Dividend exchange-traded funds (or ETFs) offer investors the opportunity to have a passive income stream. They are also an easy way to diversify your portfolio without having to do the work of researching individual stocks.
Dividend ETFs are one of the most popular ways to invest in dividend stocks. They allow you to invest in a range of companies and have a high liquidity option, giving many investors an income that is passive, sustainable and doesn’t need active management on their end.
When analyzing ETFs, keep an eye on the expense ratio. The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising and all other expenses. An expense ratio of 1% means that each year 1% of the fund’s total assets will be used for this purpose.
With all of this in mind, here are eight dividend ETFs that have low risk and provide stable returns.
|SCHD||Schwab US Dividend Equity ETF||$72.50|
|DVY||iShares Select Dividend ETF||$118.62|
|IDV||iShares International Select Dividend ETF||$26.88|
|XLRE||Real Estate Select Sector SPDR Fund||$42.20|
|VIG||Vanguard Dividend Appreciation ETF||$148.43|
|SDIV||Global X SuperDividend ETF||$9.21|
|WDIV||SPDR S&P Global Dividend Fund||$60.63|
|SPHD||Invesco S&P 500 High Dividend Low Volatility ETF||$44.04|
Dividend ETFs: Schwab US Dividend Equity ETF (SCHD)
The Schwab US Dividend Equity ETF (NYSEARCA:SCHD) is a dividend-focused fund that invests in companies that, you guessed it, pay dividends. It has an expense ratio of 0.060% and is available to investors with a Schwab account.
The fund is one of the many offerings from Charles Schwab & Co. (NYSE:SCHW). As I said before, the fund allows investors to invest in companies that pay dividends. ETFs such as this one are typically seen as less risky than regular stocks because they are dependable sources of income and are not subject to market fluctuations like other stocks.
In other words, this fund offers a low-cost, straightforward option. And with that confidence, this can be a core component of your diversified portfolio’s foundation. It also helps you to ensure that the dividends you’re receiving are sustainable and tracks an index focused on quality dividend companies.
The fund managers are also taking care to include a nice mix of names and not go the easy route of picking Big Tech names like Microsoft Corp. (NASDAQ:MSFT), which are always on everyone’s radar. You will find plenty of popular names among the fund’s top 10 holdings, such as PepsiCo (NASDAQ:PEP), Merck & Co. (NYSE:MRK) and Cisco Systems (NASDAQ:CSCO).
Due to its weighting, SCHD is generally more volatile than most ETFs. However, there are no big losses or gains in 24 hours, so you’ll be ready for any price reversals.
The iShares Select Dividend ETF (DVY)
With the volatility of value-based investments on the rise, institutions are taking a chance on dividend ETFs as a source of stable capital. In turn, a solid option is the iShares Select Dividend ETF (NASDAQ:DVY).
It is a popular ETF that exposes investors to the world’s largest dividend-paying companies. It has more than $21.3 billion in assets under management and an expense ratio of 0.38%.
Investing in the fund is about experiences rather than just a return on your investment. The company has access to 100 U.S. stocks, an investment strategy with dividend-paying companies. However, the fund’s screening methodology requires a company to have a five-year record of dividends paid. Through this technique, you get only the best dividend stocks because these companies have not halted or suspended dividends even during the pandemic.
Collectively, some of the names in the fund’s portfolio are Verizon Communications (NYSE:VZ), Philip Morris International (NYSE:PM) and Gilead Sciences (NASDAQ:GILD). Hence, you get a lot of diversification when investing in this.
Dividend ETFs: The iShares International Select Dividend ETF (IDV)
iShares International Select Dividend ETF (BATS:IDV) is a dividend-paying international stock fund that tracks the performance of hundreds of stocks. It’s a low-risk investment, and its share price is low versus other funds offering similar returns.
Furthermore, as you could have likely guessed, the iShares International Select Dividend ETF tracks the performance of a group of international dividend-paying stocks. The fund was launched in 2007 and has grown tremendously since then, with its assets reaching more than $4.3 billion.
Additionally, IDV offers a range of holdings from developed markets, including the U.K., South Korea, Australia and Spain. Thus, it is great for investors who want to gain exposure to international markets but do not want to pour capital into emerging economies.
So, to summarize, the investment benefits of using this fund are tied to three key areas. First, there is exposure to established, high-quality international companies. Second, you have access to developed market stocks that often provide profits with dividends. Finally, using this fund will help expand your income strategies internationally.
Therefore, consider IDV stock as an attractive option for those looking for their portfolios’ income and capital appreciation potential.
The Real Estate Select Sector SPDR Fund (XLRE)
The Real Estate Select Sector SPDR Fund (NYSEARCA:XLRE) is a fund that invests primarily in real estate companies. It has more than $5.3 billion in assets and a 0.10% expense ratio under management.
