Best Dividend ETFs

Risk-averse investors prefer assets earning high yields and offering low risk. Certain exchange-traded funds (ETFs) provide benefits and dividends. Most ETFs pay dividends quarterly, but some offer investors monthly earnings, from a commodity ETF to an index ETF, currency ETF and more.

The rising popularity of monthly dividend ETFs has prompted major hedge fund firms to offer a large selection. Investors have numerous options, but knowing the factors to analyze in monthly dividend ETFs is key to making the right investment. Benzinga explored the best assets, detailing their features and benefits as you search every stock exchange and brokerage account for ETF shares and an asset class that’s appropriate for you.

Quick Look at the Best Dividend ETFs:

Benzinga's Monthly Dividend ETF Picks

Investing in the best monthly dividend ETFs may enable investors to increase returns by reinvesting more frequently. It’s a predictable income stream assisting with budgeting and providing a balance for risky investments in a diversified investment portfolio. 

Dividend income allows you to plan for the future or generate predictable cash flow during retirement. Remember, your investment fund can pay for several items, but you must weigh the market price of what you’ve found against the investment return you plan to see.

Benzinga found six-monthly dividend ETFs offering high yields, low expense ratios and several other benefits.

1. Global X SuperDividend ETF

The Global X SuperDividend ETF (NYSEARCA: SDIV) has provided monthly distributions for 11 years because the fund invests in 100 of the highest-paying dividend equities globally. Its global investment strategy has enabled investors to reap high yields and achieve geographical portfolio diversity.

The dividend fund is largely made up of financial and real estate sectors in the United States and Brazil. Some of its biggest holdings are common stocks and real estate investment trusts (REITs) in companies such as Yuexiu Property CO LTD, CPFL Energia SA and Omega Healthcare.

Since its inception in June 2011, SDIV has built up a net AUM of $765 million. Its net asset value (NAV) in mid-September 2022 was just over 21.67. SDIV’s price peaked in August 2014, reaching an all-time high (ATH) of $26.19 before entering a downtrend. During the global lockdown in March 2020, the price dropped to a low of $8.08 and looks to be retesting that level.

The fund has a 0.58% total expense ratio — total annual expenses to own the fund. SDIV has a 30-day SEC yield of 5.2% and a 12-month trailing yield of 5.88%. The index review occurs quarterly and is based on dividend cuts or a company’s dividend policy outlook.

2. Global X SuperDividend U.S. ETF

The Global X SuperDividend U.S. ETF (NYSEARCA: DIV) is a blue chip ETF that started trading in March 2013 and has amassed net assets of over $723 million. The fund targets low-volatility, high-yielding assets in 50 of the highest dividend-paying equities in the U.S.

The fund is primarily made of up companies in the financial, utilities, consumer staples and energy sectors. Its major holdings are in Sabine Royalty Trust, Iron Mountain and Consolidated Edison. DIV investors have earned a 30-day SEC yield of 7.22% and a 12-month trailing yield of 7%. It offers an annual expense ratio of 0.45%.

The fund is trading at just over $16.50 in mid-May 2023 and reached an ATH of $29.94 in November 2014. The price plummeted to an all-time low of $10.58 in March 2020 and has nearly doubled its value since then. DIV’s price chart indicates a possible V-bottom formation, usually signaling an uptrend.

3. Invesco Preferred ETF

Invesco Preferred ETF (NYSEARCA: PGX) tracks the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. PGX doesn’t buy all the securities in the index but rather uses a sampling methodology to achieve its investment objective by rebalancing the fund and the index monthly.

The fund’s holdings consist of almost 300 assets, with the majority in the financial sector in companies such as Citigroup and Wells Fargo. PGX began trading in January 2008 and has assets of $4.58 billion. Its 30-day SEC yield is 6.16% and 6.05% for the 12-month distribution rate. Investors pay 0.51% annually to own the fund.

The fund traded at $11.15 in mid-May 2023. Its high, $22.65, was reached when it started trading. The price reached its low of $6.14 in February 2009, then formed a V-bottom and spiked to the upside by 2013. Since then, PGX's price has ranged, with its current value at the bottom of the range.

4. Invesco KBW High Dividend Yield Financial ETF

The Invesco KBW High Dividend Yield Financial ETF (NASDAQ: KBWD) invests at least 90% of total assets in securities of publicly listed financial companies offering competitive dividend yields. It tracks the KBW Nasdaq Financial Sector Dividend Yield Index and rebalances and reconstitutes quarterly.

Some of the companies the fund invests in are Chimera Investment, Orchid Island Capital and ARMOUR Residential REIT.

KBW started trading in December 2010 and invests in around 40 securities, providing investors with a 30-day SEC high yield of 11.69%. The dividend stock's 12-month distribution rate is 11.40%, and investors incur a high expense ratio of 2.59%. The fund’s net assets are $427 million.

In mid-May 2023, KBWD’s price is $14.32. The fund’s price peaked in May 2013 when it reached $26.66. The price ranged until the beginning of 2020 before plummeting to $9 in April. The price recovered to $14 but has pulled back slightly.

5. iShares Preferred and Income Securities ETF

iShares Preferred and Income Securities ETF (NASDAQ: PFF) is managed by BlackRock and began trading in 2007, accumulating $12.5 billion in net assets. The fund tracks the ICE Exchange-Listed Preferred & Hybrid Securities Index.

