Top 5 Most Popular Dividend ETFs

Last week in The Juice, we asked the question: Should You Be Buying Dividend Stocks? 

In that installment, we discussed a little lesson in ETF investing. Particularly that even ETFs classified as passive can be somewhat active in their management. Or at least with respect to the benchmark index they track. Some fund companies create their own benchmark indexes, which is, inherently, an active endeavor. Others apply their own criteria to filter existing indexes based on, for example, the S&P 500. 

Today, we continue the discussion, focusing on the five dividend ETFs investors have been searching for most across our 100+ financial media partners. We pull a few examples from the Trackstar top five at the top of the page to illustrate differences between these ETFs. 

Hopefully, this exercise will help ETF investing make even more sense than it already does. While ETFs provide an easy way to take the guesswork out of investing, there is nuance to consider between funds. 

For example, the most searched dividend ETF name in Trackstar — the Schwab US Dividend Equity ETF (SCHD) — could not be any more straightforward. 

SCHD takes a broad dividend index — the Dow Jones U.S. Dividend 100 Index — and tracks it. The cool thing about SCHD is that, if you’re looking to diversify away from tech dividend payers, such as Apple (AAPL), Microsoft (MSFT) and, now, Meta Platforms (META), you can do so via SCHD. 

Roughly half of SHCD’s portfolio sits in industrials, financials and healthcare. Information technology is the fourth largest sector with a 12.6% concentration. So, Lockheed Martin (LMT) and Chevron (CVX) top the holdings list with the first IT names being Texas Instruments (TXN) and Cisco Systems (CSCO). If you’re heavy tech with SPY and QQQ, SCHD can make an excellent addition on the road to diversification, especially when you consider its ultra-low expense ratio of 0.06%. 

Now, for more nuance and (hopefully) diversification …

Also with a 0.6% expense ratio, the Vanguard High Dividend Yield ETF (VYM) passively tracks the FTSE High Dividend Yield Index. On the surface, sounds like something distinct to add to, say, SPY, QQQ and SCHD. A look under the hood provides confirmation. 

Like SCHD, VYM isn’t tech heavy. In fact, the ETF provides more exposure to financials, industrials, health care, consumer staples, energy and consumer discretionary stocks than it does tech stocks. Among the names in the top ten holdings, you’ll find JPMorgan Chase (JPM), Broadcom (AVGO), Exxon Mobil (XOM), Home Depot (HD) and AbbVie (ABBV). 

As the name of the fund makes clear, you’re just getting companies with “above-average” dividend yields. However, it’s not potentially dangerous yield chasing. VYM owns solid names with impressive dividend histories. 

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) sounds similar to VYM. And, while it is, you could always add it to your portfolio to round things out even more. SPYD passively tracks the S&P 500 High Dividend Index, which is made up of the top 80 high dividend-yielding companies within the S&P 500 Index. 

With a low 0.07% expense ratio, SPYD gets you relatively even exposure to names, such as Hasbro (HAS), Ford (F), Dominion Energy (D) and 3M (MMM) alongside a healthy dose of real estate investment trusts (REITs), including Essex Property Trust (ESS), Simon Property Group (SPG), Extra Space Storage (EXR) and Public Storage (PSA). 

You can tell just by looking at the sampling of stocks in today’s Juice.

Doing a little digging into the holdings of these popular dividend ETFs can get you exposure to a truly diverse slate of stocks, helping you get closer to true diversification. If you don’t do your homework like this, you run the very real risk of owning a relative ton of AAPL and MSFT in every ETF you buy. 

The Bottom Line: The other thing that’s easy is getting sucked into the thematic and active ETF trend. 

Can going this route help you diversify? Possibly. 

However, it’s a much more complicated path than taking a closer look at low-cost, passive ETFs in areas where you want to put your money. In this case, dividend stocks.

• From The Juice: Should You Be Buying Dividend Stocks?
• Dive into Expert Picks – We Spill the Best Daily!
• 12 Best Dividend Stocks with High Upside Potential
• Check Out The Juice’s Favorite ETF Screener