2023 Best Dividend ETFs: Top 10 Income Funds Ranked (2024)

The best dividend ETFs charge low fees, maintain healthy diversification, keep turnover low, and track benchmarks that apply some filters for business quality and dividend safety.

We reviewed and ranked our top 10 dividend ETFs for income and long-term total returns. Our list includes some popular ETFs like SCHD but also funds you may not have known about.

While investing has no short cuts, we believe these dividend ETFs are some of the best ones out there for dividend growth investors.

Fund Inception: November 10, 2006

The Vanguard High Dividend Yield ETF (VYM) tracks the performance of the FTSE High Dividend Yield Index. As its name suggests, this index focuses purely on the highest-yielding stocks (excluding REITs) based on estimated dividends for the year ahead, appealing to retired investors who seek current income.

VYM is well-diversified with more than 400 stocks in the portfolio. No company exceeds 4% of the fund, and VYM's top 10 positions (all blue-chip stocks like Exxon Mobil and Johnson & Johnson) represent less than 30% of the portfolio. Holdings are balanced across sectors, too.

While VYM's diversification reduces risk, there are no business quality filters that go into creating the index that it follows – the only metric used is dividend yield. This can result in bigger payout reductions during recessions, leading us to give the ETF a "C" rating for dividend safety.

Despite the dividend cuts, VYM’s total return was reasonable in 2008. The ETF fell by 32%, which was slightly better than the S&P 500’s return of -37%.

Some of the other high-yield dividend ETFs are likely better bets for stability because they incorporate more business quality and dividend safety measures.

However, it’s also hard to ignore the Vanguard brand name, very low expense ratio, and long performance track record of this fund.

Fund Inception: November 8, 2005

The SPDR S&P Dividend ETF (SDY) seeks to match the returns of the S&P High Yield Dividend Aristocrats Index. The dividend yield-weighted index is comprised of companies in the S&P Composite 1500 Index that have increased their dividends for at least 20 consecutive years.

The is a favorite source of ideas for income investors, and its yield-focused cousin simply expands the universe of eligible companies from 500 (S&P 500) to 1,500 (S&P 1500) while using a slightly shorter dividend growth streak requirement (20 versus 25 years).

Few companies have maintained a dividend growth streak for at least two decades, so this dividend ETF theoretically targets some of the higher quality dividend-paying stocks. However, buying up the highest-yielding stocks in this group can still lead to trouble.

The fund reduced its dividend payments by 22% in 2009, about in line with the S&P 500’s total dividend cut. However, the SDY still relatively performed well overall, falling by 23% compared to the S&P 500’s decline of 37%.

Investors can also take some comfort in the fund's diversification. Individual holdings are subject to a 4% weight cap, and no sector accounts for more than 20% of the portfolio.

Vanguard's International Dividend Appreciation ETF (VIGI) gives investors exposure to over 300 companies outside the U.S. that have increased their dividends for at least seven consecutive years. The fund also excludes REITs and the top 25% highest-yielding eligible stocks.

VIGI may appeal most to investors who want international diversification for their portfolios, with a focus on consistent dividend growers to weed out potentially lower-quality businesses.

The ETF's largest positions include blue-chip stocks such as pharma giants Novartis and Roche, food-and-drink maker Nestle, and Canadian bank Toronto-Dominion.

No individual position is allowed to exceed 4% of the portfolio's value, and stocks are reasonably balanced across sectors and countries (none exceed 20% of the fund) to provide healthy diversification.

While VIGI focuses on consistent dividend growers, the ETF's payouts have been volatile. This can likely be attributed mostly to rebalancing and the effect of currency exchange rate fluctuations.

That said, VIGI's low expense ratio, focus on foreign companies with consistent dividend growth, and diversified portfolio make it an appealing ETF for dividend investors seeking international exposure.

Fund Inception: October 9, 2013

The is one of the most popular places dividend growth investors turn to for ideas. Each of its 60-plus holdings has increased its payout for at least 25 consecutive years and is a member of the S&P 500 Index.

It’s no wonder why ProShares' S&P 500 Dividend Aristocrats ETF (NOBL), which tracks an equal-weighted index of these iconic dividend growers, is considered one of the best dividend ETFs.

