5 Hot Dividend ETFs Worth Buying Now

The Fed’s shift to a patient approach on interest rates after lifting rates for three years has returned the lure for dividend investing this year. This is because higher interest rates took the sheen away from dividend investing, pushing bond yields higher and making them attractive. Now, with lower interest rates, the appeal for dividend stocks is on the rise once again.

Though these stocks don’t offer much price appreciation in the rising stock market, they offer a steady stream of income along with the potential of capital gains. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices.

Dividend-paying securities are the major sources of consistent income for investors to create wealth when returns from the equity market are at risk. The companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.

Further, research shows that dividend stocks often outperform their non-dividend paying counterparts over longer periods. According to Chicago-based Greenrock Research, a portfolio with the top 20% of the S&P 500 companies ranked by dividend yield and weighted by market capitalization, outperformed the overall S&P 500 by 2.13 percentage points annually from 1995 to 2018.

In particular, stocks having a history of dividend growth lead to a healthy portfolio when compared to simple dividend paying stocks or those with high yields. Although these stocks do not necessarily have the highest yields, they have outperformed for a longer period than the broader stock market or any other dividend-paying stocks.

That being said, we highlight five dividend ETFs that have generated strong returns this year but might be overlooked by investors given their lower AUM. These products seem to be compelling picks given renewed demand for dividend investing:

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