As billions of dollars have flowed into exchange-traded products over the past several years, some asset classes and strategies have attracted particularly high levels of interest (and cash) from investors. Dividend ETFs in particular have become quite popular as investors have sought to build portfolios around securities that generate consistent and meaningful cash flows. There are now more than four dozen dividend ETFsproducts that focus in one way or another on stocks that make payouts to their shareholders. Focusing on the subsets of stock markets that pay dividends generally requires ETF investors to pay a bit more in expenses. But those looking to keep fees down still have dividend ETFs. Below, we profile a handful of dividend-focused ETFs with relatively low expense ratios :

  1. Vanguard Dividend Appreciation ETF (VIG)

Vanguard's VIG is one of the most popular dividend ETFs, and no doubt part of the tremendous interest comes from the rock bottom expense ratio. VIG is linked to an index consisting of companies that have consistently raised dividends over the past ten years, delivering access to a group of securities that make stable payouts.

VIG charges an annual expense ratio of 0.13%, making it one of the cheapest dividend ETF available to U.S. investors and also one of the cheapest ETFs regardless of investment objective. VIG is eligible for commission-free trading in TD Ameritrade, Vanguard and Firstrade accounts.

  1. High Dividend Yield ETF (VYM)

Another Vanguard dividend ETF is at the top of this list. VYM has some overlap with VIG, but implements a slightly different dividend-centric strategy. Instead of focusing on the most consistent dividend payer, it picks those U.S. stocks with the highest yields. As a result, VYM will generally have a higher distribution yield, but will include stocks with shorter histories of paying out money to their shareholders. The index this fund follows isderived from the U.S. component of the FTSE Global Equity Index Services.

VYM charges an annual expense ratio of 0.13%, making it, along with VIG, one of the cheapest dividend ETF available to U.S. investors. VYM can be traded commission-free in TD Ameritrade and Vanguard accounts.

  1. US Dividend Equity ETF (SCHD)

Charles Schwab's SCHD follows the Dow Jones US Dividend 100 Index, which only follows consistent dividend paying stocks in the United States. The other criteria for being included in this index is the fundamental strength and comparative financial ratios of each firm compared to others in their sector.

Schwab's ETFs are often among the cheapest options out there, and this one is no different; SCHD charges an annual expense ratio of 0.17%. It's also eligible for commission-free trading in Schwab accounts.

  1. LargeCap Dividend Fund (DLN)

This ETF, like many in the WisdomTree family, is linked to a fundamentally-weighted index that includes dividend-paying stocks. DLN's portfolio consists of large cap U.S. stocks that make the largest cash distributions annually; the biggest individual weightings are AT&T (T), Exxon Mobil (XOM) and Microsoft (MSFT).

DLN charges an annual expense ratio of 0.28%, and can be traded commission-free in E*TRADE accounts.

  1. Total Dividend Fund (DTD)

This ETF seeks to replicate the WisdomTree Dividend Index, which is a fundamentally weighted index that follows U.S. companies that have paid regular cash dividends and meet liquidity requirements set by the index. It's generally similar to DLN, but includes smaller companies in its portfolio as well; DTD can be used as a way to achieve very broad-based exposure to U.S. equities.

DTD also charges an annual expense ratio of0.28%.

  1. ETRACS Monthly Pay 2x Leveraged S&P Dividend ETN (SDYL)

SDYL is unique from the other products on this list; it is structured as an ETN and offers monthly 2x leverage to the underlying index, which consists of the 50 highest dividend-yielding stocks on the S&P 1500 that have also increased dividends for at least 25 years. The result of adding leverage to this benchmark is impressive yield potential; the 2x yield on the underlying index is close to 7%. While this ETN has a very high income potential, it is worth noting that there are added risks when investing in highly leveraged funds.

SCHD charges an annual tracking fee of just 0.30%.

  1. High Dividend Yield ETF (HDIV)

HDIV is managed by Russell and follows the Russell US Large Cap High Dividend Yield Index, which is designed to invest in high-yielding dividend companies based in the United States. These companies also must have shown dividend growth and sustained profits over a period of time. HDIV charges an annual expense ratio of just 0.33%.

Unfortunately, this ETF won't be around for long; Russell recently announced that it will shutter most of its existing ETF lineup in the fourth quarter of this year.

Disclosure: No positions at time of writing.

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  3. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  4. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  5. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  8. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  9. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  10. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center