Dividend-paying exchange-traded funds (ETFs) have been growing in popularity, especially among investors looking for high yields and more stability from their portfolios. As with stocks and many mutual funds, most ETFs pay their dividends quarterly—once every three months. However, ETFs that offer monthly dividend returns are also available. While there are many ETFs that pay out regular dividends, we look at just eight of them here.
Monthly dividends can be more convenient for managing cash flows and help in budgeting with a predictable income stream. Further, these products give greater total returns, if the monthly dividends are reinvested.
Key Takeaways
- For investors looking for income from their holdings, regular dividend payments are key.
- While many dividend stocks pay quarterly or semi-annual dividends, some ETFs manage to pay out dividends on a monthly basis.
- Here, we look at eight such ETFs that the income investor may want to consider for their portfolio.
Range of Choices and Risks
Luckily, there are a plethora of monthly dividend ETF fundsoffered by the major firms, including State Street Global Advisors, Vanguard Group,and BlackRock, Inc. However, there are also smaller firms such as the Global X Funds that have increased their presence in the ETF arena. These investment products have become nearly household names and include the popular Spider SPDR and iShares products.
Before any investor falls too head-over-heels in love with these products, they must do their due diligence and review the ETF for its expenses and risk. While getting dividend income every month may sound appealing, the investor must offset the expenses of the holding against its benefits.
Fund managers sometimes offer high double-digit yields that they cannot sustain in order to attract investors who would otherwise ignore them. It is important to pay attention to expense ratios, as well. Remember, the less money that goes into a manager’s pocket the better. Some funds may return their high income through the use of leverage which may not suit the risk tolerance of all investors.
The following list of exchange-traded funds is not in any particular order and is offered only as an example of some of the funds that fall into the category of the monthly-dividend paying ETFs.
1. Global X SuperDividend ETF (SDIV)
- Net Assets as of mid-2022: $788 million
- Expense Ratio: 0.59%
- Dividend Yield (12 mo.): 12.89%
- Inception Date: 6/8/11
- Price as of August 2022: $9.35
The Global X SuperDividend (SDIV) fund tracks anindex of100 equallyweightedcompanies that rank among the highest-dividend payers around the world—a strategy that has earned it kudos in the financial press.
The fund includescommon stocks, real estate investment trusts (REITs), and master limited partnerships (MLPs) that must combine top returns with lower-than-average volatility to be included in the index. The fund has made monthly dividend distributions for more than nine years.
Some of the main holdings of the fund are:
- Yanzhou Coal Mining Company
- Fortescue Metals Group
- Electra Consumer Products
- Omega Healthcare
- Iron Mountain Inc
2. Global X SuperDividend U.S. ETF (DIV)
- Net Assets as of mid-2022: $737vmillion
- Expense Ratio: 0.45%
- Dividend Yield (12 mo.): 5.61%
- Inception Date: 3/11/13
- Price as of August 2022: $21,00
Established in 2013, the Global X U.S. SuperDividend (DIV)fund focuses on abasket of low-volatility, high-yielding securities. The objective is to track the performance of 50 equally weighted common stocks, MLPs, and REITs within the U.S.
Securities listed in the index are among the highest-yielding in the United States, and they have lower relative volatility than the market.It pairs very nicely with SDVI for investors who want a truly global grip on high-yielding equities.
Holdings in the fund include:
- Cubesmart
- Holly Energy Partners LP
- Iron Mountain Inc.
- Clearway Energy
- Public Storage
3. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
- Net Assets as of mid-2022 $4.0 billion
- Expense Ratio: 0.30%
- Dividend Yield (12 mo.): 3.53%
- Inception Date: 10/18/12
- Price as of August 2022: $47.00
TheInvesco S&P 500 High Dividend Low Volatility ETF (SPHD) looks for stocks that pay high dividends and offer low volatility. It invests 90% of its assets in the common stocks of companies listed in the Low Volatility High Dividend Index. The fund is concentrated in consumer defense and utilities. Holdings include:
- Iron Mountain Inc
- Altria Group Inc
- Exxon Mobile Corp
- Vornado
- AT&T Inc
4. WisdomTree U.S. High Dividend Fund (DHS)
- Net Assets as of Mid-2022 $1.2 billion
- Expense Ratio: 0.38%
- Dividend Yield (12 mo.): 3.15%
- Inception Date: 6/16/06
- Price as of August 2022: $87.00
The WisdomTree U.S. High Dividend Fund (DHS)mimics the WisdomTree High Dividend Index, a fundamentally weighted index that features companies ranked by dividend yield with average daily trading volumes of at least $200 million.
