There’s plenty to like about owning dividend stocks. The consistent payouts are one of the most surefire ways to generate wealth over the long term. This is why plenty of investors have plowed some big bucks into one of the numerous dividend exchange-traded funds on the market. Building a broad portfolio of dividend stocks, however, takes time and can prove daunting.
By using one of the many dividend ETFs out there, investor’s gain valuable diversification benefits, while still getting the high income and returns they need.
The problem is, when it comes to dividend ETFs seem to have just a three-track mind. The vast bulk of investor’s money — around $73 billion dollars — is tied-up in the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), iShares Select Dividend ETF (NYSEARCA:DVY) and SPDR S&P Dividend ETF (NYSEARCA:SDY).
Not that there is anything wrong with the VIG, DVY or SDY. It’s just that as the concept has been popularized, the number of dividend ETFs have exploded in recent years. With around 150 different dividend ETFs now on the market, investor’s may be selling themselves a bit short, if they only focus on the big three.
With that in mind, here are three other dividend ETFs that could find a home in your portfolio.
Dividend ETFs to Buy: WisdomTree Total Dividend Fund (DTD)
Dividend Yield: 2.7%
Expenses: 0.28%, or $28 per $10,000 invested
If there’s a problem with the three main dividend ETFs, it’s their sole focus on large-cap stocks. That’s a real shame, as many smaller firms are dividend stalwarts in their own right. Small- and mid-caps benefit from the same dividend positives as their larger twins, including lower volatility, strong financial discipline and growing revenues/profits.
So investors shouldn’t ignore them in their search for dividend income. And when it comes to dividend ETFs, only one allows investors to fully play the market-cap spectrum with one ticker. The WisdomTree Total Dividend Fund (ETF) (NYSEARCA:DTD) is that fund.
DTD tracks a proprietary smart-beta index — the WisdomTree Dividend Index — that screens and weights firms by the amount of dividends they are projected to pay in the upcoming year. It does this across large- mid- and small-cap stocks in the U.S. Currently, there are more than 1,370 different stocks in the fund/index. Investors get exposure to dividend paying giants like Microsoft Corporation (NASDAQ:MSFT) as well as small-fries like Rayonier Advanced Materials Inc (NYSE:RYAM).
All in all, DTD makes for a great all-in-one fund tracking dividend stocks. Also giving the big three dividend ETFs a run for their money is that DTD pays its distributions monthly. So not only are investors getting multi-cap exposure, but are paid every month to do so.
Expenses for DTD run just 0.28%, or $28 per $10,000 invested.
Dividend ETFs to Buy: iShares International Select Dividend ETF (IDV)
Dividend Yield: 5.3%
If you think investors are woefully underexposed to small- and mid-cap dividend stocks, then their exposure to international ones is downright abysmal. Dividend ETFs can fix that problem.
With $3 billion in assets, the iShares Dow Jones EPAC Sel Div Ind (ETF) (NYSEARCA:IDV) is one of the largest funds dedicated to international dividend investing. The IDV tracks the Dow Jones EPAC Select Dividend Index, which is a measure of high-dividend stocks in non-U.S. developed markets. The international dividend ETF tracks high-paying equities and screens for those that have consistently paid those dividends over longer periods of time.
This currently produces a portfolio of around 100 different international dividend stocks, including Rio Tinto plc (ADR) (NYSE:RIO) and VTech Holdings Ltd. (ADR) (OTCMKTS:VTKLY). It also provides the dividend ETF with a strong 4.59% dividend yield. That’s more than double the S&P 500’s current yield.
And down the road, that yield could be worth even more. As foreign currencies fluctuate against the U.S. dollar, a drop in the dollar would boost the fund’s underlying yield, as weaker local currencies convert into the stronger dollar. That would provide a nice boost to an investor’s purchasing power over the long term.
Expenses for IDV run at just 0.50%.
Dividend ETFs to Buy: Guggenheim Multi-Asset Income ETF (CVY)
Dividend Yield: 5.1%
Traditional stocks aren’t the only places to find a great dividends. Esoteric asset classes like real estate investment trusts, master limited partnerships or preferred stocks throw off plenty of yield. Yet, they can be difficult to value and purchase for many retail investors. The Guggenheim Multi-Asset Income ETF (NYSEARCA:CVY) makes adding these asset classes easy.
CVY tracks the Zacks Multi-Asset Income Index. That index is made up of a variety of these asset classes and includes the aforementioned REITs, MLPs and preferred stocks. But also adds in international ADRs, royalty trusts, business development companies, closed-end funds and high-yielding common stocks.
In the end, investor’s have a dividend ETF that is a one-stop shop for all the “weird” dividend stocks that the market has to offer. Betting on “weird,” however, is also good for income. And CVY kicks out a hefty 5.08% dividend yield.
Performance for CVY has been mixed — beating the market handily in some years and losing out in others. But for those investors looking to buy, hold and collect the dividend for the long haul, it’s a pretty good fund.
Expenses for one of the most unfamiliar dividend ETFs out there come in at 0.65%.
*This expense ratio represents the amount after a waiver of fees through Dec. 31, 2018.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.