7 High-Dividend ETFs for February 2024 and How to Invest in Them
Dividend-paying ETFs can be a great tool for those looking to increase cash flow and diversify their investments. Here is a list of seven high-dividend ETFs for February 2024, along with information on how to invest in them.
7 High-Dividend ETFs:
| Ticker | Name | Annual Dividend Yield |
|---|---|---|
| XSHD | Invesco S&P SmallCap High Dividend Low Volatility ETF | 7.78% |
| DIV | Global X SuperDividend U.S. ETF | 7.06% |
| SPYD | SPDR Portfolio S&P 500 High Dividend ETF | 4.67% |
| SPHD | Invesco S&P 500® High Dividend Low Volatility ETF | 4.52% |
| FDL | First Trust Morningstar Dividend Leaders Index Fund | 4.51% |
| SDOG | ALPS Sector Dividend Dogs ETF | 4.28% |
| DHS | WisdomTree US High Dividend Fund | 4.28% |
Data current as of market close on January 31, 2024, and is for informational purposes only. Inverse, leveraged, actively managed, and hedged ETFs are excluded, as are ETFs with expense ratios over 0.5%.
Can You Live Off ETF Dividends?
While it is possible to live off ETF dividends, careful planning is necessary. The 4% rule is often used, suggesting you withdraw around 4% from your savings every year. Consider factors like Social Security benefits, pension benefits, 401(k)s, IRAs, and other sources of income when planning to live off ETF dividends.
How to Invest in Dividend ETFs:
- Find a broadly diversified dividend ETF: Look for low-cost funds that pick dividend stocks from indices like the S&P 500 for broad diversification.
- Analyze the ETF:
- Check for investment in stocks (equities), not bonds.
- Assess dividend yield, 5-year returns, expense ratio, and stock size (large, mid, or small caps).
- Consider Assets Under Management (AUM) to gauge fund size.
- Buy the ETF: Purchase ETFs regularly through an online broker to take advantage of dollar-cost averaging.
Additional Considerations:
- Balancing Income and Expenses: If you plan to live off ETF dividends, balance the income generated from your investments with your expenses. Utilize strategies like the 4% rule to determine a sustainable withdrawal rate from your retirement stash.
- Consulting a Financial Advisor: For individuals approaching retirement, seeking advice from a financial advisor is advisable. They can help estimate the gaps in income that need to be filled with ETF dividends, taking into account various income sources.
Comparison of High-Dividend ETFs:
| ETF (TICKER) | CATEGORY | EXPENSE RATIO |
|---|---|---|
| XSHD | U.S. small-cap value | N/A |
| DIV | U.S. mid-cap value | 0.58% |
| SPYD | U.S. large-cap value | 0.07% |
| SPHD | U.S. large-cap value | 0.30% |
| FDL | U.S. large-cap value | 0.45% |
| SDOG | U.S. mid-cap value | 0.40% |
| DHS | U.S. large-cap value | 0.38% |
Data accurate as of the latest available information.
Final Thoughts:
Dividend ETFs can serve as an excellent core holding in an income-oriented investment portfolio. Unlike picking individual dividend stocks, these ETFs offer simplicity, accessibility, and diversification.
Recommendation: The Schwab U.S. Dividend ETF (SCHD) stands out due to its high Morningstar rating, rigorous index methodology, low expense ratio, competitive yields, and strong historical performance.
What is a Dividend ETF?
A dividend ETF is a fund that holds a portfolio of different dividend stocks based on a specific methodology. These ETFs trade on exchanges, providing investors with exposure to dividend-paying stocks. Dividend ETFs can be actively or passively managed and hold U.S. or international dividend stocks.
Objectives of Dividend ETFs:
- High-Yield ETFs: Focus on stocks with the highest current yields.
- Dividend Appreciation ETFs: Emphasize companies with a history of increasing dividends over time.
How to Invest in Dividend ETFs:
Investing in dividend ETFs mirrors the process of investing in any other ETF:
- Open a Brokerage Account: Begin by opening a brokerage account.
- Search for ETFs: Look for dividend ETFs based on your investment goals.
- Purchase ETFs: Buy ETFs through your brokerage account, considering factors like dividend yield, expense ratio, and investment objective.
FAQs (Frequently Asked Questions):
- What to Look for in a Dividend ETF?
- Beyond yields, assess the ETF’s benchmark index, underlying holdings, expense ratio, historical volatility, and total assets.
- Consider the reputation of the ETF’s manager and align their investment philosophy with your goals.
- Is There a Dividend King ETF?
- Answer here
- Pros and Cons of Dividend ETFs:
- Answer here
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