In this article, we discuss 11 best dividend ETFs to buy. If you want to skip our discussion on dividend-paying companies, head over to 5 Best Dividend ETFs To Buy.
Reuters reported that global corporate dividends reached a record high of $1.66 trillion in 2023, largely due to substantial contributions from banks. According to the Janus Henderson Global Dividend Index, nearly 86% of listed companies worldwide either increased or maintained their dividends. Projections from the same index indicate that dividend payouts are set to hit a new peak of $1.72 trillion this year. Microsoft Corporation (NASDAQ:MSFT) emerged as the leading dividend payer in 2023, followed closely by Apple Inc. (NASDAQ:AAPL) and Exxon Mobil Corporation (NYSE:XOM). The overall value of corporate dividends saw a 5% increase from 2022 to 2023, totaling $1.57 trillion. Ben Lofthouse, head of global equity income at Janus Henderson, attributed this growth to robust corporate cash flow, driving dividends and share buybacks.
Moreover, high interest rates boosted bank margins, resulting in a record $220 billion payout to shareholders in 2023. However, this positive trend was counteracted by significant dividend cuts in the mining sector, primarily due to lower commodity prices. Although the rapid ascent of bank dividends may decelerate, declines in the mining sector are expected to have a reduced impact. Despite challenges in specific sectors, diverse industries such as vehicles, utilities, software, food, and engineering demonstrated promising growth. Geographically, Europe (excluding the UK) and Japan played pivotal roles in global dividend growth, with Europe witnessing a 10.4% increase in payouts. The United States, while making a substantial contribution to global dividend growth owing to its size, reported a growth rate in line with the global average at 5.1%. Conversely, emerging markets observed stagnant dividends, with Brazil facing substantial cuts and China experiencing lackluster growth.
The Federal Reserve responded to the rise in inflation, spurred by monetary easing during the COVID-19 pandemic, by steadily increasing interest rates throughout 2023. This move had significant ramifications, leading to heightened borrowing costs for companies amid escalating interest rates and inflationary pressures. S&P Global Market Intelligence reported that there was a notable 59% increase in the number of companies filing for bankruptcy in 2023, compared to the previous year, nearing levels observed during the pandemic’s peak. However, the anticipated growth in regular dividends in the US market averages around 5.8%, aligning with the 10-year compound annual growth rate (CAGR) of 5.7% since 2014. The energy sector leads variable dividends, driven by a shift towards performance-based shareholder return policies since 2019. In 2022, over 20 energy companies disbursed a record $20 billion in variable dividends, benefiting from elevated oil and gas prices. However, in 2023, companies favored share repurchases due to lower valuation. The size of variable dividends in 2024 will hinge on oil and gas price volatility, demand, and its impact on share prices. The five largest sectors collectively contribute nearly 40% of total dividends and 2.05% in the estimated 5.8% growth, with real estate mandated to distribute the majority of its earnings.
Lately, investors are showing renewed interest in dividend-paying stocks this year after a period of decline in 2023, despite robust returns in the US stock market. Last year, rising interest rates led investors to favor bonds over stocks with smaller payouts, while mega-cap tech stocks attracted attention due to artificial intelligence hype. The S&P 500 Dividend Aristocrats index saw a modest 5.7% increase compared to the broader S&P 500 total return index’s 26% gain. However, with recent declines in yields and the possibility of interest rate cuts by the Federal Reserve, dividend stocks are gaining traction again. Analysts suggest that investors are seeking stable, higher-yielding dividends amidst ongoing market volatility, particularly during an easing cycle. Companies that raise their dividends often receive favorable attention from investors, as evidenced by recent examples such as Lennar Corporation (NYSE:LEN) and Mastercard Incorporated (NYSE:MA), whose stock prices increased following dividend hikes and share buyback announcements. Historical data indicates that companies increasing dividends tend to outperform in the stock market, while those lowering dividends may face underperformance.
Some of the best dividend stocks to buy include Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and Exxon Mobil Corporation (NYSE:XOM). However, this article includes the best dividend ETFs to buy, which also expose investors to top stocks in the industry.
