Dividend ETF

DEFINITION of 'Dividend ETF'

Any exchange-traded fund that seeks to provide high yields by investing in a basket of high-dividend-paying common stocks, preferred stocks or REITs. There are dividend ETFs that contain only U.S. domestic stocks and global dividend ETFs, which have an international focus. The indexes used to create dividend ETFs vary by fund manager or custodian, but most contain stocks with a high level of liquidity and above-market dividend yields.

BREAKING DOWN 'Dividend ETF'

Although dividend ETFs are passively managed around an index, that index may be the result of certain quantitative screens, such as companies with a history of increasing their dividends, or larger blue-chip companies with a higher level of perceived safety.


The expense ratios of dividend ETFs should be comparable to - or lower than - the cheapest no-load mutual funds with similar investment objectives. As with all ETFs, dividend ETFs can be traded intraday. These types of funds may be part of the core portfolio of an income-seeking or generally risk-averse stock investor.

RELATED TERMS
  1. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  2. Dividend Drag

    A disadvantage of the dividend structure of unit trust exchange-traded ...
  3. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  4. Forward Dividend Yield

    An estimation of a year's dividend expressed as a percentage ...
  5. Dividend

    A distribution of a portion of a company's earnings, decided ...
  6. Stock ETF

    A security that tracks a particular set of equities, similar ...
Related Articles
  1. ETFs & Mutual Funds

    How Dividend-Paying ETFs Work

    Understand how ETFs that hold dividend-paying securities collect and pass along those dividends proportionally to the shareholders of the ETF.
  2. ETFs & Mutual Funds

    4 Smart Beta ETFs That Pay Dividends (DVY, LMT)

    Learn about smart-beta exchange-traded funds. Discover four ETFs that have an investment strategy that focuses on dividends. Obtain a summary of each fund.
  3. ETFs & Mutual Funds

    4 Dividend ETFs to Help Fund Your Retirement

    Investing in stocks that pay out dividends can be a smart way to establish a reliable income stream in retirement. Here are four low-fee dividend ETFs.
  4. ETFs & Mutual Funds

    ETF Dividends: The Lowdown on How They're Taxed

    Here's the rundown on how different ETF dividends are taxed.
  5. ETFs & Mutual Funds

    Vanguard Launches 2 Dividend-Oriented International ETFs (VIGI, VYMI)

    Find out about two international dividend ETFs launched by Vanguard in March 2016, patterned after its Dividend Appreciation ETF and High Dividend Yield ETF.
  6. ETFs & Mutual Funds

    High Dividend ETF: iShares Core High Dividend vs. Vanguard Dividend Appreciation (HDV, VIG)

    Get a comparison review of two high dividend yield ETFs: the iShares Core High Dividend ETF and the Vanguard Dividend Appreciation ETF.
  7. ETFs & Mutual Funds

    Looking for Yield? Check Out This Preferred Stock ETF (PFF)

    Take a look at a review of the performance of the most popular preferred stock ETF, the iShares U.S. Preferred Stock ETF from BlackRock.
  8. ETFs & Mutual Funds

    5 High-Dividend Paying ETFs for Income-Focused Investors (VIG, SDY)

    Take a look at five high-dividend paying ETFs for income-focused investors, including one that tracks a Buffett-like index created through Morningstar.
  9. ETFs & Mutual Funds

    Advantages And Disadvantages Of ETFs

    You've probably heard that ETFs are better than mutual funds, but you need to consider all aspects before investing.
  10. Investing

    A Look At the Growth Of the ETF Industry

    Explore the phenomenal growth rate of the ETF industry, and learn some of the principal reasons why ETFs are projected to continue to grow at a rapid pace.
RELATED FAQS
  1. Are ETFs that pay dividends less desirable?

    Hello, Thanks for your time in this forum. I have a question about ETFs. The Investopedia article found Read Answer >>
  2. Does an ETF pay out the full dividend that comes with the stocks held in that ETF?

    Learn if ETFs pay out the full dividend that comes with the stocks held in that ETF. Understand the difference between qualified ... Read Answer >>
  3. Who's in charge of managing exchange-traded funds?

    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
  4. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ... Read Answer >>
  5. Are ETFs required to pay out a percentage of income as dividends?

    The exchange-traded fund (ETF) is a relatively new investment vehicle, hitting the market in 1993. A fund company can create ... Read Answer >>
  6. Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center