Since the 1990s, ETFs have skyrocketed in popularity among investors. Vast price fluctuations in the past demonstrate the importance of portfolio diversification. Investors that are price sensitive tend to choose ETFs over individual stocks as they can ease the mind during tumultuous times. Below we will analyze four dividends ETFs that are popular amongst investors and have shown to be a reliable source of passive income.
About: Created in 2013 and issued by ProShares and made up of S&P 500 dividend aristocrats.
Dividend Yield: 2.90%
Expense Ratio: .35%
Top 3 Sectors: Industrial (21.48%), Consumer Non-Cyclical (20.64%) and Financials (13.79%)
Top 3 Holdings: Franklin Resources (1.91%), Lowe’s Corporation (1.90%) and Cintas Corporation (1.86%)
NOBL tracks the cream of the crop assets. Since it follows dividend aristocrats, investors are exposed to safe, reliable dividends that have a history of performance. Its sole criteria make NOBL less susceptible to substantial price fluctuations in the market. Strong fundamentals and a history of strong dividend growth over the years guarantees that it will persist in any economic scenario. The ETF has many of our dividend aristocrats’ favorites such as Clorox, Johnson and Johnson and Walmart
About: Created in 2005 and managed by State Street Global Advisors and made up of 119 holdings that are carefully analyzed from the S&P 1500 Composite Index. All assets are required to have at least 20 years of consecutive dividend growth.
Dividend Yield: 3.63%
Expense Ratio: .35%
Top 3 Sectors: Financials (24.23%), Industrials (18.05%) and Consumer Non-Cyclicals ( 12.74%)
Top 3 Holdings: Exxon Mobile (2.42%), Franklin Resources (2.25%) and National Retail Properties (2.00%)
SDY, like many of the funds, follows reliable growth companies. Since there is a strict 20-year rule to be in the SDY, it does not have many technology stocks in it. Due to the 20-year dividend rule, the companies that are in this ETF have not only shown steady growth in their dividends but also capital growth. This ETF is a mixture of the two critical components for long term investing: stable dividends accompanied by strong capital growth.
About: IDV was created in 2007 and is managed by iShares, a subsidiary of BlackRock. Unlike the other ETFs, IDV looks for high yield dividend companies in developed countries outside the United States. The countries that hold the most weight in the fund are the United Kingdom, Australia and Italy
Dividend Yield: 7.52%
Expense Ratio: .49%
Top 3 Sectors: Financials (38.07%), Utilities (13.21%) and Consumer Cyclicals (11.04%)
Top 3 Holdings: British American Tobacco (5.22%), Commonwealth Bank (4.07%) and Azimut Holding Spa (3.45%)
IDV is made up of companies that are in developed nations outside the U.S. The fund still uses a stringent method to verify and add companies under IDV assets. Since it is made up of all foreign companies, the fund has an above-average dividend yield compared to the benchmark. The main downside to this fund is the expense ratio. Compared to other funds, it has an above average expense ratio. Composed of 89 securities, this fund is exceptionally well balanced.
About: VYM was created in 2006 and is managed by Vanguard. The fund looks for high yield dividend assets, and it does not include any real estate investment trusts.
Dividend Yield: 3.96%
Expense Ratio: .06%
Top 3 Sectors: Healthcare (17.43%), Consumer Non-Cyclical (16.06%) and Financials (15.34%)
Top 3 Holdings: Johnson & Johnson (4.30%), JPMorgan Chase (3.30%) and Procter & Gamble (3.07%)
With a meager expense ratio and an above-average dividend yield, VYM is a great long-term hold. The ETF is made up of 393 assets worth a total of $33.8 billion. With a median market cap of $109.4 billion, this ETF can balance out any unexpected economic downturns. Centered around large market cap assets, the fund was able to return 9.30% in 10 years after taxes.
Exchange traded funds are a great tool for diversifying your portfolio during uncertain times. Investors that are price sensitive have the ability to spread their money across a wide range of sectors and companies. Diversifying your portfolio is a major component of long-term growth as your portfolio isn’t weighted based on a single company. Dividend ETFs are great for accumulating wealth based on compounding. Since these ETFs are diversified, investors are less likely to see major dividend cuts or reductions to their portfolios.