Dividend exchange-traded funds (ETFs) are designed to invest in a basket of high-dividend-paying stocks. These high-dividend stocks tend to be associated with companies that have a strong history of dividend increases, and that usually means bigger, less-risky, blue-chip companies. They may be either domestic or international and span a range of economic sectors and industries, including International Business Machines Corp. (IBM), 3M Co. (MMM), and Nike Inc. (NKE).
- The top three dividend ETFs have significantly outperformed the broader U.S. market over the past year.
- The ETFs with the best 1-year trailing total return are SYLD, SDVY, and CSB.
- The top holdings of these ETFs are Rent-A-Center Inc., Louisiana-Pacific Corp., and MGE Energy Inc., respectively.
Dividend ETFs often are favored by more risk-averse, income-seeking investors. They also are used by investors to balance riskier investments in their portfolio. In addition to offering a regular income stream, these ETFs generally offer much lower management expense ratios (MERs) than dividend-focused mutual funds.
There are 121 dividend ETFs that trade in the U.S., excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). Over the past 12 months, the top three dividend ETFs have significantly outperformed the S&P 500's total return of 50.0%, as of May 6, 2021. The best-performing dividend ETF, based on performance over the past year, is the Cambria Shareholder Yield ETF (SYLD). We examine the top 3 best dividend ETFs below. All numbers below are as of May 11, 2021, except where indicated.
- Performance over 1-Year: 123.8%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 1.24%
- 3-Month Average Daily Volume: 82,450
- Assets Under Management: $318.0 million
- Inception Date: May 14, 2013
- Issuer: Cambria
SYLD is an actively-managed ETF that uses a quantitative approach to select U.S. equities with high cash distribution characteristics. It screens for U.S. stocks with market capitalizations greater than $200 million. The fund is comprised of 101 top-ranked companies based on dividend payments and net stock buybacks. It also screens for value and quality factors, such as low financial leverage. SYLD follows a blended strategy, investing in a mix of value and growth stocks. Its top three holdings include Rent-A-Center Inc. (RCII), a provider of furniture, electronic appliances, and accessories through flexible rental purchase agreements; Toll Brothers Inc. (TOL), a builder of luxury homes; and Louisiana-Pacific Corp. (LPX), a building materials manufacturer.
- Performance over 1-Year: 88.2%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 1.04%
- 3-Month Average Daily Volume: 38,555
- Assets Under Management: $74.4 million
- Inception Date: Nov. 1, 2017
- Issuer: First Trust
SDVY is a multi-cap fund targeting the Nasdaq US Small Mid Cap Rising Dividend Achievers Index. The index is comprised of small and mid-cap companies with a history of raising dividends and which are likely to do so over the long term. Eligible companies are ranked according to dollar dividend increase over the previous five year period, current dividend yield, and payout ratio. The top holdings include Louisiana-Pacific Corp.; Boise Cascade Co. (BCC), a maker of wood products and building materials; and PulteGroup Inc. (PHM), a company that develops and builds homes and adult residential communities.
- Performance over 1-Year: 87.0%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 3.33%
- 3-Month Average Daily Volume: 33,526
- Assets Under Management: $226.1 million
- Inception Date: July 8, 2015
- Issuer: Victory Capital
CSB is a small-cap fund that targets the Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted Index. The index is comprised of 100 dividend-yielding stocks from within the broader Nasdaq Victory U.S. Small Cap 500 Volatility Weighted Index. CSB follows a blended strategy, focusing on both value and growth stocks. The fund's top 10 holdings comprise under 15% of total assets invested. The top holdings of CSB include MGE Energy Inc. (MGEE), a utility holding company; Unitil Corp. (UTL), an elecricity and natural gas utility company; and American National Group Inc. (ANAT), an insurance company.
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