Skip to main content

Dividend stocks weren't really in favor in 2021, but there were a handful of dividend ETFs that still performed quite well. The ETF Action database tags nearly 150 different ETFs as having a dividend focus, but less than 30 of those managed to beat the S&P 500 in 2021. Less than 10 managed to beat the index by more than 3%. The lack of income provided by equities has been an ongoing problem, but the lack of ability to beat the benchmark over the past few years has been an added blow.

There wasn't much advantage to be had in choosing one dividend strategy over another. Dividend growth ETFs performed perhaps a bit better than others as investors drifted away from fixed income and into equities for higher yields. With the government pledging endless monetary support for the economy, some of the riskier high yield stocks/ETFs had an opening to deliver above average returns. Excessive risk in many cases wasn't rewarded, but a yield in the 3-4% range could have been had without venturing too far out on the risk spectrum.

Note: Interested in getting periodic e-mail notifications when articles are published here? Drop your e-mail in the box below!

The top performing dividend ETF list covers all sorts of themes - dividend growth, quality, value, tech, quant and even a few small- and mid-cap dividend payers. Financials and real estate did comparatively well in 2021 and ETFs that were tilted in those directions, namely those that focused on the absolute highest yielders in these areas were able to gain 30%+.

Here's the list of the top performing dividend ETFs for the year 2021.

Top Performing Dividend ETFs For 2021

Top Performing Dividend ETFs For 2021

The best performing dividend fund of the year is the First Trust Dorsey Wright Momentum & Dividend ETF (DDIV). Dorsey Wright is a momentum investing specialist and looks for the highest yielders within a large- and mid-cap stock universe that display the best relative strength. This strategy clearly benefited from the year's early winners continuing to stay in leadership throughout much of the year.

The ALPS REIT Dividend Dogs ETF (RDOG) is an interesting inclusion on this list. Most of us know about the dividend dogs strategy, targeting the highest yielders within an index or sector, but it hasn't performed particularly well lately. With real estate doing so well in 2021, it provided the right environment for high yielders within this winning sector to do especially well.

VictoryShares had a good year by landing two of its ETFs on this list's top 6 - the VictoryShares U.S. Large Cap High Dividend Volatility Weighted ETF (CDL) and the VictoryShares U.S. Equity Income Enhanced Volatility Weighted ETF (CDC). It probably isn't intuitive that a volatility weighting strategy, where lower beta stocks tend to receive greater weights in a portfolio, would have worked in an environment that mostly favored mega-cap growth, but VictoryShares strategy that favors companies with positive earnings and stronger fundamentals has a history of working. CDC, which adds or reduces exposure to equities based on volatility levels, is also one of my top dividend ETF picks for 2022.

Several of the dividend ETF heavyweights made 2021's top performer list. The highest ranked ETF is the SPDR Portfolio S&P 500 High Dividend ETF (SPYD), which simply targets the index's 80 highest yielders, gained 32%. The iShares Select Dividend ETF (DVY) and the Schwab U.S. Dividend Equity ETF (SCHD), both of which give attention to varying degrees of dividend strength and dividend quality, are funds that I follow closely and are consistently among the highest ranked dividend ETFs available.

I don't usually discuss funds that haven't made the list, but it's worth noting that the Vanguard Dividend Appreciation ETF (VIG) and the Vanguard High Dividend Yield ETF (VYM) failed to make the cut. They returned 24% and 26%, respectively, and just missed the cutoff.

Other ETFs worth noting:

A trio funds which have traditionally been among the highest yielding dividend ETFs out there, the Global X SuperDividend U.S. ETF (DIV), the Invesco KBW Premium Yield Equity REIT ETF (KBWY) and the Invesco KBW High Dividend Yield Financial ETF (KBWD), all land in 2021's top 15. Yields today haven't been quite as high as they have in the past, but they'll still grab the attention of yield seekers. DIV and KBWY have current dividend yields of around 5%, while KBWD is just above 8%.

I'll bring up the JPMorgan U.S. Dividend ETF (JDIV) as a fund that deserves more attention than it gets. It targets high yielders but also uses risk mitigation techniques to generate that yield with lower volatility. It charges just 0.12%, but only has around $50 million in assets.

There's not much representation for smaller company dividend ETFs, but there have been a few strong performers. The WisdomTree U.S. MidCap Dividend ETF (DON), which seeks broad coverage within this group, netted a 30% return. The First Trust SMID Cap Rising Dividend Achievers ETF (SDVY) is the only other small-/mid-cap focused fund to crack the top 30.

The Siren DIVCON Leaders Dividend ETF (LEAD) is worth mentioning again. You may be familiar with it if you seen the top performing monthly dividend ETF lists. Much of 2021's gains came in the tail end of the year and has averaged a 20% annual return over the past five years.

Note: Interested in getting periodic e-mail notifications when articles are published here? Drop your e-mail in the box below!

Read More…

Top Performing ETFs For 2021

Top 7 Dividend ETF Picks For 2022

200 Large Cap ETFs Ranked For 2022

Top 6 Semiconductor ETFs For 2022

68 High Yield Bond ETFs Ranked For 2022

138 Small Cap ETFs Ranked For 2022

Top 6 Blockchain ETFs For 2022

144 Dividend ETFs Ranked For 2022