5 Best Dividend ETFs to Invest in 2024

Dividend ETFs are ETFs that include stocks that pay dividends regularly. Dividend ETFs can help you increase your income, diversify your portfolio, and enhance your resilience to market volatility. However, not all dividend ETFs are the same. Some dividend ETFs offer high dividend yields, but they also entail high risks. On the other hand, some dividend ETFs focus on dividend growth rather than dividend yield, and pursue long-term growth. Therefore, when choosing a dividend ETF, you need to find one that matches your investment goals and risk preferences.

In this article, we introduce 5 best dividend ETFs to invest in 2024. These ETFs are selected based on criteria such as performance, risk, cost, and diversification, and I only considered ETFs that have at least 3 stars from Morningstar. Also, the dividend yields of these ETFs are based on January 2, 2024.

1. Schwab U.S. Dividend Equity ETF (SCHD)

SCHD is an ETF that consists of high-quality dividend stocks in the U.S. SCHD selects stocks based on factors such as dividend stability, financial soundness, fair value, and growth potential, and holds more than 100 stocks. SCHD's annual dividend yield is 3.58%, and its annual fee is 0.06%. SCHD achieved a return of 11.16% in 2021, and has 4 stars from Morningstar.

The advantages of SCHD are as follows.

- Low fee: SCHD charges the lowest fee among dividend ETFs. This can have a big impact on your long-term investment returns.

- High-quality stocks: SCHD consists of stocks that have high dividend stability and financial soundness. This enhances your resilience to market volatility and increases your dividend sustainability.

- Diversification: SCHD consists of stocks from various industries and sizes. This helps you diversify your investment risk and pursue market average returns.

The disadvantages of SCHD are as follows.

- Low dividend growth rate: SCHD focuses on dividend stability rather than dividend yield. Therefore, the dividend growth rate may be lower than other dividend ETFs. This means that it is difficult to cope with inflation.

- Growth limitation: SCHD consists of high-quality stocks, but that also means that the growth potential may be limited. SCHD pursues market average returns, but it is hard to expect returns that exceed the market.

2. Vanguard Dividend Appreciation ETF (VIG)

VIG is an ETF that consists of dividend growth stocks in the U.S. VIG selects stocks that have increased their dividends for at least 10 consecutive years, and holds more than 200 stocks. VIG's annual dividend yield is 1.75%, and its annual fee is 0.06%. VIG achieved a return of 14.76% in 2021, and has 4 stars from Morningstar.

The advantages of VIG are as follows.

- Dividend growth rate: VIG consists of stocks that have high dividend growth rates. This helps you increase your long-term dividend income and cope with inflation.

- Growth potential: VIG consists of stocks that have high dividend growth rates, which means that they also have high growth potential. VIG can achieve returns that exceed the market average.

- Low fee: VIG also charges a low fee like SCHD. This can have a big impact on your long-term investment returns.

The disadvantages of VIG are as follows.

- Low dividend yield: VIG focuses on dividend growth rate rather than dividend yield. Therefore, the dividend yield may be lower than other dividend ETFs. This means that it is hard to expect immediate income.

- Sector bias: VIG is biased towards sectors such as industrials, consumer staples, and technology. This means that it is vulnerable to crises in specific sectors.

3. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

SPHD is an ETF that consists of high dividend low volatility stocks in the S&P 500 index. SPHD selects stocks that have high dividend yields and low volatility in the past 12 months, and holds 50 stocks. SPHD's annual dividend yield is 4.55%, and its annual fee is 0.30%. SPHD achieved a return of 8.67% in 2021, and has 3 stars from Morningstar.

The advantages of SPHD are as follows.

- High dividend yield: SPHD consists of stocks that have high dividend yields. This helps you increase your immediate income and reduce your investment risk.

The disadvantages of SPHD are as follows.

- High fee: SPHD charges a high fee compared to other dividend ETFs. This can have a negative impact on your long-term investment returns.

- Sector bias: SPHD is biased towards sectors such as utilities, consumer staples, and real estate. This means that it is vulnerable to crises in specific sectors.

4. iShares Core High Dividend ETF (HDV)

HDV is an ETF that consists of high-quality high dividend stocks in the U.S. HDV selects stocks that have high dividend stability and financial soundness, and holds 75 stocks. HDV's annual dividend yield is 3.38%, and its annual fee is 0.08%. HDV achieved a return of 9.82% in 2021, and has 3 stars from Morningstar.

The advantages of HDV are as follows.

- High-quality stocks: HDV consists of stocks that have high dividend stability and financial soundness. This enhances your resilience to market volatility and increases your dividend sustainability.

- Low fee: HDV charges a low fee. This can have a big impact on your long-term investment returns.

- Diversification: HDV consists of stocks from various industries and sizes. This helps you diversify your investment risk and pursue market average returns.

The disadvantages of HDV are as follows.

- Low dividend growth rate: HDV focuses on dividend stability rather than dividend yield. Therefore, the dividend growth rate may be lower than other dividend ETFs. This means that it is difficult to cope with inflation.

- Growth limitation: HDV consists of high-quality stocks, but that also means that the growth potential may be limited. HDV pursues market average returns, but it is hard to expect returns that exceed the market.

5. SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

SPYD is an ETF that consists of high dividend stocks in the S&P 500 index. SPYD selects stocks that have high dividend yields in the past 12 months, and holds 80 stocks. SPYD's annual dividend yield is 4.69%, and its annual fee is 0.07%. SPYD achieved a return of 13.34% in 2021, and has 3 stars from Morningstar.

The advantages of SPYD are as follows.

- High dividend yield: SPYD consists of stocks that have high dividend yields. This helps you increase your immediate income and reduce your investment risk.

- Low fee: SPYD charges a low fee. This can have a big impact on your long-term investment returns.

- Growth potential: SPYD consists of stocks that have high dividend yields, which means that they are undervalued. This means that they have the potential to increase in value in the long term. SPYD can achieve returns that exceed the market average.

The disadvantages of SPYD are as follows.

- Dividend sustainability: SPYD consists of stocks that have high dividend yields, but that also means that they may have low dividend sustainability. That is, they may have difficulty maintaining or increasing their dividends. This means that they are vulnerable to market volatility.

- Sector bias: SPYD is biased towards sectors such as real estate, utilities, and consumer staples. This means that it is vulnerable to crises in specific sectors.

These ETFs have their own advantages and disadvantages, so you should choose one that suits your investment goals and risk preferences.