Our Methodology
We curated our list of the best dividend ETFs by choosing consensus picks from multiple credible websites. We have mentioned the 5-year share price performance of each ETF as of March 15, 2024, ranking the list in ascending order of the share price. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
Photo by Viacheslav Bublyk on Unsplash
Best Dividend ETFs To Buy
11. SPDR S&P Dividend ETF (NYSE:SDY)
5-year Share Price Performance as of March 15: 30.21%
SPDR S&P Dividend ETF (NYSE:SDY) aims to track the performance of the S&P High Yield Dividend Aristocrats Index, which includes companies that have raised their dividends for at least 20 consecutive years. The ETF’s portfolio consists of 136 stocks. As of March 14, 2024, SPDR S&P Dividend ETF (NYSE:SDY) had $20.5 billion in assets under management and an expense ratio of 0.35%. Established on November 8, 2005, it offers exposure to companies with both capital growth and dividend income characteristics. SPDR S&P Dividend ETF (NYSE:SDY) is one of the best dividend ETFs to invest in.
3M Company (NYSE:MMM) is the largest holding of SPDR S&P Dividend ETF (NYSE:SDY). 3M is a global technology services provider operating through four segments – Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. On March 13, 3M Company (NYSE:MMM) stock surged 5% to a two-month high after CEO Mike Roman said he expects a higher first-quarter profit of as much as $2.20 per share, up from $2.15. This increase is due to interest earned on debt raised for the spinoff of Solventum as an independent healthcare company.
According to Insider Monkey’s fourth quarter database, 62 hedge funds were long 3M Company (NYSE:MMM), compared to 54 funds in the last quarter. Dmitry Balyasny’s Balyasny Asset Management is the largest stakeholder of the company, with 2.65 million shares worth approximately $290 million.
In addition to Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and Exxon Mobil Corporation (NYSE:XOM), 3M Company (NYSE:MMM) is one of the best dividend stocks to buy.
10. WisdomTree U.S. MidCap Dividend Fund (NYSE:DON)
5-year Share Price Performance as of March 15: 31.35%
WisdomTree U.S. MidCap Dividend Fund (NYSE:DON) ranks 10th on our list of the best dividend ETFs. WisdomTree U.S. MidCap Dividend Fund (NYSE:DON) aims to mirror the performance of dividend-paying mid-cap companies in the US equity market. It offers investors exposure to a wide array of dividend-paying firms in this segment, catering to both growth potential and income objectives. As of March 14, 2024, the fund had total assets of $3.5 billion and an expense ratio of 0.38%. Established on June 16, 2006, it provides a distribution yield of 1.54% and a SEC 30-day yield of 2.37%.
Vistra Corp. (NYSE:VST) is the largest holding of WisdomTree U.S. MidCap Dividend Fund (NYSE:DON). It is an integrated retail electricity and power generation company operating in the United States and the District of Columbia. On February 23, Vistra Corp. (NYSE:VST) declared a $0.215 per share quarterly dividend, a 0.9% increase from its prior dividend of $0.213. The dividend is payable on March 29, to shareholders on record as of March 20.
According to Insider Monkey’s fourth quarter database, 56 hedge funds were bullish on Vistra Corp. (NYSE:VST), compared to 52 funds in the last quarter. Dan Loeb’s Third Point is the largest stakeholder of the company, with 4.60 million shares worth $177.2 million.