The fund’s holdings are well diversified among sectors such as real estate, health care, utilities, IT, and consumerstaples. Top holdings include:
- Verizon Communications Inc
- Pfizer Inc
- AT&T Inc
- Phillip Morris
- The Coca-Cola Company
5. Invesco PreferredETF (PGX)
- Net Assets as of mid-2022: $5.8 billion
- Expense Ratio: 0.51%
- Dividend Yield (12 mo.): 5.44%
- Inception Date: 1/31/08
- Price as of August 2022: $13.00
The Invesco Preferred Fund (PGX) is another preferred stock ETF that delivers on yield. PGX's objective is to replicate the performance and yield of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. Its portfolio holds more than 200 preferred stocks with a heavy weighting towards the financial sector. The bulk of investments is in BBB-rated holdings. Some of the investments include:
- Citigroup Inc
- JPMorgan Chase & Co
- Wells Fargo & Co
- AT&T
- Bank of America Corp
6. Invesco KBW High Dividend Yield Financial ETF (KBWD)
- Net Assets as of 10/25/21: $449 million
- Expense Ratio: 2.59%
- Dividend Yield (12 mo.): 8.81%
- Inception Date: 12/2/10
- Price as of 10/25/21: $18.30
Based on one of the prestigious Keefe,Bruyette & Woods NASDAQindexes, the Invesco KBW High Dividend Yield Financial Portfolio ETF (KBWD) fundis heavily weighted (at least 90%) towards publicly held financial companies, which should perform better in a rising interest rate environment.
Holdings include:
- Orchid Island Capital Inc
- Chimera Investment corp
- ARMOUR Residential REIT Inc
- AGNC Investment trust
- TCG BDC Inc
7. iShares Preferred and Income Securities ETF (PFF)
- Net Assets as of 8/6/21: $16.1 billion
- Expense Ratio: 0.45%
- Dividend Yield (12 mo.): 5.61%
- Inception Date: 3/26/07
- Price as of 8/6/21: $34.60
The iShares Preferred and Income Securities ETF (PFF) is a viable alternative for investors seeking high yields. PFF seeks to mirror the performance and yield of the S&P U.S. Preferred Stock Index. The portfolio is well-diversified, with no security weighted more than 2.53%. However, it does tend to favor banks, diversified financials, and utilities. Some of the main holdings include:
- Broadcom Inc
- Wells Fargo & Co
- Bank of America Corp
- NextEra Energy
- Avantor Inc
8. SPDR Dow Jones Industrial Average ETF Trust (DIA)
- Net Assets as of mid-2022: $29.4 billion
- Expense Ratio: 0.16%
- Dividend Yield (12 mo.): 1.79%
- Inception Date: 1/14/98
- Price as of August 2022: $340.00
The SPDR Dow Jones Industrial Average ETF (DIA) does not offer the highest yield, but investors who prefer some capital appreciation potential with their income might find its portfolio attractive. Launched in January 1998 (making it one of the oldest ETFs still standing), the fund is one of the few to directly play the Dow Jones Industrial Average (DJIA)—itself the grandpa of stock indexes, composed of 30 of the bluest blue chip companies. Its holdings include:
- Goldman Sachs Group Inc
- UnitedHealth Group Inc
- Home Depot Inc
- McDonald's
- Boeing Co
What Are Some Other High-Yielding Dividend ETFs?
While they may not pay monthly dividends, the following ETFs do tend to have above-average distribution yields. Some of the most popular such dividend ETFs include:
- Vanguard Dividend Appreciation ETF (VIG)
- Fidelity International High Dividend ETF (FIDI)
- iShare Core High Dividend ETF (HDV)
- SPDR S&P Global Dividend ETF (WDIV)
- Schwab U.S. Equity Dividend ETF (SCHD)
Which ETF Has the Highest Dividend Yield?
The dividend yield of an ETF will depend on how its share price does, since a lower share price given then same dividend payment will equal a higher yield.
As of August 2022, the ETF with the greatest dividend yield was the ProShares K-1 Free Crude Oil Strategy ETF (OILK), with a yield of 26.1%.
How Are ETF Dividends Taxed?
Tax rates on ETFs are treated the same way as holding common stock. ETFs held less than a year before they are sold are taxed at the short-term capital gains tax rate. This is much higher than if you were to hold for a year or longer.
The Bottom Line
High-dividend ETFs offer a cheap, easy way to add an extra stream of income to the portfolios of retirees and new investors alike. As always, it is important to do your due diligenceon any fund before committing your hard-earned cash.
