The 7 Best High Dividend Yield ETFs to Own In 2023
These 7 best High Dividend yield ETFs will give you an above average dividend yield as well as diversification and stability.
You won’t find ETFs with 8-10% dividend yield in this list, because they wouldn’t maintain that yield for more than a couple of years. Instead you’re going to find the best in the range 3.5% to 6%.
If instead you are interested in the best dividend ETFs overall, regardless of the dividend yield and considering the total return, you’ll find them in this post.
The High Dividend Yield ETFs of this list were selected following these criteria:
- We screened out ETFs with a dividend yield below 3.5%
- We removed new ETFs that have been created in the past 3 years
- We kicked off everything below a morningstar rating of 3
- We narrowed down to only broadly diversified high yield dividend equity funds
Let’s go straight to the 7 ETFs, starting with the one with the best diversification.
7. VWO – Vanguard FTSE Emerging Markets ETF – 3.77%
The first ETF takes a 5% slice of an ideal High Dividend Yield ETF Portfolio, offers a generous dividend yield of 3.77% which is paid quarterly and with 5700 stocks is the most broadly diversified in terms of geography. I’m talking about the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO), which gives you exposure to emerging markets like China, Brazil, Taiwan and South Africa while giving you a good 3.77% dividend yield.
In particular this ETF focuses on Emerging Markets and is a good way to access the Chinese Market while maintaining a low expense ratio of 0.08%.
There’s a minimum investment of $1, which shouldn’t be a big deal for anybody, but the expense ratio of 0.08% is really low for an international ETF and even more considering that 35.1% of the whole portfolio is composed of Chinese Stocks, which usually come in ETFs with expensive fees.
I’m pretty confident that China is going to become the strongest economical power in the world in the next decades, and the chinese stock market in the last few years has been a disaster, which makes us hope that chinese Stocks are now finally under their intrinsic value.
So having a 30% exposure to the chinese market with an ETF that only asks you for 0.08% per year, at this lowest point of the chinese stock market of the last 10 years, can actually be a one of a kind deal for international investors.
The other big countries included in the ETF are Taiwan, India and Brazil, but basically the whole emerging countries are listed in the ETF and this reflects on the 5700 stocks that you’ll get with a single ETF.
6. SPHD – Invesco S&P 500 High Dividend Low Volatility ETF – 4.06%
The next ETF, like the first, takes a 5% slice of the cake and has a high but quite stable dividend yield of 4.06%. This means that to get 1,000$ per month or 12,000$ per year in free passive income you should have a portfolio of around 295,000$.
I’m talking about the Invesco S&P 500® High Dividend Low Volatility ETF (NYSEARCA: SPHD), and what I like about this ETF is that it builds its portfolio from the stocks included in the S&P 500 index choosing Stocks that have both high dividend yield and low volatility. There is a total of 51 holdings within this ETF as of May 2023 and they are all value-oriented stocks, mainly large- and mid-cap stocks.
The top holdings are Altria, Verizon Communications, AT&T, Kinder Morgan, but interestingly enough the top sector is Real Estate, with 18.52%. This of course explains the generous dividends, together with the other main sectors which are all value sectors like utilities, consumer staples and communication.
The performance over the last 10 years has been 8.58% against 12.2% of the S&P500 index, but that’s unfortunately the price to pay to have a lower volatility and higher dividend yield.
The Fund has an expense ratio of 0.30%, that means that you are going to pay $30 yearly for a $10,000 portfolio, and the underlying stocks are evaluated and reconstituted twice a year in January and July.
By the way, I usually don’t suggest ETFs with less than 100 underlying companies because I find them to be not diversified enough, but in this video I’m focusing on stable ETFs with high dividend yields so I decided to include it.
5. DES – WisdomTree U.S. SmallCap Dividend Fund – 3.74%
Alright, the ETF Nr. 5 takes a 10% slice of the cake and is an ETF focused on Small Cap Companies that gives a 3.74% dividend yield which is paid out monthly.
