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144 Dividend ETFs Ranked For 2022

The ultra-cheap "big 6" top the rankings, but there are plenty of interesting choices within the top 50.

The post-COVID economic recovery has almost entirely favored risk assets. For the most part, that's mean above average gains for tech and growth stocks (mostly large-caps), the occasional period of outperformance for cyclicals and mostly underperformance for defensive sectors, such as utilities and consumer staples.

That's largely put dividend ETFs into the laggard category. If you look at many of the largest dividend funds, you'll see overweights in financials, consumer staples, healthcare and real estate (for those dividend ETFs that allow it) - all of the sectors that have, for the most part, struggled throughout the past year and a half.

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Within the dividend ETF universe, there has been some separation. High yielders, despite their tendency to fall on the riskier end of the volatility spectrum, have underperformed. The best-performing subgroup is still long-term dividend growers. While there were some issues with suspensions and cuts during the depths of the COVID recession (e.g. Disney and AT&T), but most have been able to weather the storm and now are perhaps even in a better position to continue their dividend growth streaks moving forward. With long-term Treasury rate still struggling to get and stay above the 2% level (although that could change as the Fed preps to begin lifting interest rates), the idea of steady and predictable pay raises from large corporations becomes more and more attractive.

If you're a believer that the 2000s are going to be a decade low or even zero returns (as I do), dividend yields are going to become an incredibly important part of total returns. Today, you can earn a modest 2% yield from the dividend aristocrats. A high yield equity ETF might get you somewhere near 3%. Beyond that, you're venturing into riskier areas of the market - sector equity, emerging markets, MLPs, high yield REITs - and I'm not sure you want to be anywhere near these groups if the market turns south. 2% yields don't look like much when the Vanguard Growth ETF (VUG) has returned 19% a year over the past decade, but if we have a repeat of the 2000s, where the S&P 500 (SPY) generated a total return of -9%, those dividends will begin looking really good.

There are any number of thematic or smart beta twists on dividend investing within the ETF space, as we're about to see, and I think that'll only help investors pivot their portfolios to take advantage of the market environment.

Ranking The Dividend ETFs

The variety of ETF choices makes distinguishing the best from the rest a little challenging. You've probably heard most financial pundits talk about focusing on funds with low expense ratios. That can certainly be a big factor in deciding which ETF to go with (it's probably the most important factor, in my view), but there are a lot of things that could go into making the right choice.

That's where I'm going to try to make things easier for you. Using a methodology that I've developed, which takes into account many of the factors that should be considered and weighting them according to their perceived level of importance, we can rank the universe of available ETFs in order to help identify the best of the best for your portfolio.

Now, this certainly won't be a perfect ranking. The data, of course, will be objective, but judging what's more important is very subjective. I'm simply going off of my years of experience in the ETF space in helping investors craft smart, cost-efficient portfolios.

Methodology And Factors For Ranking ETFs

Before we dive in, let's establish a few ground rules.

First, all of the data is used is coming from ETF Action. They have gone through the ETF universe to identify and categorize those ETFs used here. There are many that qualify and we'll be using their categorization as a starting point. Many thanks to them for opening up their vast database for my use.

Second, let's run down the factors I used in the ranking methodology.

  • Expense Ratio - This is perhaps the most important factor since it's the one thing investors can control. If you choose a fund that charges 0.1% annually over a fund that charges 1%, you're automatically coming out ahead by 0.9% annually. You can't control what a fund returns, but you can control what you pay for the portfolio. Lower expense ratios equal more money in your pocket.
  • Spreads - This relates to how cheaply you can buy and sell shares. Generally speaking, the larger the fund, the lower the spreads. Bigger funds usually have many buyers and sellers. Therefore, it's easier to find shares to transact and that makes them cheaper to trade. On the other hand, small funds tend to trade fewer shares and investors often need to pay a premium to buy and sell. Considering expense ratios and spreads together usually give you a better idea of the total cost of ownership.
  • Diversification - Generally speaking, the broader a portfolio is, the better chance it has at reducing overall risk. A fund, such as the Energy Select Sector SPDR ETF (XLE), provides a good example. 45% of the fund's total assets go to just two stocks - ExxonMobil and Chevron. By buying XLE, you're putting a lot of faith in just those two companies. An equal-weighted fund, such as the Invesco S&P 500 Equal Weight Energy ETF (RYE), would score higher on diversification than XLE.
  • FactSet ETF Scores - FactSet calculates its own proprietary ETF ranking for efficiency, tradeability and fit. They basically are designed to tell us if an ETF is doing what it sets out to do. I'm not going to copy and paste that work that they're doing, but there is some influence there to make sure my rankings are on the right path.

There are a few other minor factors thrown into the mix, but these are the main factors considered.

One thing that is not considered is historical returns. Most ETFs are passively-managed and are simply trying to track an index, not outperform. ETFs shouldn't be penalized for low returns simply because the index they're tracking is out of favor at the moment.

I'm ranking ETFs based on more basic structural factors. Are they cheap to own? Are they liquid? Do they minimize trading costs? Do they maintain risk-reducing diversification benefits?

Being in the bottom half of the list doesn't automatically make a fund "bad". It simply means that due to a low asset base, a high expense ratio, a concentrated portfolio or some other factor, it poses additional costs or downside risks.

