The Best Dividend ETFs for Investors Who Don’t Want Stock-Picking Stress

If you’re just jumping into the world of investing, the markets can seem intimidating. Maybe you feel you don’t have the time or know-how to carefully pick winning stocks for your portfolio.

To get around this, many investors turn to exchange-traded funds (ETFs). These are professionally managed funds that invest in a handful of stocks and offer instant diversification.

But there are also dividend ETFs. Dividends are regular payments that companies pay to shareholders out of their profits. And dividend ETFs invest in baskets of dividend stocks handpicked by the pros. Dividend ETFs may offer a regular income stream in addition to capital appreciation.

But picking the right dividend ETFs can also be a hassle for beginners. So we devised a list of the best dividend ETFs for investors who don’t want stock-picking stress.

A lot of these funds screen companies for more than just high yields. They also look for companies with strong financials and track records of consistently paying dividends and even increasing them over time. They are also well-diversified across multiple market sectors. And some have very competitive fees or expense ratios.

So let’s take a deeper dive.

Schwab U.S. Dividend Equity ETF (SCHD)

Many investors have selected the Schwab U.S. Dividend Equity ETF (SCHD) as a core part of their portfolios. And it’s not surprising why. SCHD invests in high-quality companies with reputable financial strength and a consistency in paying dividends.

It generates a yield of about 4%, while also delivering a five-year return of over 35%.

The fund is well diversified across multiple sectors. Its main holdings include companies in the energy, consumer staples and healthcare sectors. The last two are part of the defensive sectors, which tend to perform well under various market conditions. Combined, these characteristics can give investors stability, capital appreciation and reliable income.

But one of the main reasons many investors rely on SCHD is because of its low expense ratio of 0.06%, which is among the lowest in the industry. And it holds net assets totalling $71.64 billion.

Vanguard High Dividend Yield ETF (VYM)

Another fund that often fills the core part of many dividend investors’ portfolios is the Vanguard High Dividend Yield ETF (VYM). This well-diversified ETF invests in nearly 600 stocks across 10 sectors. It screens for companies projected to pay higher-than-average yields, which could give investors a significant income stream. The fund mainly focuses on the financials, technology and industrials sectors.

VYM offers a yield of about 2.44% and has delivered a five-year return of over 64%. Moreover, Vanguard is known for offering funds with industry-beating fees. And VYM also stands out for its low expense ratio of 0.06%. Plus, it has net assets of $84.52 billion.

SPDR S&P Dividend ETF (SDY)

The SPDR S&P Dividend ETF (SDY) is another fund recognized for stability and steady income. SDY invests in the so-called Dividend Aristocrats. It seeks companies which have consistently increased their dividends for at least 20 consecutive years, and it weights the stocks by yield. This could offer investors both reliable income and capital appreciation. SDY offers a yield of about 2.61% and has a five-year return of about 40%. Its top holdings are among the industrials, consumer staples and utilities sectors. Moreover, the fund holds about $19.88 billion in net assets and has an expense ratio of 0.35%.

Vanguard Dividend Appreciation ETF (VIG)

The Vanguard Dividend Appreciation ETF (VIG) is another fund that focuses on companies with track records of raising dividends year over year. VIG’s main holdings are in the information technology, financials and healthcare sectors. And it’s diversified across more than 300 stocks.

The fund offers a yield of about 1.62% and a five-year return of over 60%. It also has an ultra-low expense ratio of 0.05%.

JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) takes two approaches to generating income. It invests in large-cap stocks in the S&P 500 Index and also sells options. Moreover, the fund screens for stocks with low volatility and it uses its proprietary research to find over- and- undervalued stocks with favorable risk/return profiles. And it delivers an impressive yield of above 8%, among the highest on this list. This could make the fund very attractive to income seekers.

The fund is heavily invested in the information technology sector, which has been benefiting from the artificial intelligence (AI ) movement. It’s also largely concentrated in the financials and healthcare sectors. Additionally, JEPI has earned the Morningstar Silver Medalist rating.

But as an actively managed fund, JEPI has a slightly higher expense ratio of 0.35%, which is higher than fees for other funds on our list. JEPI has a five-year return of around 5.21% and holds net assets of $41.49 billion.