The ETF is the WisdomTree U.S. SmallCap Dividend Fund (NYSEARCA: DES) and tracks the investment results of dividend-paying small-cap companies in the U.S. equity market. It was created back in 2006 and if you invested $10,000 10 years ago you’d now have $18,397 with an average annual growth of 6.90%.
You might wonder, why small caps?
First of all, for those of you who don’t know, any listed company with a value between $300 million and $2 billion can be considered a small-cap Stock. Over longer periods, small-cap value stocks have outperformed the overall U.S. stock market. In particular, in the past 20 years the S&P SmallCap 600 index, which is a leading benchmark for small-cap stocks, has outperformed the related large- and mid-cap indexes on an annualized basis.
During this period, the S&P SmallCap 600 index returned an average of 8.3% annually, compared to 8% and 6.3% from its mid- and large-cap counterparts, respectively.
Looking at the sector composition, you see the financial sector in pole position with 20.23%, followed by industrial, consumer discretionary and real estate.
You probably know about the collapse of the Silicon Valley Bank on March 8 2023 and of the Signature Bank later in the same month, and these recents failures of the banking system have impacted the whole financial sector, which of course poses the question if it’s the right time to buy this ETF. I don’t know when the crisis of the financial sector will be over and I cannot know exactly what the repercussions on this ETF will be, but it’s good to know that 20% of this ETF is in the small cap financial sector so that you can make a responsible decision.
4. VYMI – Vanguard International High Dividend Yield ETF – 4.53%
The ETF nr. 4 of my list takes a 15% slice of an ideal High Dividend Yield ETF Portfolio, has a dividend yield of 4.53% and belongs to my favorite investment company, Vanguard.
I’m talking about the Vanguard International High Dividend Yield ETF (NASDAQ: VYMI), which gives you exposure to international stocks that are expected to have above-average dividend yields. In fact since inception in 2016 it managed to give an extremely generous dividend yield which even peaked to almost 6% in 2021.
It was created in 2016 and is a great choice if you want a high dividend yield over 4% and want international exposure. In fact with about 1,300 international stocks it offers you the greatest global diversification in this list including both emerging and developed markets.
The reason why I included this ETF is that after almost 10 years of predominance of the U.S. stocks, over the past year or so international stocks have outperformed again.
This graph from Blackrock shows the performance of US and International Stocks from 1973 to 2022, and the orange bars are when the international stocks outperformed:
You can notice that in the last 10 years the US market has almost always outperformed. While this might make you think it’s useless to invest in international markets, it signals to me that given the incoming recession international markets might outperform again in the next few years.
Add this to the fact that this year the Vanguard ETF has had solid returns, offers an above-average 4.53% dividend yield with a really low expense ratio of 0.22%, which believe it or not for an international ETF is indeed low, and you see that this is a great choice for international diversification.
If instead you want to stay on the American market, the Vanguard High Dividend Yield ETF (NYSEARCA: VYM) is the US alternative and will give you a dividend yield of 3.11% but great overall returns.
3. PEY – Invesco High Yield Equity Dividend Achievers ETF – 4.57%
Alright, now we finally got to the top 3 of the high dividend yield achievers and this is where it gets interesting. Our Nr. 3, the Invesco High Yield Equity Dividend Achievers ETF, has an incredible dividend yield of 4.57%.
This ETF takes 15% of the cake and owns the 50 U.S. dividend stocks with the highest yields and a history of increasing dividend payments. The current Dividend yield of 4.57% is paid out monthly and has paid $0.86 per share in the past year. So let’s say that you manage to have a portfolio of $262,582, which is not incredibly high, with 4.57% you’d have $1,000 of passive income in dividends every single month.
Value stocks comprise about three-quarters of the fund’s holdings, with the rest being core equities.
As for sector allocation , the biggest weight is in Financials with 25.65%, followed by Utilities with 18.78%, Consumer staples with 13.63% and Consumer Discretionary with 10.30%. All the other sectors cover less than 10% each.