Sound Shore Management made the following regarding Vistra Corp. (NYSE:VST) in its fourth quarter 2023 investor letter:
“For the year, we had a number of stocks up 50% or more and the list includes a diverse set of industries such as homebuilding, heavy truck manufacturing, and semiconductor capital equipment. We would like to highlight one outstanding contributor for the year, electricity generator and marketer Vistra Corp. (NYSE:VST), a low-cost provider with a healthy balance between generation and retail. Demand for electricity is growing and notably, load peaks are changing as well. As the country brings on more renewables and adjusts to greater demand later in the day due to increased use of electric heat pumps and electric car charging, reliable clean power is at a premium. Vistra is well positioned with diversified fuel sources including solar, natural gas, coal, nuclear and battery power storage facilities, along with a marketing division to manage price volatility. The company will soon be closing its accretive acquisition of merchant power generator, Energy Harbor, and the deal will make Vistra the second largest carbon free, nuclear electricity provider behind Constellation Energy, another portfolio holding. Vistra CEO Jim Burke, leads a veteran utility management team that is committed to transitioning the company’s portfolio to a sustainable footprint by closing older fossil fuel plants and increasing the renewables portfolio. They have also been an important voice to advocate for changes that will accelerate the global transition to a clean, renewable energy future, while maintaining adequate near-term supply. Vistra has a strong balance sheet that allows the company to invest in innovation and operational improvements. Additionally, management is using excess cash flow to buy 40% of the outstanding shares over a five year period and they are more than half way through that process. Currently valued at 9 times earnings with a 17% free cash flow yield and a 2.3% dividend, the stock remains a full position. As you can see from the chart below, Vistra’s performance was quite different than many other electricity providers and provides further evidence of the disparate performance that can often be found within a sector.”
9. Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM)
5-year Share Price Performance as of March 15: 36.14%
Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM) aims to replicate the performance of the FTSE High Dividend Yield Index, which measures the returns of stocks with high dividend yields. It offers investors an easy way to track stocks with anticipated above-average dividend yields. The ETF follows a passive management strategy, utilizing a full-replication approach. The fund has an expense ratio of 0.06% and a 30-day SEC yield of 3.02%, along with a portfolio of 451 stocks as of February 29, 2024. Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM) is one of the best dividend ETFs to buy.
Broadcom Inc. (NASDAQ:AVGO) is the largest holding of Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM). Broadcom Inc. (NASDAQ:AVGO) plans to boost revenue in 2024, focusing on networking and artificial intelligence offerings. Analysts express positivity towards the company’s fiscal year 2024 guidance. Mizuho reaffirmed a Buy rating and increased its price target on Broadcom Inc. (NASDAQ:AVGO) from $1,550 to $1,625 on March 8.
According to Insider Monkey’s fourth quarter database, 91 hedge funds were bullish on Broadcom Inc. (NASDAQ:AVGO), compared to 87 funds in the previous quarter.
Carillon Eagle Growth & Income Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its fourth quarter 2023 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) traded higher after closing on its acquisition of VMware. The company also announced earnings that were relatively in line with estimates with some benefit of better operating expenses. The stock appears to be one of the first real beneficiaries of generative artificial intelligence (AI) with meaningful revenue expected to show up in 2024.”
8. ProShares S&P 500 Dividend Aristocrats ETF (CBOE:NOBL)
5-year Share Price Performance as of March 15: 47.80%
ProShares S&P 500 Dividend Aristocrats ETF (CBOE:NOBL) aims to mirror the performance of the S&P 500 Dividend Aristocrats Index, focusing solely on high-quality companies within the S&P 500 that have consistently increased dividends for at least 25 consecutive years. Established on October 9, 2013, ProShares S&P 500 Dividend Aristocrats ETF (CBOE:NOBL) has an expense ratio of 0.35% as of February 29, 2024, and holds a portfolio of 67 stocks. It offers a distribution yield of 2.71% and a 30-day SEC yield of 2.11%. ProShares S&P 500 Dividend Aristocrats ETF (CBOE:NOBL) is one of the best dividend ETFs to buy.
Dover Corporation (NYSE:DOV) is the largest holding of ProShares S&P 500 Dividend Aristocrats ETF (CBOE:NOBL). Dover Corporation (NYSE:DOV) is a global provider of different equipment, components, consumable supplies, aftermarket parts, software, digital solutions, and support services. On February 8, the company declared a quarterly dividend of $0.51 per share, in line with previous. The dividend was paid on March 15.
According to Insider Monkey’s fourth quarter database, 21 hedge funds were bullish on Dover Corporation (NYSE:DOV), same as the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is the largest stakeholder of the company, with 1.90 million shares worth $293.75 million.
