The 3 Dividend ETFs I Wish I’d Bought Earlier

Investors looking for yield in this current environment certainly have plenty of great options in the equity and fixed income market to choose from. But for many investors, finding the right exchange traded fund (ETF) that can provide diversified exposure to a particular asset class is the preferable way to go. 

Personally, I’m one such investor. Doing deep dives into particular companies or specific bond holdings excites me, and I do pick stocks in and around the edges. But the vast majority of my savings and investments are in ETFs due to the low-cost diversification these vehicles provide. 

For investors looking for top-quality dividend ETFs to consider right now, here are three of my top picks I wish I’d bought sooner.

iShares 20+ Year Treasury ETF (TLT)

Those with the view that interest rates are likely to continue to head lower may want to take a look at the iShares 20+ Year Treasury ETF (TLT). 

What TLT and other bond ETFs tracking government bonds with longer durations provide is really a sense of portfolio stability over a given time frame. For those looking to invest for the next two decades or longer, holding some exposure to assets that will provide a reasonable yield over that time frame makes sense. And for those like myself who believe that this recent bout of inflation and higher interest rates will ultimately get bought leading to rock-bottom interest rates at some point in the future, that’s an insurance policy that could turn out to be a profitable bet moving forward. 

I’m of the view that the 4.3% yield TLT currently provides is one that’s worth locking in, even for those who think rates may hold steady or increase slightly over time. That’s a reasonable yield to park a portion of one’s portfolio in, to balance out cash needs that may come over time, or have an ultra-liquid option to be able to sell when the time comes (and keep one’s capital working in higher-growth equities in the meantime).

Whatever one’s goals are, I think TLT can supplement an equities portfolio well both from a diversification and risk-adjusted returns perspective. I wish I locked in an even higher yield before, but can’t do anything about that now. Again, this ETF’s 4.3% yield is still attractive to me now. 

Vanguard Dividend Appreciation ETF (VIG)

Another top dividend ETF I’ve discussed in the past, but still think holds great value, is the Vanguard Dividend Appreciation ETF (VIG). 

This. ETF tracks the Nasdaq U.S. Dividend Achievers index, which is comprised of a range of companies that have a long history of raising its dividends. For investors like myself who prioritize dividend growth as a key factor to consider when picking individual dividend stocks, that’s a big deal and should be a meaningful driver of capital flows over time in my view. 

Indeed, companies that are able to consistently raise their dividends over time require rock-solid balance sheets, durable growth outlooks, and a proven willingness to do so over time. Statistically speaking, those companies that have not deviated from a dividend growth strategy tend to stick with it until they can’t anymore. But given the mature nature of the high-quality companies held in the VIG ETF, I think there are many decades of dividend growth to come for most of this fund’s holdings. And if one particular company stops raising its dividend or does something crazy like cuts its dividend, another company will find its way into the ETF.

For long-term investors looking for a broadly diversified basket of quality U.S. dividend paying stocks with embedded dividend growth, this is a great option to consider. 

Schwab U.S. Dividend Equity ETF (SCHD)

Investors looking to amplify their yield today via equity exposure have a great option in the Schwab U.S. Dividend Equity ETF (SCHD).

This fund tracks the larger Dow Jones U.S. Dividend Index, which means only the largest and bluest of the blue-chip dividend names are included in this ETF.

With said large-cap exposure, investors have benefited from holding SCHD relative to other dividend ETFs, at least of late. The outperformance we’ve seen in large cap stocks has been impressive, and has been driven in part by changing structural fundamentals in the technology sector which drive most of our economy today. 

In other words, investors who believe that these trends are more likely than not going to continue, with the largest companies getting even larger, the SCHD ETF and its 3.8% dividend yield makes sense as a way to benefit from this upside appreciation while generating strong up-front yield.