Dividend ETFs - A Comparative Analysis

Income-oriented investors disgusted by the pitiful yields available in US fixed income securities during the past five years have turned increasingly to dividend ETFs.  However, in the ETF world, dividend-oriented ETFs and ETFs construction to pay owners the highest possible dividend yields aren’t necessarily the same thing.  Today, we’ll compare 5 dividend-oriented ETFs with very different construction rules and performance records. Then we will provide return/yield comparisons with a few ETFs paying very high dividend yields with very different holdings and methodologies.

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We selected these popular dividend ETFs for the analysis:

  • NOBL, ProShares S&P 500® Dividend Aristocrats
  • SCHD, Schwab US Dividend Equity ETF
  • SDOG, ALPS Sector Dividend Dogs
  • SPDV, Advisors Asset Management (AAM) High Dividend Value ETF
  • VYM, Vanguard High Dividend Yield ETF

All five ETFs have distinct strategies:

  • NOBL mimics the S&P 500 Dividend Aristocrats Index. Its selection set is limited to the stocks of companies that have increased their dividends for at least 25 consecutive years. Holdings are equal-weighted, with sector weights capped at 30%.
  • SCHD includes firms with a 10-year history of paying dividends. Within that universe, it uses fundamental screens (cash-flow to debt ratio, ROE, dividend yield, and dividend growth rate) to focus on quality companies with sustainable dividends. SCHD is market-cap weighted.
  • SDOG applies the “Dogs of the Dow” theory to the S&P 500 Index on a sector-by-sector basis.  The ETF equally weights the five companies with the highest dividend yields in each industry sector grouping (GICS)
  • SPDV selects companies from the S&P500 index with high, positive dividend and free-cash-flow yields. The latter calculation adds depreciation and amortization back into Earnings Per Share then divides that quantity by Price Per Share. This dual measure combined using a statistical transformation, provides the ranking for selection as one of the top five securities in each industry sector grouping (GICS). This newer fund can be thought of as a twist on SDOG that takes cash-flow earnings as well as dividends into account in its selection scheme/
  • VYM is the broadest (400+ names) and in many ways the simplest of these five dividend focused ETFs.  Firms are ranked by forecast dividends over the next 12 months, those in the top half are selected before market-cap weighting these stocks.
  • IVV, the iShares S&P 500 ETF is used for comparative purposes in the chart below. The bold numbers denote the Dividend ETF with the most favorable score in the category.
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Disclaimer: Always read the fact sheets and/or summary prospectus before buying any ETF.  Past performance is not necessarily indicative of future results.

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