PFF provides exposure to around 500 U.S. preferred stocks offering a 30-day SEC yield of 6.46% and a 12-month trailing yield of 5.9%. The largest portion of its securities is invested in the industrial sector in Broadcom. Other investments are in Wells Fargo, Nextera Energy and Bank of America. The fund charges investors annually 0.45%.

The fund’s highest price was at inception, reaching $50.40. The price tumbled until March 2009, reaching an all-time low of $14.30. PFF’s price formed a V-bottom and climbed to $40 by September 2010 and has consolidated since then. 

The iShares Preferred and Income Securities ETF offers several highlights and benefits for investors. It is a straightforward and low-cost fund that provides potential tax efficiency. This fund can be a valuable component of a diversified portfolio, serving as part of its core. Investors can easily access corporate fixed-income securities with remaining maturities between 1 and 5 years through this ETF. It is also designed to generate income from the short end of the corporate bond yield curve, making it an attractive option for investors seeking income opportunities.

6. Schwab 1-5 Year Corporate Bond ETF

The goal of the Schwab 1-5 Year Corporate Bond ETF (NYSEARCA: SCHJ) is to track as closely as possible the total return of the short-term U.S. corporate bond market. This ETF makes it possible for you to buy into the bond market without purchasing individual bonds on your own.

What is a Monthly Dividend ETF?

An ETF is a pooled asset investment tracking a particular index, aiming to replicate its track record or achieve better. It functions similarly to a mutual fund, but it can be structured to track commodities or a broad range of securities. Dividend investing is powerful, but you must remember that every dividend payment is different and can change. You need to watch each dividend stock to ensure that it’s performing well.

It’s a basket of securities trading on an exchange, the way stocks and other assets do. A hedge fund manager selects a pool of securities to invest in and then periodically rebalances the portfolio to achieve the highest returns.The selected assets are income-producing securities providing a dividend yield of at least 2%, distributed to investors monthly. Investors can choose to withdraw their ETF dividends and exchange them for cash or reinvest them into their portfolios. At the same time, you can use these ETFs to set up future income if you feel they can serve you well in retirement.

Benefits

Investors owning monthly dividend ETFs enjoy certain benefits that may provide an advantage over owning quarterly dividends on dividend stocks.

Provides a Steady Income

Owning monthly dividend ETFs enables income investors to budget because they receive monthly, passive income. Monthly dividend amounts tend to be more consistent than quarterly stock dividends, so it enables investors to achieve better cash flow forecasting.

More Frequent Reinvestment

Investors wanting to optimize their returns prefer frequent stock dividends to reinvest so that their interest compounds at a higher rate.

Highly Diversified

To provide investors with high yields, fund managers seek the best securities. That usually requires investments in global equities, reducing the risk of stock market crashes. Even if invested in a domestic monthly dividend ETF, investors can choose from a broad range of sectors.

Planning for the Future

When you invest, you want to ensure some sort of income for the future. As you invest, you will discover that it’s much easier to manage your family, create cash flow and retire when you have some recurring income sources. You can even use a dividend reinvestment plan to make the most of these payments.

What to Look For

Making the right investment requires investors to analyze several key factors in ETFs.

Net Assets

The net assets figure of an ETF is usually indicative of a fund’s popularity. Investors prefer investing in funds providing high returns, so those ETFs have accumulated large assets. Funds with small assets depict limited investor interest and can be risky investments because of their uncertain nature. High-asset funds are more likely to provide long-term dividend growth and stability.

Trading Volume

Shares are traded among buyers and sellers. To profit from capital appreciation, sellers need to sell their shares to buyers. That’s the reason a fund must have a high trading volume, enabling traders to sell or buy at any time to lock in the best prices.

Underlying Index

The best ETFs track popular indexes, striving to replicate their results or ideally achieve better returns. Investors need to gauge the performance of those indexes to determine if they match their investing goals.

Expense Ratio

High expense ratios make low returns even worse, and they can significantly reduce profits. ETFs shouldn’t have high expense ratios because they are passive investments.

Reliable Brokers

Investing in a high-yield ETF is futile if investors cannot withdraw their funds. Investors need to choose a regulated broker with a proven history of managing client funds and providing returns.

Investment Strategy

Make certain that the ETFs you choose fit into your investment strategy. Yes, you might get recommendations, but that doesn’t mean all those ETFs are right for you. Create a plan, stick to your plan, research with Benzinga and speak with a financial professional.

Management Fees

When you invest in dividend-paying assets, you are getting more than a cash payout that’s tied to the asset’s market value. You must subtract fees from the dividend payout you get. So, what is the payout ratio of this asset and how does it compare to other funds?

Do Proper Research Before Investing

Investing in a monthly dividend ETF can be an excellent way for income investors to budget and plan for the future. By properly researching the net assets, trading volume, underlying index, expense ratio, reliable brokers, investment strategy and management fees associated with the ETF they are considering, investors can maximize their returns while minimizing risk.

So, don't let the anxiety of investing keep you from making smart choices. Instead, do your research, examine the portfolio and seek out a financial expert if necessary. That way, you can make sure that the fund you choose is a perfect fit for your investing goals.

Compare ETF Brokers

Investors selecting the best monthly dividend ETF broker need to do extensive research, yet they aren’t guaranteed results. Benzinga has done the hard lifting on behalf of investors and provided some of the most popular brokers offering ETFs. Your investment decision should be based on the ETF strategy you’re using, the dividend amount you plan to see, the types of growth stocks you keep in your portfolio and the brokerage that you use.

Frequently Asked Questions