Editor’s Note: This article was republished with permission from Sure Dividend.
When it comes to buying stocks that pay dividends, many people will just look at the current list of dividend aristocrats. These are companies that have raised dividends for at least 25 years in a row. Buying each of these companies might take a few years because most investors do not start out with huge sums of money to immediately buy what they want. That’s where dividend ETFs can come into play.
ETFs provide a strong level of diversification like mutual funds while also providing the ability to trade in real time like individual stocks. Whether investors are looking for a good oil ETF or one that looks to follow a given index, there are options that will work for their goals. Here are seven ETFs that can provide dividend income for investors.
Vanguard High Dividend Yield ETF
This fund from Vanguard, known by the ticker symbol VYM, focuses on companies that pay a nice dividend yield. This does not mean that Vanguard is on the lookout only for yield. There are solid companies like Johnson & Johnson in this fund. JNJ pays out a yield of less than 3 percent, yet it’s a major holding in the high dividend yield ETF.
One of the benefits of this fund is its low expense ratio. Vanguard charges only 0.08 percent of an investor’s holdings as a fee. This is well below the average that brokers charge for similar funds.
Vanguard Dividend Appreciation ETF
While there are some decent yielders in the Vanguard Dividend Appreciation ETF (VIG), this fund has a focus on companies that not only pay dividends but also raise them on a regular basis. The idea behind the dividend growth strategy is a stream of dividends that grows in excess of inflation over the long run.
Like the high-yield fund that Vanguard offers, VIG comes with a low management fee. This fee equals that of VYM at 0.08 percent, which means that investors pay less for holding this fund. This little fact contributes to much higher overall returns over a lengthy period of time as the management fees compound just like interest and dividends.
Vanguard International Dividend Appreciation ETF
This fund from Vanguard has a similar investing premise as VIG. However, it allows for international exposure for those who are looking to expand their investment holdings outside of the USA. VIGI charges a management fee of 0.25 percent, which is higher than Vanguard’s US-based dividend ETFs. It’s important to remember that this fund will frequently offer returns that are different that US-focused dividend ETFs.
PowerShares Dividend Achievers Portfolio
This dividend ETF, which trades under the ticker of PFM, attempts to find dividend-paying stocks that pay out a nice dividend. The yield on this fund is higher than that of the S&P 500, and it comes with a management fee of 0.40 percent. This is higher than the Vanguard funds, but it is still not as high as some more actively managed funds.
The top holdings of PFM include familiar names. Some of these companies are parts of the Dividend Aristocrat list, which means that these companies have paid out a growing stream of dividends for at least 25 years straight. Included in this list are:
- Johnson & Johnson (JNJ)
- Coca-Cola (KO)
- AT&T (T)
O’Shares FTSE US Quality Dividend ETF
This fund from O’Shares attempts to seek out quality while cutting down on volatility. Ideally, this means that the companies that OUSA invests in will provide continuing returns for investors while experiencing ups and downs that are less extreme than the market as a whole.