Furthermore, the Real Estate Select Sector SPDR Fund is an ETF that tracks the performance of the real estate sector of the S&P 500 Index, which consists of companies with large investments in commercial properties, residential properties and land.
With this, the fund seeks to provide the right investment exposure to companies that manage real estate and real estate investment trusts (or REITs) without taking any position in mortgage REITs. This will help investors take more strategic or tactical positions at a more focused level.
REITs are commonly seen as a safe investment for moderate growth and significant short-term returns. They often buy and sell real estate, such as office buildings and shopping malls, to generate quick revenue from the property to fund operations. In turn, these investment vehicles typically have low volatility because they typically hold long-term leases with tenants who pay them in cash or through rent payments.
Nonetheless, you get many top-performing real estate companies when you invest in this fund, including American Tower Corporation (NYSE:AMT), Prologis (NYSE:PLD) and Crown Castle International (NYSE:CCI).
Dividend ETFs: Vanguard Dividend Appreciation ETF (VIG)
Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) is a fund that will give investors the potential for long-term capital growth, with dividends reinvested automatically.
It has become one of the most popular index funds on the market, with net assets of $71.3 billion and an expense ratio of 0.06%.
Moreover, the Vanguard Dividend Appreciation ETF is an index fund that tracks a portfolio of dividend-paying stocks with a focus on capital appreciation potential over time. With Vanguard’s low fees and diversified investment approach, it’s no wonder this fund generates so much interest among dividend ETFs.
Overall, it has a diverse portfolio of companies, including Visa (NYSE:V), Home Depot (NYSE:HD), Procter & Gamble (NYSE:PG) and UnitedHealth Group (NYSE:UNH).
The fund uses a traditionally-managed approach to hold stocks that have increased their dividends year-over-year. And the emphasis is on large-cap stocks with growth prospects.
Global X SuperDividend ETF (SDIV)
Global X SuperDividend ETF (NYSEARCA:SDIV) is a new type of investment fund that “accesses 100 of the highest dividend paying equities around the world.” SDIV seeks to track the performance of global dividend growth stocks. In turn, it offers investors a unique opportunity to invest in this market segment.
Nonetheless, it is important to remember the risk associated with investing in this fund because of the international exposure. For example, you will find companies from Brazil and China among the portfolio’s holdings.
In China, there is a lot of pressure on companies not to violate government regulations. This has led to many Chinese companies having to reevaluate their business models. Companies like Alibaba (NYSE:BABA) and Didi (OTCMKTS:DIDIY) have found themselves in the crosshairs of regulators. Similarly, Brazil has an investment environment that might not be familiar to American investors. Hence, a certain amount of risk comes with investing in this fund.
However, on the bright side, at more than $755 million in net assets, it’s still large enough for you to be sure about your investment.
Dividend ETFs: SPDR S&P Global Dividend Fund (WDIV)
The SPDR S&P Global Dividend Fund (NYSEARCA:WDIV) is a collection of companies with high dividend yields. It is designed to provide investors with the opportunity to participate in the global dividend market.
The SPDR S&P Global Dividend Fund has been around since 2013 and has grown to more than $256 million in assets under management. It has a nice mix of domestic and international stocks. Plus, it invests in several industries, including consumer staples, utilities, financials, health care, industrials and technology sectors.
In addition, the fund exposes you to high dividend-yielding companies from around the world. The fund’s portfolio includes promising companies with sustainable, increasing, or constant dividends for at least 10 straight years. No more than 20 stocks are selected from a single country and 35 from each GICS sector.
This fund aims to provide investors with exposure to high-yielding companies that are not just located in America but also all over the world. They also offer diverse industries and geographic regions, which, overall, minimize risks.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD) is an ETF that invests in the public equity markets of the United States. This fund is looking to track the investment performance of the S&P 500 Low Volatility High Dividend Index, which seeks companies with low volatility and high dividend payouts — perfect for investors looking to lower their risk/reward ratio.
Moreover, the S&P 500 High Dividend Low Volatility Index is a basket of 50 stocks chosen from the S&P 500 index and with similar volatility, dividend payout and long-term investment. The stock market index is diversified, tradable and has a low level of volatility. All 500 stocks in the S&P Index are sorted from highest to lowest dividend yield. The top 75 stocks are currently selected for the strategy, which is capped at 10 stocks per sector. The 50 stocks with the lowest volatility are then selected and weighted.
The fund’s strategy will include investing a minimum of 90% of its assets in stocks that form the index for S&P 500 stocks. This ensures a high degree of stability. Some of the stock’s top 10 holdings include Kinder Morgan (NYSE:KMI), Altria (NYSE:MO) and Kraft Heinz (NASDAQ:KHC).
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.