Few companies have survived multiple recessions, found ways to remain relevant, and maintained sufficient financial health to keep their dividends rising for decades. Buying NOBL is one way to gain exposure to dozens of these businesses.

NOBL is reasonably diversified across sectors but holds relatively few technology stocks, which generally face a faster pace of change and prioritize growth investments over dividends.

Focusing on quality, time-tested companies has historically helped NOBL outperform the S&P 500 with lower volatility. However, the ETF's dividend growth has been choppy due primarily to periodic rebalancing.

Investors desiring more predictable dividend growth each year may prefer building their own portfolio of individual stocks.

But income noise aside, NOBL provides an easy way to gain exposure to a number of proven dividend growth stocks, making it a top dividend ETF to consider.

The Franklin U.S. Low Volatility High Dividend ETF (LVHD) owns between 50 and 100 profitable U.S. companies that meet screens for sustainable high dividend yields and low price and earnings volatility.

The portfolio maintains healthy diversification by limiting individual holdings to 2.5% of its value. Additionally, no sector can exceed 25% of the portfolio, and REITs cannot top 15%. Holdings are reconstituted annually and rebalanced quarterly.

Given its focus on stocks with lower volatility, LVHD skews towards more stable sectors like utilities and consumer staples and holds quality, time-tested businesses like General Mills, Duke Energy, Coca-Cola, and Kimberly-Clark.

Thanks to this defensive approach, LVHD's returns have exhibited less volatility than the broader market's. The ETF usually outperforms in down markets, too.

The biggest knock on the fund is its choppy dividend growth track record. This appears to be driven by rebalancing activity rather than dividend cuts from underlying holdings, most of which seem likely to produce consistent but slow dividend growth.

Income investors comfortable with some fluctuation in dividends may still find LVHD's 3% to 4% yield and focus on dividend sustainability and low volatility attractive.

Fund Inception: May 22, 2013

WisdomTree's U.S. Quality Dividend Growth ETF (DGRW) tracks an index of approximately 300 dividend-paying companies deemed to have the best combined rank of growth and quality factors.

DGRW is one of the best dividend ETFs because it screens companies based on long-term earnings growth expectations, return on equity, and return on assets. While not perfect, these factors can remove some of the lower-quality, slower-growing dividend stocks from the fund.

The result has been double-digit annual dividend growth since the fund's inception in 2013.

With hundreds of holdings, DGRW is well-diversified. The dividend-weighted ETF's top 10 holdings account for around 35% of the portfolio and consist of quality businesses like Apple, Procter & Gamble, and Home Depot. Only one sector (technology; 27% of the fund) exceeds 20% of DGRW's value, too.

Fund Inception: March 29, 2011

The iShares Core High Dividend ETF (HDV) tracks Morningstar's Dividend Yield Focus Index, which consists of high quality U.S. companies with strong financial health and relatively high dividend yields (all qualified income as REITs are excluded).

The index is comprised of qualified dividend-paying stocks (REITs are excluded) that are screened for superior company quality and financial health as determined by Morningstar’s proprietary methodologies focused on economic moats and balance sheet analysis.

Companies in the index must have a moat rating of "narrow" or "wide", an uncertainty rating that is not very high or extreme, and a Distance to Default score, which measures the likelihood of a default, in the top 50% of eligible companies. The stocks in the index represent the 75 highest-yield stocks meeting the screening requirements.

Compared to the other best dividend ETFs on our list, HDV's portfolio is more concentrated with its top 10 holdings (weighted by dividend dollars paid) accounting for over half of the fund's value. However, HDV's largest weights are in blue-chip stocks such as Exxon Mobil, Verizon, and AbbVie.

The fund's sector mix tells a similar story, with outsized exposure to health care and energy stocks compared to more diversified indices.

HDV's higher concentration hasn't stopped the ETF from delivering rising dividends over the long term. The fund's annual payouts have compounded at a mid-single-digit pace since its 2011 inception, with only two years recording moderate dips.

Considering its quality filters, low expense ratio, and higher dividend yield that usually hovers near 3% to 4%, iShares Core High Dividend ETF is an interesting option for retirement income.

The iShares Core Dividend Growth ETF (DGRO) tracks the Morningstar U.S. Dividend Growth Index, which is a dividend dollar-weighted index that picks companies based on whether they have a consistent history of growing their dividends for at least five straight years.

