As the US Fed begins its interest rate cut cycle, the market's expectations for a decline in US interest rates are growing. The US market has set off a wave of high-dividend investment, and more and more investors are choosing to invest in high-dividend products.
High-dividend ETFs mainly determine the constituent stocks and holding ratios based on "cash dividends and dividends". Investing in high-dividend ETFs can regularly obtain considerable returns.
Dividends can be a powerful source of income. Some investors harness them by investing in dividend stocks, but there's another option for those who want to save time on stock research: high-dividend ETFs.
Takeaways
$Invesco KBW Premium Yield Equity REIT ETF(KBWY)$ and $Invesco S&P SmallCap High Dividend Low Volatility ETF(XSHD)$ have some of the highest yields of any high-dividend ETF.
You can find high-dividend ETFs by analyzing the ETF selection in your brokerage account.
It's possible to live off the income from high-dividend ETFs, but it may take some planning.
High-dividend ETFs may generate income
Dividend-paying ETFs can be a great tool for those looking to increase cash flow and diversify their investments. They offer a simple solution to getting exposure to a specific investing niche — in this case, stocks that pay a regular dividend.
Tiger investors can buy high-yield ETFs directly of the US and Singapore markets.
You can use those dividends to pad your income as many retirees do. You can also reinvest those dividends back into the fund to better take advantage of compound interest and grow your investment portfolio. Whatever you choose, dividend-paying ETFs make it easy to add a large variety of investments to your portfolio all at once.
10 high-dividend ETFs
Below is a list of seven large-cap U.S. dividend ETFs, ordered by annual dividend yield.
Source: Finviz. Data is current as of Oct. 23, 2024
The ETFs are: $JPMorgan Equity Premium Income ETF(JEPI)$，$Invesco KBW High Dividend Yield Financial ETF(KBWD)$，$iShares International Select Dividend ETF(IDV)$，$Invesco KBW Premium Yield Equity REIT ETF(KBWY)$，$Invesco S&P SmallCap High Dividend Low Volatility ETF(XSHD)$，$Global SuperDividend US ETF(DIV)$，$SPDR Portfolio S&P 500 High Dividend ETF(SPYD)$，$ALPS Sector Dividend Dogs ETF(SDOG)$, $RevenueShares Ultra Dividend Fun(RDIV)$,$WisdomTree U.S. High Dividend Fund(DHS)$.
Remember that high dividend ETFs may come with higher risk. and is for informational purposes only. Inverse, leveraged, actively managed and hedged ETFs are excluded, as are ETFs with expense ratios over 0.5%.
Always read the fine print and investigate dividends that seem too good to be true.
How to invest in dividend ETFs
A dividend ETF typically includes dozens, if not hundreds, of dividend stocks. That instantly provides you with diversification, which means greater safety for your payout. Even if a few of the fund’s stocks cut their dividends, the effect will be minimal on the fund’s overall dividend. A safe payout should be your top consideration in buying any dividend investment.
Here’s how to buy a dividend stock ETF:
1. Find a broadly diversified dividend ETF. You can typically find dividend ETFs by searching for them on your broker's website.
Probably the safest choice is a low-cost fund that picks dividend stocks from the $.SPX(.SPX)$ stock index. That offers a broadly diversified package of top U.S. companies.
2. Analyze the ETF. Make sure the ETF is invested in stocks (also called equities), not bonds. You’ll also want to check the following:
The dividend yield. This is how much a company pays out in dividends each year relative to its share price and is usually expressed as a percentage.
5-year returns. Generally, higher is better.
Expense ratio. This is the ETF's annual fee, paid out of your investment in the fund. Look for an expense ratio that is under 0.50%, but lower is better.
Stock size. Dividend ETFs can be invested in companies with large, medium or small market capitalization (referred to as large caps, mid caps and small caps). Large caps are generally the safest, while small caps are the riskiest.
Assets under management (AUM). This refers to the total market value of the assets a fund manages. The AUM gives an indication of the fund's size. Funds with a low AUM promising high dividends may be risky.
3. Buy the ETF. You can buy ETFs just like you’d buy a stock — through an online broker.
A Tool to Invest in Dividend ETFs
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