Top Dividend ETF Rankings For 2022

As is usually the case in these rankings, the ultra-cheap ETFs tend to have the advantage and that's no clearer than looking at the dividend ETFs. The chasm between the ultra-cheap and the next tier is so large, in fact, that it's no surprise that the six ETFs that charge less than 10 basis points annually take the top 6 spots on this list.

Top Dividend ETF Rankings

Top Dividend ETF Rankings

The Vanguard High Yield Dividend ETF (VYM) takes the #1 spot again as it usually does whenever I run the algorithm, although I have few, if any issues, with the ETFs at the top. VYM along with the SPDR Portfolio S&P High Dividend ETF (SPYD) and the iShares Core High Dividend ETF (HDV), obviously, focus on the high yield end of the space. The Vanguard Dividend Appreciation ETF (VIG) and the iShares Core Dividend Growth ETF (DGRO) use slightly different criteria to target dividend growers. The Schwab U.S. Dividend Equity ETF (SCHD) goes after long-term dividend payers with quality characteristics and above average yields, so it would be your multi-themed option. If you're looking strictly for a high quality, low cost, long-term buy-and-hold dividend ETF, this group is a great place to start.

The best of the rest include the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). This is the one that only includes the stocks meeting the strict definition of dividend aristocrats by raising their dividend for at least the past 25 consecutive years. The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) has long been one of my personal favorite dividend ETFs, but it's been out of favor for a while. In fact, if you look at its historical track record, it's been very feast or famine. When low vol is in favor, it often lands among the top 10% of all dividend ETFs. When it's not though, it's not unusual to find it landing right near the bottom of the list. If you feel low volatility is ready to outperform, SPHD would be a personal pick of mine.

The Vanguard International High Dividend Yield ETF (VYMI) and the Vanguard International Dividend Appreciation ETF (VIGI) are the highest rankings foreign equity ETFs on the list. Whenever overseas stocks come back into favor (I suspect international will outperform U.S. during the 2020s decade as a whole), these two would be clear candidates for inclusion in a dividend portfolio. As is the case with most Vanguard ETFs, they lead on cost and liquidity and follow similar strategies to their U.S. counterparts.

Some of my other favorite ETFs landing in the top 30: the Invesco High Yield Equity Dividend Achievers ETF (PEY), the FlexShares Quality Dividend Index ETF (QDF), the Invesco S&P Ultra Dividend Revenue ETF (RDIV) and the First Trust Rising Dividend Achievers ETF (RDVY).

The next batch of 30 names in the rankings include a few funds I thought would rank higher, a number of interesting mid-size ETFs and some newbies.

Top Dividend ETF Rankings

Top Dividend ETF Rankings

I'd put the WisdomTree U.S. Quality Dividend Growth ETF (DGRW) right up there with almost any fund in the top 10. It scores a little lower on cost and concentration, but its focus on quality balance sheet health within the dividend growth universe is an ideal strategy for almost any portfolio.

I've often wondered why the JPMorgan U.S. Dividend ETF (JDIV) at #39 hasn't gotten more attention from investors. JPMorgan debuted a few ETFs a while back and tried to compete on cost. At 0.12%, it's the cheapest outside of those top 6 names, but it's only gathered $50 million in assets. It weights based on both yield and volatility, so it should be ideal if investors ever pivot away from large-cap growth. Its 3.1% yield should also be attractive.

The Global X SuperDividend ETF (SDIV) is the purest high yield play out there. It simply grabs the 50 highest yielding stocks from around the world. Predictably, it's very heavy in REITs and financials and investors will no doubt be intrigued by that 8-9% yield, but it's highly volatile and likely to suffer badly if stocks begin to correct.

Other ETFs I like from this group: the First Trust Nasdaq Technology Dividend Index ETF (TDIV), the VanEck Morningstar Durable Dividend ETF (DURA), the WisdomTree U.S. Total Dividend ETF (DTD) and the VictoryShares U.S. Large Cap High Dividend Volatility Weighted ETF (CDL).

Now we're starting to get to the area of these rankings where there might be some investability issues. These ETFs may be getting dinged on expense ratios, concentration or liquidity. They may also just be too small to have really gained any scale at this point.

Top Dividend ETF Rankings

Top Dividend ETF Rankings

There are also a lot of international ETFs in this range, which tend to rank a little lower on size and expense ratio compared to U.S. dividend ETFs.

I've always found the AAM S&P 500 High Dividend Value ETF (SPDV) kind of interesting. There aren't a whole lot of dividend ETFs that focus on value and SPDV could be interesting if that theme makes a comeback.

It's a little unusual to find 12 WisdomTree ETFs all bunched up here. WisdomTree is a terrific ETF issuer and their funds generally follow a very well thought out and logical strategy. It may never compete with the lowest fee dividend ETFs, but its lineup has a lot of reasonably priced funds that fit almost any strategy.

You may remember the Siren DIVCON Leaders Dividend ETF (LEAD) from the top monthly dividend ETF performers lists over the past couple of months. It has landed in the top 5 in both October and November, as evidenced by its 30% return over the past year. This has been one of the best performing dividend ETFs recently although it has yet to really grow its asset base.

And the rest of the dividend ETF rankings:

Top Dividend ETF Rankings

Top Dividend ETF Rankings

Top Dividend ETF Rankings

Top Dividend ETF Rankings

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