Additional criteria focuses on payout ratio and dividend yields that are not at extreme levels, reducing risk and increasing the odds of picking companies that can sustain healthy dividend growth:

The result is a well-diversified portfolio with over 400 holdings (none greater than a 3.5% weight), including heavyweights like Microsoft, Exxon Mobil, Pfizer, and Apple. Stocks touch every sector:

DGRO's approach has resulted in a double-digit annualized return since its 2014 inception. Annual dividends have also grown every year:

Coupled with a very low expense ratio and a dividend yield that usually hovers near 2%, DGRO represents a top ETF for long-term dividend growth investors to consider.

Fund Inception: October 20, 2011

Schwab's U.S. Dividend Equity ETF (SCHD) tracks the Dow Jones U.S. Dividend 100 Index, which selects high-yielding stocks with a record of consistently paying dividends and maintaining strong financial ratios.

One hundred stocks are selected to the index based on four fundamentals-based characteristics that are given equal weights:

Each stock is also screened for dividend payment consistency, size, and liquidity. All companies in the index have paid dividends for at least 10 consecutive years.

This screening criteria results in a portfolio of mostly blue-chip dividend stocks, with SCHD's top 10 positions including AbbVie, Pepsico, Merck, Verizon, and Chevron.

No single stock can represent more than 4% of the index, and no one sector can exceed 25%. This results in a well-diversified ETF that doesn't tend to be overly exposed to any given area of the market.

REITs, MLPs, preferred stocks, and convertibles are excluded from the index, resulting in a stream of qualified dividend income that receives favorable tax treatment.

SCHD's quarterly dividends fluctuate unpredictably. But the fund's focus on quality companies that generate free cash flow, have moderate debt, and grow their dividends has resulted in higher annual payouts since SCHD's inception in 2011.

Coupled with a dividend yield that usually hovers around 3%, SCHD is one of the best dividend ETFs for investors seeking a balance of income and long-term capital appreciation.

Fund Inception: April 21, 2006

Vanguard's Dividend Appreciation ETF (VIG) seeks to match the performance of the S&P U.S. Dividend Growers Index. This index tracks companies that have increased their dividends for at least 10 consecutive years, excluding REITs and the top 25% highest-yielding eligible stocks.

The result is a portfolio filled with high-quality dividend growers. Visa, Microsoft, Home Depot, and Johnson & Johnson are among the ETF's top 10 holdings.

VIG's focus on more reliable dividend-paying stocks paid off during the 2007-09 financial crisis. The ETF's -27% total return in 2008 outperformed the S&P 500's loss of 37%.

More impressively, the fund paid out 98 cents per share of dividends during 2009, which was a decrease of less than 5% compared to 2008. The S&P 500’s (SPY) dividends fell by 20% over the same period.

VIG's diversification has helped smooth results over time, too. The fund typically holds around 200 to 300 stocks, with none allowed to exceed 4% of the portfolio's value. Stocks are also balanced across sectors.

While VIG's growth tilt and lower dividend yield may turn away some income investors, the low-cost ETF is one of the best options for fast-growing payouts and long-term capital appreciation potential.

Over 100 dividend-focused ETFs exist, but the best dividend ETFs charge low fees, focus on business quality, and maintain strong diversification.

For growth-focused investors, the Vanguard Dividend Appreciation ETF (VIG) and iShares Core Dividend Growth ETF (DGRO) are two of our favorite dividend ETFs.

Investors seeking income first may find the iShares Core High Dividend ETF (HDV), Schwab's U.S. Dividend Equity ETF (SCHD), and Franklin's U.S. Low Volatility High Dividend ETF (LVHD) to be most appealing.

Owning ETFs can provide a quick and easy way to achieve immediate diversification, save time, and keep costs low. However, investors should be comfortable with the key tradeoffs between ETFs and owning individual stocks, including the potential for more substantial dividend reductions.

There's no right or wrong answer regarding the ideal mix of dividend ETFs and individual stocks in a portfolio. In most cases, it's ultimately a personal preference.

Most of the investors who use Simply Safe Dividends' portfolio tracking tools and research own a mix. If you're looking for ways to generate more income and save time overseeing your portfolio, feel free to give our site a try.