Exchange-traded funds, or ETFs, can serve as a starting point for finding the perfect matches for your portfolio. Sector ETFs, for example, can help provide safety in a risky industry through the diversity of their holdings. But there are also plenty of options for dividend investors looking for income.
Dividend ETFs with a high number of holdings across several sectors are an easy launchpad for beginning investors still deciding on a strategy — or seasoned investors looking for some balance. Here’s a look at three diverse dividend ETFs that can get you started.
1. iShares Select Dividend ETF (NYSEARCA:DVY)
The iShares Select Dividend ETF (NYSEARCA:DVY) tracks the Dow Jones U.S. Select Dividend Index, with 101 holdings making up about $12.5 billion in assets. The ETF is up 14% in the past year and has a dividend yield of 3.37%.
Utilities make up more than 28% of the holdings, with industrials and consumer goods rounding out the top three sectors. The top companies are Lorillard Inc. (NYSE:LO), Lockheed Martin, and Chevron.
Reigning fund heavyweight Lorillard Inc. (NYSE:LO), accounting for 3.64% of all holdings, produces several brands of cigarettes in the U.S., including Newport and Max. The company’s e-cigarette segment is making headlines after the Centers for Disease Control and Prevention reported that 10% of high-school students use the devices. A dubious Food and Drug Administration could begin to regulate the devices, which purport to help smokers kick the habit. But company financials aren’t suffering from the controversy, trading up 14% in the past year and yielding 5%. This looks like a smart position for the ETF.
The iShares Select Dividend ETF (NYSEARCA:DVY) has an expense ratio of 0.4%, which is the highest of the three. Its three-year net average value return is 18.93%, while the five-year average is 9.59%.
2. WisdomTree LargeCap Dividend Fund
WisdomTree LargeCap Dividend Fund tracks the index of the same name and contains 299 holdings that add up to $1.7 billion in assets. The ETF is up 12% year to date and has a dividend yield of 3.17%.
Consumer staples, information technology, and financials lead the sector breakdown. Top companies include ExxonMobil, AT&T, Apple, and Microsoft.
WisdomTree LargeCap ETF has an expense ratio of 0.28% — higher than the third entry in this list but still rather low by ETF standards. The three-year average NAV return is about 18%, while the five-year average sits at 7.37%.
3. Vanguard High Dividend Yield ETF (NYSEARCA:VYM)
Vanguard High Dividend Yield ETF (NYSEARCA:VYM) tracks the FTSE High Dividend Yield Index and contains 388 holdings totaling $9.5 billion in assets. The ETF is up nearly 15% year to date and has a dividend yield of 2.96%.
