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:
|Special Security Types||8|
|Year of Inception||Count|
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 Used||Count|
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:
|Symbol||Description||Inception Date||Lifetime Total Return||SPY Total Return||Difference|
|DLN||WisdomTree LargeCap Dividend Fund ETF||06/16/2006||138%||202%||-64%|
|SDOG||ALPS Sector Dividend Dogs ETF||06/29/2012||90%||166%||-77%|
|NOBL||S&P 500 Dividend Aristocrats ETF||10/09/2013||94%||111%||-17%|
|SPYD||SPDR Portfolio S&P 500 High Dividend ETF||10/21/2015||14%||70%||-56%|
|DJD||Invesco Dow Jones Industrial Average Dividend ETF||12/16/2015||49%||68%||-18%|
|LEAD||Reality Shares DIVCON Leaders Dividend ETF||01/06/2016||87%||75%||12%|
|RNDV||US Equity Dividend Select ETF||06/20/2017||14%||40%||-26%|
|RNLC||Large Cap US Equity Select ETF||06/20/2017||23%||40%||-17%|
|TEQI||T. Rowe Price Equity Income ETF||08/05/2020||-5%||-2%||-3%|
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:
|DLS||WisdomTree International SmallCap Fund ETF||06/16/2006||Global Equity|
|DVYE||iShares Emerging Markets Dividend ETF||02/23/2012||Global Equity|
|FNDC||Schwab Fundamental International Small Cap Company Index ETF||08/15/2013||Global Equity|
|FNDE||Schwab Fundamental Emerging Markets Large Company ETF||08/15/2013||Global Equity|
|XSHD||Invesco S&P SmallCap High Dividend Low Volatility ETF||11/29/2016||US Equity|
|VSDA||VictoryShares Dividend Accelerator ETF||04/17/2017||US Equity|
|EEMD||AAM S&P Emerging Markets High Dividend Value ETF||11/28/2017||Global Equity|
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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