Dividend ETFs: How To Decide Which Is Best For You

Dividend ETFs have seen major inflows in recent years. At a time when most fixed income ETFs have historically low yields, that interest is easy to understand. There are more than 100 US-listed ETFs categorized by Morningstar, ETF.com, ETF Stream, and others as Dividend ETFs. Many of these use very different methodologies to satisfy disparate objectives resulting in performance and portfolio holdings files that can look quite different. 

Let’s take a deeper dive into 4 of them: Dividend ETFs: DVY; NOBL; SCHD; SPYD.

DVY is the iShares Select Dividend ETF. It seeks to track the investment results of the Dow Jones US Select Dividend Index which is composed of relatively high dividend-paying U.S. equities. As with SPYD, the weighting scheme for DVY emphasizes the highest yielding stocks at time of reconstitution. Four major differences: The starting universe is broader than the S&P 500; REITs are excluded; stocks that do not pass both of two dividend coverage and dividend directional screens are also excluded; DVY holds 100 stocks at reconstitution.

NOBL is the ProShares S&P 500 Dividend Aristocrats ETF. Its selection universe is the S&P 500 Dividend Aristocrats Index — companies within the S&P 500 that have raised their dividends for at least 25 consecutive years. Its focus tends to result in consistent dividend growth, not maximizing dividend yield. The number of constituents in NOBL varies with the number of stocks in the S&P 500 that pass that hurdle. Currently, NOBL has 65 constituents.

SPYD is the SPDR Portfolio S&P 500 High Dividend ETF from State Street Global Advisors. It seeks to provide a high level of dividend income through replicating the S&P 500 High Dividend Yield Index. Despite having the 500 in its names, the ETF and the Index contain the top 80 highest dividend-yielding companies within the S&P 500 Index at the time the index changes its holdings, known as reconstitution. 

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I have owned SDOG in the past but currently own none of the tickers in this article.

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