Many investors follow investments that offer stable revenue on a regular basis in the form of dividends, leading to dividend increases over time. Therefore, for balanced exposure, optimum diversification across different sectors, and protection against economic and market turmoil, dividend ETFs are a suitable choice.
Given the backdrop, let’s look at some of the high-return dividend ETFs: iShares Select Dividend ETF (DVY), Vanguard High Dividend Yield Index Fund ETF Shares (VYM), and Schwab U.S. Dividend Equity ETF (SCHD) ideal for income-seeking investors.
The U.S. economy underwent a rocky phase at the beginning of 2024 owing to high prices, elevated interest rates, and escalating geopolitical tensions. However, with each quarter, the economy’s performance showed unexpected results with surprises to the upside. This was because of the increases in consumer spending, exports, and federal government spending.
Also, the last 50 basis point rate cut, followed by the recent Federal Reserve cut of interest rate by 0.25% to a target range of 4.50% to 4.75%, reflects optimism. The U.S. Federal Reserve will consider another interest rate in December. In 2025, it will move at a slower pace due to the risk of higher inflation and other lingering uncertainties.
Amid the ongoing economic dynamics and changing monetary policies, bagging stable investments that offer reliable income and growth prospects is ideal. In this category falls dividend ETFs, which are exchange-traded funds (ETFs), investing in a basket of dividend-paying stocks.
Investing in such ETFs is an income-investing strategy that can safeguard your portfolio from market downturns and provide a passive revenue stream. Another advantage of high-return dividend ETFs is effective diversification in different industries and regions.
Considering these conducive trends, let’s analyze the fundamental aspects of the three dividend ETFs belonging to the Large Cap Value ETFs group, beginning with #3.
ETF #3: iShares Select Dividend ETF (DVY)
DVY is an ETF focused on dividend-paying stocks, and its underlying index screens equities by factors such as dividend per share growth rate, dividend payout percentage rate, and dividend yield. It suits investors well for a long-term investment with minimum volatility. The fund tracks the Dow Jones U.S. Select Dividend Index.
The fund has assets under management (AUM) of $20.63 billion. DVY’s top holdings include Altria Group, Inc. (MO) with a 3.18% weighting, followed by AT&T Inc. (T) at 2.10%, and International Paper Company (IP) and ONEOK, Inc. (OKE) at 2.08% and 2.04%, respectively.
The ETF has a total of 100 holdings, with its top 10 assets comprising 20.49% of its AUM. DVY’s expense ratio is 0.38%, lower than the category average of 0.49%. Over the past three months, its fund flows were $23.45 million.
DVY pays an annual dividend of $4.67, which translates to a 3.25% yield at the current price level. The fund’s dividend payouts have increased at a CAGR of 6.9% over the past three years. Notably, DVY has paid dividends for 20 consecutive years.
DVY has surged 17.3% over the past six months and 29.7% over the past year to close the last trading session at $143.30. It has a beta of 0.87. The fund’s NAV was $143.28 as of November 26, 2024.
DVY’s POWR Ratings reflect solid prospects. The fund has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DVY has an A grade for Buy & Hold, Peer, and Trade. Within the A-rated Large Cap Value ETFs group, it is ranked #9 of the 89 ETFs.
To access all of DVY’s POWR Ratings, click here.
ETF #2: Vanguard High Dividend Yield Index Fund ETF Shares (VYM)
VYM is an ETF that The Vanguard Group, Inc. manages and invests in U.S. public equity markets. It provides exposure to large-cap companies offering dividends and value characteristics within the U.S. equity realm.
The ETF tracks the FTSE Custom High Dividend Yield Index. With $61.08 billion in AUM, VYM’s top holdings are Broadcom Inc. (AVGO) with a 4.37% weighting, JPMorgan Chase & Co. (JPM) at 3.60%, Exxon Mobil Corporation (XOM) with a 2.97% weight, and Home Depot, Inc. (HD) at 2.21%.
The fund has a total of 538 holdings, with its top 10 assets forming 24.70% of its AUM. It has an expense ratio of 0.06%, lower than the category average of 0.49%. VYM fund inflows were $928.28 million over the past six months and $489 million over the past year.
VYM has raised its dividends for 13 consecutive years. The ETF pays a $3.63 per share dividend annually, which translates to a 2.70% yield on the current price. Its dividend payments have grown at a CAGR of 6.9% over the past three years and 5.3% over the past five years.
VYM has gained 13.3% over the past six months and 27.3% over the past year to close the last trading session at $134.46. It has a beta of 0.84. The fund’s NAV was $134.46 as of November 26, 2024.
VYM’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. Of the 89 ETFs in the A-rated Large Cap Value ETFs group, VYM is ranked #4.
Click here to see all the VYM ratings.
ETF #1: Schwab U.S. Dividend Equity ETF (SCHD)
SCHD is an ETF managed by Charles Schwab Investment Management, Inc. It is a market-cap-weighted fund that invests in companies with a 10-year history of paying dividends. SCHD applies fundamental screens to build its portfolio and focuses on quality companies with sustainable dividends. It seeks to track the Dow Jones U.S. Dividend 100 Index.
The fund has an AUM of $65.66 billion. Its top holdings include Cisco Systems, Inc. (CSCO) and Bristol-Myers Squibb Company (BMY) with a weighting of 4.45% each, followed by BlackRock, Inc. (BLK) at a 4.41% weighting, and HD at 4.35%. SCHD has a total of 102 holdings, with the top 10 assets comprising 40.47% of its AUM.
In addition, its 0.06% expense ratio compares favorably to the 0.49% category average. Over the past six months, SCHD fund inflows came in at $4.96 billion, and $7.15 billion over the past year. Also, it has a beta of 0.88.
SCHD pays a $0.98 annual dividend yielding 3.31% at the current share price. Its dividends have increased at a 9.5% CAGR over the past three years and a 12% CAGR over the past five years. The ETF has raised its dividends for 12 consecutive years.
SCHD has soared 14.1% over the past six months and 23.7% over the past year to close the last trading session at $29.45. The fund has a NAV of $29.43 as of November 26, 2024.
SCHD’s POWR Ratings reflect its bright outlook. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
SCHD has an A grade for Buy & Hold and Trade. The fund is ranked #2 among 89 ETFs in the same group.
To access all the POWR Ratings for SCHD, click here.
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VYM shares were trading at $134.27 per share on Wednesday afternoon, down $0.19 (-0.14%). Year-to-date, VYM has gained 22.81%, versus a 27.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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