7. T. Rowe Price Dividend Growth ETF (NYSE:TDVG)
5-year Share Price Performance as of March 15: 48.18%
Rowe Price Dividend Growth ETF (NYSE:TDVG) primarily invests at least 80% of its assets in stocks with a history of paying dividends or those that are expected to do so over time. As of March 14, 2024, T. Rowe Price Dividend Growth ETF (NYSE:TDVG) has an expense ratio of 0.50% and net assets totaling $395 million. It is one of the best dividend ETFs to invest in.
Microsoft Corporation (NASDAQ:MSFT) is the top holding of T. Rowe Price Dividend Growth ETF (NYSE:TDVG). JPMorgan analysts, led by Mark Murphy, believe that Microsoft Corporation (NASDAQ:MSFT)’s Copilot for Security artificial intelligence chatbot is revolutionizing the company’s security capabilities. They perceive Microsoft’s strong emphasis on AI at its flagship security event as indicative of the potential impact on enhancing the company’s differentiation in the market. The analysts maintain an Overweight rating on Microsoft Corporation (NASDAQ:MSFT) shares and set a price target of $440 on March 14.
According to Insider Monkey’s fourth quarter database, 302 hedge funds were bullish on Microsoft Corporation (NASDAQ:MSFT), compared to 306 funds in the last quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 38.2 million shares worth $14.3 billion.
Carillon Eagle Growth & Income Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) performed well after reporting strong earnings supported by accelerated growth from Azure. The cloud business is seeing consistent trends from optimization while AI has contributed strongly to its growth.”
6. Fidelity High Dividend ETF (NYSE:FDVV)
5-year Share Price Performance as of March 15: 49.18%
Fidelity High Dividend ETF (NYSE:FDVV) aims to mirror the performance of the Fidelity High Dividend Index before fees and expenses. The index is structured to represent large and mid-cap dividend-paying companies expected to sustain and increase their dividends. Established on September 12, 2016, Fidelity High Dividend ETF (NYSE:FDVV) had net assets totaling $2 billion as of December 31, 2023, with a portfolio comprising 97 stocks. Its expense ratio stands at 0.15%. Fidelity High Dividend ETF (NYSE:FDVV) is one of the best dividend ETFs to buy.
Apple Inc. (NASDAQ:AAPL) is the largest holding of Fidelity High Dividend ETF (NYSE:FDVV). On March 14, Apple Inc. (NASDAQ:AAPL) acquired Canadian artificial intelligence startup DarwinAI. This acquisition aims to boost Apple’s generative AI capabilities as it competes in the field against rivals like Microsoft and Alphabet’s Google.
According to Insider Monkey’s fourth quarter database, 131 hedge funds were long Apple Inc. (NASDAQ:AAPL), compared to 134 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 905.56 million shares worth $174.3 billion.
In addition to Johnson & Johnson (NYSE:JNJ), JPMorgan Chase & Co. (NYSE:JPM), and Exxon Mobil Corporation (NYSE:XOM), Apple Inc. (NASDAQ:AAPL) is one of the best dividend stocks to invest in.
Horizon Kinetics stated the following regarding Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter:
“The full point is that if BYD has turned its attention from its domestic market to direct global competition, then other Chinese companies can do the same. The next most visible example of Chinese commercially applied technological prowess relates to the 2nd highest-weight company in the S&P 500, Apple Inc. (NASDAQ:AAPL).
In September 2023, Huawei Technologies introduced its Mate 60 Pro smartphone. It uses its own, internally developed 5G enabled chip that is apparently competitive with the Apple A17 chip. For practical purposes it has the functionality of the iPhone 15 Pro. This came as a great surprise – perhaps even shock – to the U.S. technology community, because four years ago the U.S. placed strict sanctions on China’s access to state-of-the-art semiconductor manufacturing technology…”
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Disclosure: None. 11 Best Dividend ETFs To Buy is originally published on Insider Monkey.
