Dividend factor ETFs


This is one of a series of articles discussing smart beta ETFs. Other smart beta articles you can read:



Since 1926, dividends have contributed nearly a third of total equity return while capital gains have contributed two-thirds. So dividend investing has become very popular. A dividend ETF is a so-called "smart beta" ETF that follows an index that intentionally selects stocks with high dividend yields, and/or weights the stocks it is holding, based on each stock's dividend yield (rather than each stock's market capitalization).

There are a large number of dividend focused ETPs, as shown in this table:

CategoryCount
Alternatives4
Global Equity75
Special Security Types8
US Equity 90
Total177

The number of dividend based ETFs continues to grow, as shown by this table:

Year of InceptionCount
20032
20042
20056
200623
20079
20083
20091
20103
20115
201211
201321
201410
201521
201629
201712
20189
20197
20203
Total177

Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.

More and more ETFs are being launched that combine dividend investing with other investment factors:

Number of Factors UsedCount
175
247
331
424
Total177

Does dividend investing work?

What is the goal?

Dividend ETFs are not necessarily about outperforming the market. In today's low interest rate environment, dividend ETFs have soared in popularity partly because investors are looking for any kind of yield. Many dividend ETFs combine dividend strategies with low volatility strategies, under the theory that investors looking for yield also want stable, conservative companies with less volatility.

What factors do you get with a dividend ETF?

It is difficult to use academic research as a tool to analyze dividend yield ETFs because most factor investment academic research does not specifically address dividends as a factor by itself. There is research on low volatility investing, and value investing, but not a lot on dividend investing. The general consensus seems to be that by selecting dividend stocks, you are indirectly selecting value stocks and low volatility stocks.

How well do dividend ETFs perform?

Here's a screen of U.S. equity dividend ETFs that are large cap ETFs that are not using any other factor or strategy:

SymbolDescriptionInception DateLifetime Total ReturnSPY Total ReturnDifferenceActions
DLNWisdomTree LargeCap Dividend Fund ETF06/16/2006138%202%-64%Analyze
SDOGALPS Sector Dividend Dogs ETF06/29/201290%166%-77%Analyze
NOBLS&P 500 Dividend Aristocrats ETF10/09/201394%111%-17%Analyze
SPYDSPDR Portfolio S&P 500 High Dividend ETF10/21/201514%70%-56%Analyze
DJDInvesco Dow Jones Industrial Average Dividend ETF12/16/201549%68%-18%Analyze
LEADReality Shares DIVCON Leaders Dividend ETF01/06/201687%75%12%Analyze
RNDVUS Equity Dividend Select ETF06/20/201714%40%-26%Analyze
RNLCLarge Cap US Equity Select ETF06/20/201723%40%-17%Analyze
TEQIT. Rowe Price Equity Income ETF08/05/2020-5%-2%-3%Analyze

Our Picks

One thing we do at StockMarketMBA.com is give each ETF a rating for long term investors. Here are the dividend ETFs that we have rated as an "editors choice", our highest rating:

SymbolDescriptionInception DateCategoryActions
DLSWisdomTree International SmallCap Fund ETF06/16/2006Global Equity Analyze
DVYEiShares Emerging Markets Dividend ETF02/23/2012Global EquityAnalyze
FNDCSchwab Fundamental International Small Cap Company Index ETF08/15/2013Global Equity Analyze
FNDESchwab Fundamental Emerging Markets Large Company ETF08/15/2013Global Equity Analyze
XSHDInvesco S&P SmallCap High Dividend Low Volatility ETF11/29/2016US Equity Analyze
VSDAVictoryShares Dividend Accelerator ETF04/17/2017US Equity Analyze
EEMDAAM S&P Emerging Markets High Dividend Value ETF11/28/2017Global EquityAnalyze

You can see a list of all ETFs that are using dividends as an investment factor using our ETF screener.


All data is a live query from our database. The wording was last updated: 04/09/2020.

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