The 3 Best Dividend ETFs of 2022 (and 1 to Avoid)

As the investment landscape continues to evolve, many investors seek stable income streams to weather market volatility. Dividend exchange-traded funds (ETFs) are an excellent option for those looking to generate income while gaining exposure to a diverse range of equities. In this article, we’ll explore the three best dividend ETFs of 2022 and one that investors might want to avoid.

The Best Dividend ETFs of 2022

1. Vanguard Dividend Appreciation ETF (VIG)

Overview:
VIG is designed to track the performance of the NASDAQ U.S. Dividend Achievers Select Index, which includes companies that have a long history of increasing their dividends.

Key Features:

• Low Expense Ratio: VIG boasts an expense ratio of just 0.06%, making it one of the most cost-effective options in this space.
• Quality Companies: The fund focuses on high-quality companies that have demonstrated strong dividend growth, which often correlates with stable earnings.
• Consistent Performance: In 2022, VIG maintained solid performance, appealing to those seeking reliability amidst market fluctuations.

2. Schwab U.S. Dividend Equity ETF (SCHD)

Overview:
SCHD aims to track the performance of the Dow Jones U.S. Dividend 100 Index, which consists of high dividend yielding U.S. stocks.

Key Features:

• High Dividend Yield: With a yield typically over 3%, SCHD offers a strong income potential.
• Focus on Financial Health: The fund selects stocks based on fundamental criteria, emphasizing cash flow and dividend sustainability.
• Diversification: SCHD is well-diversified across sectors, reducing risk while still providing attractive income.

3. iShares Select Dividend ETF (DVY)

Overview:
DVY targets high dividend-paying stocks in the U.S. while focusing on companies that have a strong history of dividend payments.

Key Features:

• Historical Stability: The ETF primarily invests in established companies, which can provide more stability during unpredictable market conditions.
• Yield: DVY generally offers one of the higher yields among dividend ETFs, often crossing 3.5%.
• Sector Exposure: The fund typically emphasizes sectors like utilities and consumer goods, which tend to be less volatile.

Dividend ETF to Avoid

ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

Overview:
NOBL tracks the S&P 500 Dividend Aristocrats Index, which includes companies that have increased dividends for 25 consecutive years. While it seems enticing, there are reasons investors might want to reconsider.

Concerns:

• Higher Expense Ratio: Compared to other dividend ETFs, NOBL has a higher expense ratio of around 0.35%, which can eat into returns over time.
• Concentration Risk: While it focuses on well-established companies, it tends to be heavily weighted in a few sectors, potentially increasing risk if those sectors underperform.
• Performance Issues: In 2022, NOBL lagged behind other dividend ETFs, raising questions about its effectiveness in providing reliable returns compared to its competitors.

Conclusion

For investors seeking income and stability in 2022, the Vanguard Dividend Appreciation ETF (VIG), Schwab U.S. Dividend Equity ETF (SCHD), and iShares Select Dividend ETF (DVY) have proven to be excellent choices. Conversely, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) may not provide the best value due to its higher costs and underwhelming performance. As always, it’s crucial for investors to conduct thorough research and consider their individual financial goals before making investment decisions.

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA