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. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Intelligent ETF

    An exchange-traded fund (ETF) that employs an active investment ...
  3. Intraday

    Another way of saying "within the day". Intraday price movements ...
  4. Yield

    The income return on an investment. This refers to the interest ...
  5. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  6. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
Related Articles
  1. Mutual Funds & ETFs

    Mutual Fund Or ETF: Which Is Right For You?

    Learn the differences between these investment products and how to take full advantage.
  2. Investing Basics

    The Power Of Dividend Growth

    Dividends may not seem exciting, but they can certainly be lucrative. Learn more here!
  3. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  4. Mutual Funds & ETFs

    6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.
  5. Mutual Funds & ETFs

    All Weather Investing With ETFs

    All Weather investment strategies can shield investors during the worst bear markets.
  6. Fundamental Analysis

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  7. Markets

    Your Dividend Payout: Can You Count On It?

    We go over several telling factors that can help you answer this question and avoid losses.
  8. Mutual Funds & ETFs

    Exchange-Traded Funds (ETFs)

    This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.
  9. Mutual Funds & ETFs

    3 Morgan Stanley Funds Rated 5 Stars by Morningstar

    Discover the three best mutual funds administered and managed by Morgan Stanley that received five-star overall ratings from Morningstar.
  10. Mutual Funds & ETFs

    Top 3 Voya Funds for Retirement Diversification in 2016

    Learn about Voya Investment Management's mutual fund offerings and the three Voya funds to consider for retirement diversification in 2016.
RELATED FAQS
  1. Is a company allowed to reduce its dividends?

    Yes. Companies have no restrictions - not from their exchange (NYSE, Nasdaq, AMEX, etc.), the SEC or the NASD - that require ... Read Full Answer >>
  2. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >>
  3. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  4. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  5. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
  6. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center