You’re going to have a great distribution within the market caps, in particular Large Cap Value and Blend covers around 29% together, Mid Cap 37% and Small cap 33%, which if you ask me, is pretty equally balanced.
The top holdings are going to be Altria Group, VF Corp, Universal Corp, Verizon and so on and the performance in the last 10 years has been pretty great with 10.58% per year.
The only big problem with this ETF, which actually has made my choice here really hard, is the high expense ratio of 0.52%, which in the short term would mean that you pay $52 per year on a $10,000 portfolio, but in the long term does impact your overall returns substantially. So this is the reason why I only gave it 15% of the ideal High Dividend Yield ETF Portfolio, since for all the rest it’s actually a great Dividend ETF.
2. FDVV – Fidelity High Dividend ETF – 3.83%
Let’s move on now to our number 2, the Fidelity High Dividend ETF (NYSEARCA: FDVV) which is a high dividend yield ETF from one of my favorite investing companies, Fidelity. This ETF takes 20% of the cake, has a generous dividend yield of 3.83% and an annual return since inception in 2016 equal to 10.87%, which is really not bad.
The Fidelity High Dividend ETF is designed to reflect the performance of stocks of large and mid-cap dividend-paying companies that are expected to continue to pay and grow their dividends in the future.
The choice of the companies is the primary reason why I like this ETF. The top Holdings boast names like Apple, Microsoft, Exxon Mobil, Procter & Gamble, JP Morgan Chase, PepsiCo, Nvidia, Coca-Cola, Chevron.
I mean, do I have to say more?
And, this is not all. Not only are you getting great companies, but you are also getting a bit more diversification because North America covers not 100 but 90% of the portfolio, followed by Europe and Asia. In particular Japan, UK and Italy follow the US.
This 10% non-U.S. allocation adds diversification to the portfolio and it likely helps the dividend yield as well. And by the way while choosing the companies, the ETF screens out the top 5% of stocks with the highest payout ratios and this is a good thing because it protects us from overly risky holdings or dividend traps.
The expense ratio is not the cheapest, but it’s still acceptable with 0.29% per year which means $29 per year for a $10,000 portfolio. Let me know what you think about this ETF in the comment section below. I know there are others that I could have mentioned like VYM or VXUS, but they have a lower Dividend Yield so they couldn’t make it into this list.
1. SCHD – Schwab U.S. Dividend Equity ETF – 3.78%
So, finally moving on to the first ETF we have an ETF that is in my opinion the best dividend ETF around, so much so that a couple of weeks ago I made a video exclusively for it.
It’s going to take 30% of the ideal High Dividend Yield ETF Portfolio and in case some of you still haven’t guessed it, I’m talking about SCHD, the Schwab U.S. Dividend Equity ETF. This ETF is the perfect combination between high dividend yields, with 3.78% at the time of recording, and a wonderful 10 years average annual growth of 11.90%, which is almost the same as the 12.28% of the S&P500 in the same time period.
If you’d invested $10,000 10 years ago, you’d now have 31,059$ and they would yield you now $1,174 yearly only in dividends. Add this to a great growth and you realize why SCHD is the best option if you are looking for long term growth and for a great dividend yield.
If you are worried about the stability of the dividend yield, know that SCHD managed 10 consecutive years of dividend payment increases.
SCHD has $45 billion in assets under management, an incredibly low expense ratio of 0.06%, over 100 holdings, a wonderful Return on Equity of 38.44%, long history of positive retur ns, which is the best amongst all the ETFs that I mentioned.
I mean, it’s hard to find something wrong with this ETF.
Some of you might mention the fact that the last reconstitution of SCHD, that happened in march 2023, didn’t really account for the recent banking crisis, and this is partially true but this is not something that worries me about this ETF.
In fact a couple of weeks ago I published this blog post and this video which I strongly suggest you to watch after this .
With SCHD, you’re going to get a mix of companies such as Abbvie, Pepsico, Cisco, UPS, Texas Instrument, Coca Cola, and all sectors are well covered, with a stronger weight on information technology and financials, which is a good thing considering these sectors usually outperform in the long run.
