Traderade Ideas: 10 Dividend ETFs

Updated: Feb 17, 2023

Let's look at something boring today - Dividend ETFs.

There are just so many choices out there, it can get a little daunting. I screened through the universe of Dividend ETFs and came up with a list of 10. I give you my top 3 picks + an honorable mention.

The list is based on the following:

  • Returns from Dividends: We want a high level of dividends but, a stable stream as well

  • Beta: We want a low beta, i.e., lower than 1. This will mean it moves slower than the S&P so we don't lose capital in a volatile market

  • Expense Ratio: We want a low expense ratio so that are profits are not eaten up.

  • Solid Holdings: We want the the underlying holdings to be good companies

  • Good Sponsor such as JP Morgan, BlackRock who don't have bankruptcy risk

  • Longevity: I'd rather look at an ETF that's been around for a while with a low risk of closure.

  • FactSet Fund Grade: FactSet grades ETFs with A being the best, F being the worst based on how efficient and tradable the ETF is.

In terms of the return, I've looked at two different kind of returns

  • The Distribution Yield - which is the amount that they pay out or the dividend yield and this number is on a yearly basis

  • The 1 year return - this is price return so basically how much the ETF has moved in terms of market price.

After looking at a whole bunch of ETFs, I shortlisted the 11 names below based on a decent return, exposure to Large Caps (only DON is mid cap focused), and high FactSet Grade.

Based on the above universe, I took a deeper dive into each ETF and their holdings. I came up with my top 3 choices - SCHD, VYM, DVY and an honorable mention - JEPI.

(Full Disclosure: I do own some SCHD at $75.31.)

1 - SCHD - Schwab US Dividend Equity ETF

I like the underlying holdings for this fund. All stable companies and well balanced. The top 10 holdings are below. They also have a very low Expense Ratio, and are quite liquid.

2 - VYM- Vanguard High Dividend Yield Index ETF

Another large fund with very solid, boring holdings. But, boring is good because we're looking for stability. I see a lot of the Dividend Aristocrats in this fund.

3 - DVY - iShares Select Dividend ETF

DVY has a higher expense ratio and the top holdings cover more utilities. The combined return is decent but, they're not as liquid as the first two. Hence it's my third choice.

"Honorable Mention" - JEPI - JPMorgan Equity Premium Income ETF

I tried to find out what was wrong with this ETF. How does it return 11%??

Well, it's because they use covered calls. This is not a dividend fund. It's an actively managed fund that's harvesting call premiums on the underlying holdings. If this was any other manager, I would have said caution. But, JPM and GS tend to know what they are doing, most of the time. The underlying holdings are also solid.

I hope you find this useful. I probably will think about adding some of the other funds to my portfolio just to diversify a little but I will wait 3 days after the publication of this article for compliance reasons.

As always, if you have any questions, I'm happy to answer them.