrats directly, whereas SPYD is an interesting selection for revenue traders on the lookout for excessive yields.

Different Dividend Lists

For traders concerned about buying particular person securities, the next lists include many extra high-quality dividend shares: