3 Great Dividend ETFs (That Improve Your Portfolio Today)

David Dierking

Investors have mostly been targeting growth and tech stocks in the post-bear market rally. That's certainly where the short-term returns have been, but focusing just on those two groups doesn't necessarily make for a solid long-term strategy.

Riskier assets need to be balanced with more conservative ones in order to improve risk-adjusted returns in your portfolio.

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While there are literally hundreds of dividend ETFs out there to choose, there a handful which I consider to be elite. These are funds that execute simple, proven strategies that have generated superior long-term risk-adjusted returns while reducing overall portfolio risk through diversification.

These are ETFs that are appropriate for investors are virtually any age, from those just starting out to those needing to generate predictable, regular income in retirement.

If you're looking to balance out the risk in your portfolio, boost your yield or just add a product with a superior long-term track record, each of these three ETFs will immediately improve the overall quality of your portfolio.

Schwab U.S. Dividend Equity ETF (SCHD)

I've written before that this is my favorite dividend ETF.

SCHD applies several criteria to narrow the dividend stock universe to just 100 qualifying names. It looks at dividend yield, cash flow, total debt, return on equity and dividend growth rate. It's a fairly strict selection process, but those stocks that make the cut exhibit dividend quality, dividend growth and high yield.

SCHD's expense ratio of just 0.06% is one of the cheapest you'll find and carries a top 5-star rating from Morningstar.

ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

NOBL is a pure long-term dividend growth play. It only includes stocks that have at least 25 consecutive years of dividend growth. Since companies that pay and grow their dividends over such a long period of time, these tend to be more mature, more stable companies.

Dividend growth stocks tend to be a popular target for income seekers since their dividends are often predictable and they offer a raise to shareholders every year. Dividend growth doesn't necessarily translate to high yield as evidenced by NOBL's current 2.4% yield, but for steadily growing income, few ETFs can deliver better.

Vanguard Dividend Appreciation ETF (VIG)

VIG also targets companies with longer-term dividend growth histories, but with a few differences compared to NOBL.

VIG only requires a 10-year dividend growth history, so it allows some growthier names who have only begun paying dividends more recently to qualify for the fund. It also eliminates higher-yielding REITs from the portfolio. High yield seekers probably won't enjoy this, but the group's removal helps eliminate some of the more volatile yields from consideration.

As is the case with many Vanguard ETFs, its 0.06% expense ratio is also one of the cheapest and is one of the company's top long-term performers.

More ETF Research

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