You can spend countless hours screening thousands of stocks individually to determine their annual dividend rates or simply invest in the best high-yield ETFs that offer a high yield.
High-yield ETFs offer you assets in a basket of companies that reward their shareholders with regular dividends. With a few right investments, these outsized payouts can become a reliable source of income for you. If you’re a long-term investor looking for stocks with above-average dividends, high-yield ETFs are a solution for your financial needs.
The Best High-Yield ETFs
- ProShares Short High Yield ETF
- iShares Interest Rate Hedged High Yield Bond ETF
- iShares Select Dividend ETF
- Invesco S&P 500 High Dividend Low Volatility ETF
- Schwab U.S. Dividend Equity ETF
- JPMorgan BetaBuilders Europe ETF
- iShares Core High Dividend ETF
- Alerian MLP ETF
- Global X MLP ETF
- iShares International Select Dividend ETF
ETFs either distribute cash or stocks as dividends. You should invest in high-yield ETFs with cash dividends for instant liquidity rather than having to sell your stocks on the market at a later date for a payout.
Before investing in ETFs, you should evaluate the index performance, expense ratios, liquidity, historical returns record, annual dividend rates and total assets under management (AUM). You can consider these high-yield ETFs to give yourself a head start.
1. ProShares Short High Yield ETF
ProShares' Short High Yield ETF (NYSEARCA: SJB) delivers daily inverse exposure to an index comprised of junk bonds, which have a high risk of default. The ETF is useful as a tool for implementing a tactical bet against the junk bond sector. The fund may be useful for establishing a short position over a longer period of time, though it may not be quite as useful if you want to invest in it as a long-term portfolio add-in.
2. iShares Interest Rate Hedged High Yield Bond ETF
The iShares Interest Rate Hedged High Yield Bond ETF (NYSEARCA:HYGH) holds shares of iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and short positions in interest rate swaps. It was created to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, high-yield corporate bonds.
3. iShares Select Dividend ETF (NASDAQ: DVY)
iShares Select Dividend ETF has an expense ratio of 0.39%. It corresponds to Dow Jones U.S. Select Dividend Index and exposes you to dividend-paying stocks from the equity universe. This ETF has a total AUM of $13 billion.
iShares Select Dividend ETF trades over 1 million shares every day. It has an annual dividend rate of $3.68 and a dividend yield of 4.77%. iShares Select Dividend ETF has a 5-year return rate of 20.45%.
4. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The Invesco S&P 500 High Dividend Low Volatility ETF generally will invest at least 90% of its total assets in securities that comprise the underlying index. In this case, that underlying index is the S&P 500, with the aim of generating low volatility and high dividends for the investor.
5. Schwab U.S. Dividend Equity ETF (SCHD)
The Schwab U.S. Dividend Equity ETF’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100™ Index. In doing so, the fund hopes to maintain a straightforward and low-cost fund that also features tax efficiency.
The underlying index the fund hopes to track is focused on quality and sustainable dividends and features stocks that are selected for their strength as compared to their peers and competition.
6. JPMorgan BetaBuilders Europe ETF (BBEU)
The JPMorgan BetaBuilders Europe ETF is a fund designed to invest at least 80% of its total assets in securities in a free floating and adjusted market capitalization-weighted index that consists mostly of securities from developed European territories. These locations include Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.
7. iShares Core High Dividend ETF (HDV)
The iShares Core High Dividend ETF aims to offer investors “exposure to established, high-quality U.S. companies,” while providing access to dividend paying stocks from 75 firms that are routinely monitored to ensure they are in good financial health. With this ETF, you can seek out income, while the fund itself will track the results of the highest-paying U.S. equities.
8. Alerian MLP ETF (AMLP)
The Alerian MLP fund traditionally invests 90% of its total assets in energy infrastructure MLPs that are designed to earn much of their cash flow from transportation, storage and energy processing commodities. Investors should keep in mind that the fund is not diversified.
9. Global X MLP ETF (MLPA)
The Global X MLP ETF aims to invest at least 80% of its total assets in securities that function like MLPs or Master Limited Partnerships. Remember, this fund is non-diversified.
10. iShares International Select Dividend ETF (IDV)
The iShares International Select Dividend ETF will generally invest around 80% of its assets in component securities which are intended to be identical to the performance of 100 high-dividend-paying companies in the EPAC sector, which is comprised of Europe, the Pacific, Asia and Canada.
High-Yield ETFs Biggest Gainers and Losers
Here's a list of high-yield ETFs on the stock exchange with the most profits and losses. Remember, high-yield investments can be quite profitable, but you must pick and choose carefully.
