Best dividend ETF to invest in
The best dividend ETFs can serve a lot of purposes nowadays. For example, the high-yield options can bring a lot of earnings quickly. Those extra funds can be useful for starting other investments or improving your long-term finances. Dividend ETFs could also be a great way to deal with the uncertainty brought by the pandemic.
However, it’s not a good idea to start if you do not know much about this dividend-paying asset. It can be a bit trickier to choose the best dividend ETFs than picking the most promising dividend stocks. That’s because they are like a basket of different assets. Fortunately, I could help you choose by showing my recommendations for this year!
That’s why I’ll start by talking about my top three divided ETFs while explaining why I picked them. Then, I’ll elaborate on what dividend ETFs are and how they work. After that, I’ll show you the other assets that can be a source of passive income. Note that you’re in charge of planning your investments, so choose your ETFs based on your goals.
Top 3 dividend ETFs for 2022
- Global X SuperDividend ETF (SDIV)
- Vanguard FTSE Developed Markets ETF (VEA)
- ProShares Bitcoin Strategy ETF (BITO)
#1. Global X SuperDividend ETF (SDIV)
Dividend yield: 8.93%
People usually look to large gains when they want the best dividend ETFs. That’s why the Global X SuperDividend ETF tops the list.
Now, you might be wondering how that’s possible. That 8.93% yield is not easy to come by for most ETFs. Regular ones only provide around 2% to 3% yield every year.
ETFs are a basket of assets under management by certain companies. In this case, SEI Investments Distribution Co. is in charge of the SDIV option.
It has holdings from major companies worldwide, such as China Power International and Imperial Brands PLC. This allows the fund to gain profits from several good sources.
#2. Vanguard FTSE Developed Markets ETF (VEA)
Dividend yield: 3.46%
In plenty of my articles, I’ve mentioned that tech continues to advance despite the overall uncertainty we have nowadays. And this is all because of the COVID-19 pandemic.
At the time of writing, people worldwide are staying indoors to avoid the virus. This makes normal office work impossible, so many have turned to remote jobs.
This increased the need for devices and the semiconductor chips found in each. That’s why it’s a good idea to invest in companies related to these products.
That’s the reason why the Vanguard FTSE Developed Markets ETF (VEA) is in second place on this list. It has a large-cap foreign mix that blends with the current tech demand.
Its top two holdings are in Samsung Electronics Co. Ltd., the major South Korean tech brand that held the 12.4% global market share of computer chips in 2020.
What’s more, its top seven holdings is Shopify, the popular online shopping cart platform. That will likely yield more dividends in the long run as more people buy things on the internet.
VEA’s number nine is AstraZeneca, a brand that supplies the world with COVID vaccines. At the time of writing, the world is taking the booster shots, so it is also likely to earn more.
VEA isn’t on top of my list because of its lower dividend yield. Yet, this could help you balance the more volatile SDIV ETF. After all, diversification is a basic investment strategy.
At the time of writing, its market price is $51.38. It’s a bit pricier, but that might be worth it if you want a more durable option than the SDIV ETF.
#3. ProShares Bitcoin Strategy ETF (BITO)
This one doesn’t pay dividends, so why is it on the list As mentioned earlier, diversification is a basic investment move. That’s because it reduces risk and boosts profit.
This is why ProShares Bitcoin Strategy ETF (BITO) topped this list. It’s the first-ever bitcoin ETF, a fund that tracks the value of this cryptocurrency.
It lets you invest in this digital asset even though it’s banned in your country. What’s more, you can buy and sell it just like any regular stock. You will want to sell it, though!
Let’s say your other ETFs don’t perform well. You could sell BITO to cut your losses. With growth as high as 500%, this may provide more profits than the previous entries.
Yet, It didn’t top the list of the best dividend ETF list because it doesn’t provide dividends. What’s more, it’s a new type of asset, so we’re not sure how it will perform in the long run.
That’s expected from a fund that tracks the most volatile asset in the world. As of January 3, 2022, the BITO price was $28.95.
Why did these dividend ETFs make the list?
You can find so many other great options, not on this list, such as the iShares Select Dividend ETF. Yet, there are reasons why these made it on the list.
That’s because they are in sectors that are likely to profit well in the coming years. As was said, the world is diving deeper into tech, so it would make sense to get related options.
SDIV is the best dividend ETF as it provides a high dividend yield. If you’re looking for a more durable option, the VEA might be a better choice.
These assets were not meant to stand alone in your portfolio. A good investor should pick various assets that balance their risk and reward appetite.
At the start of this article, you will have to choose your ETFs based on your research. This could help you start, but you should look into your assets further.
What are dividend ETFs?
This article can help you begin investing because it will explain how dividend ETFs work. Knowing this is a must for you to pick the best options.
An ETF or exchange-traded fund collects various assets such as stocks, bonds, and even consumer staples. A company, sometimes called a sponsor, manages the fund.
Now, ETFs can provide dividends because they contain assets that produce that money. Now, you might be wondering why or how an asset even gives dividends.
Dividends often come from companies with publicly-traded shares. Buying them means purchasing a part of those companies. Sometimes, they come with other benefits.
Specifically, stocks may pay dividends if a company decides to give some to investors. It does this to ensure its continued loyalty and improve its image.
If you earn money from your dividend stocks, chances are you’d keep holding on to them. Also, more people are likely to invest once they learn you can earn from it.
However, dividends aren’t a sure thing. A company may choose not to distribute dividends if it didn’t earn enough in a certain period or wants to use the money for expansion.
How to choose the best dividend ETF
Let’s say you truly want to include dividend ETFs in your portfolio. Then, you must follow these steps to choose the right ones:
- Look at the risks – Even the ETFs suggested in this article have a chance of doing poorly. Rather than looking for the perfect investment, you should look for the one that fits your goals. Also, look for the reasons why an asset could fail. For example, the bitcoin ETF could crash if the bitcoin price goes down significantly.
- Check the other metrics – You should pay attention to their market caps, expense ratios, and other characteristics. These will help you gauge how your ETFs will perform in the long run. For example, look at the dividend history to understand its future dividend growth and total returns.
- Know the sponsor – Your ETF will have another group managing it. They will choose to add new assets or remove new ones. Make sure they will run the ETF in your best interest as you will spend an expense ratio for them.
- Find the right broker – Since ETFs work like stocks, you will have to get a good broker too. Thankfully, it’s much easier to purchase assets nowadays as you can do it with a credit card. Again, you’ll pay that person or website for the service, so make sure you look for the one that’s worth it.
Other passive income options
The best dividend ETFs aren’t the only passive income sources, though. If you want more dividend investments, you might want to check these:
- Index funds – Similar to ETFs, they’re a collection of various assets. However, it’s meant to follow a specific market index like the S&P 500. You don’t mind the milder dividend yields. This might be a good choice if you want a safer investment.
- Mutual funds – These are like ETFs and index funds, but they try to beat market indexes instead. You will have to choose these more carefully, as mutual funds rely heavily on their managers. If they choose the wrong assets for the fund, it could spell huge losses for you!
- Growth stocks – You could just invest in individual stocks that pay dividends. It would be best to find the ones that belong in the most promising sectors. They’re highly risky as they will fall heavily on their future profits.
Those were the best dividend ETFs in 2022. Again, this article is not meant as investment advice. Choose your assets based on your research and plans.
Hopefully, this article gave you an idea of how you should invest. However, it would be best for you to look at the millions of other sources on the internet.
Of course, you could check the other content on Inquirer USA first. Those could teach you more about assets, investment strategies, and other global trends.