|PEY||Invesco High Yield Equity Dividend Achievers ETF||$20.10||0.6%||419.2K||Buy/Sell|
|IHY||VanEck International High Yield Bond ETF||$20.25||0.44%||27.8K||Buy/Sell|
|SJB||ProShares Short High Yield||$17.86||0.22%||281K||Buy/Sell|
|NUHY||Nuveen ESG High Yield Corporate Bond ETF||$20.62||0.03%||19.9K||Buy/Sell|
|HYGH||iShares Interest Rate Hedged High Yield Bond ETF||$83.74||-0.73%||24.7K||Buy/Sell|
|UJB||ProShares Ultra High Yield ETF||$65.53||-0.43%||16.7K||Buy/Sell|
|GHYB||Goldman Sachs Access High Yield Corporate Bond ETF||$43.14||-0.31%||6.1K||Buy/Sell|
|BSJR||Invesco BulletShares 2027 High Yield Corporate Bond ETF||$22.00||-0.28%||34.1K||Buy/Sell|
|HYDW||Xtrackers Low Beta High Yield Bond ETF||$45.52||-0.27%||5.4K||Buy/Sell|
|HYG||iShares iBoxx $ High Yield Corporate Bond ETF||$75.82||-0.22%||46.6M||Buy/Sell|
|HYLS||First Trust Tactical High Yield ETF||$40.63||-0.19%||229.7K||Buy/Sell|
|HYGV||FlexShares High Yield Value-Scored Bond Index Fund||$40.07||-0.18%||207.6K||Buy/Sell|
|PHYL||PGIM Active High Yield Bond ETF||$33.96||-0.17%||15.8K||Buy/Sell|
|FDHY||Fidelity High Yield Factor ETF||$47.01||-0.12%||36.8K||Buy/Sell|
Why Invest in High-Yield ETFs?
Here are the top 3 reasons you should consider investing in these ETFs. Remember, you must match these reasons to invest with your overall investment strategy. Sometimes, you’re ready to invest in ETFs and sometimes you’re not.
1. High-Yield ETFs Are a Good Source of Passive Income
You can create a steady and predictable source of income by investing these ETFs. Some of these ETFs issue monthly or quarterly dividends that can cover your menial expenses throughout the year. This can add to your investment strategy, and it also helps you fill a brokerage account if you don’t plan to “play the market”. You can lean into this asset class, look at the dividend yield you’ll get and add ETF shares every time you have money available to invest.
Earlier this year, the S&P Dow Jones Indices announced that the companies listed on the S&P 500 Index were set to pay out more than $500 billion in dividends to shareholders. However, the COVID-19 outbreak might have caused that number to take a sharp fall. But the recent pledge from the Federal Reserve to buy undervalued corporate bonds has boosted some of the ETFs tracking these companies.
At the same time, future income that’s paid out regularly is a large part of planning for the future, including retirement. As a result, you should invest as much time as you can in finding the best high-yield investments—like ETFs.
2. High-Yield ETFs Are Cheaper Than High-Yield Mutual Funds
As an investor, you must be familiar with ETFs and mutual funds. While both of these investment options are good for returns, you should be aware that in general, mutual funds cost more than ETFs. Because the management fee is effectively non-existent, you can focus on filling your portfolio, tax efficiency and your personal investment style.
There is an expense ratio that is involved with the purchase of mutual funds and ETFs. These expense ratios can range anywhere between 0.01% to 2.5% or more. ETFs with high yields are comparatively cheaper than mutual funds because ETFs are passively managed and reflect the performance of benchmark indices, reducing your overall risk level.
3. High-Yield ETFs Can Help You Plan for Your Retirement.
You can start planning for your retirement early by investing in high-yield ETFs. Map out your projected daily expenses and invest in ETFs that will pay you that much in cash as dividends. This makes your investment decision simpler, and you can look at performance figures that tell you which ETFs you should hold over time.
Let’s say you need 3% of your overall capital for your expenses. You should aim for a total return of around 7% of your financial portfolio. You’ll need that buffer to cover the cost of expense ratios and capital gain taxes among other deductions. And if you still have 20 to 30 years before you retire, you can reinvest the dividends into these high-yield ETFs for better returns. And yes, you could add dividend stocks to your portfolio to effectively double your output.
Best Online Brokers for High-Yield ETFs
You can find and invest in the top ETFs with an online broker. Most online brokers let you trade ETFs commission-free. Benzinga has handpicked the best online brokers to help you reach your financial goals.
1. Best for Active and Global Traders: Interactive Brokers
Interactive Brokers is a powerful platform that allows you to buy into any market you choose, including stocks and ETFs. Fees are low, minimums are low and the site has a robust selection of markets, education and portfolio management options for any sort of investor.
- IBKR has a large platform that gives you more than enough options for investing
- Newer investors can take the time to learn while investing
- If you’re new to investing, you may want to start with a smaller platform with less functionality
2. Best for Mobile Investing: Firstrade
Unlock a wide range of investment opportunities online with Firstrade. You can open an account on Firstrade without any minimum amount as a deposit.
Firstrade’s advanced technology makes it simple and seamless for you to execute your trading strategies. You can place and manage orders, view your positions and track the market from 1 screen using Firstrade Navigator. Firstrade is regulated by FINRA.
- Investors can start at their own level and pace as they learn how to build a portfolio
- Because there’s no minimums you can budget more effectively
- You may not see the functionality that you’re looking for
Investments Driven by Dividends
High-yield ETFs are prone to high volatility. You should regularly monitor its performance and keep a tab on any dividend cuts. If the ETF dividend yield dips below your financial needs, don’t be afraid to sell your stocks and make a better investment that fulfills your monetary requirements and level of risk tolerance.
Frequently Asked Questions
What are high-yield ETFs?
High-yield ETFs are bundles of shares in companies that offer good dividends to their investors.
Are high-yield ETFs volitile?
High-yield ETFs can be volitile, so it’s important to reserach your options before investing.
What are the best high-yield ETFs?
Above you will find a list of recommended high-yield ETFs.