Consumer goods, industrials, and financials lead the fund’s sectors by weighting. The top companies include ExxonMobil, Johnson & Johnson, and General Electric — three companies that benefit greatly from sheer scope and size.
The Vanguard High Dividend Yield ETF (NYSEARCA:VYM) has a low expense ratio of 0.1%. Average three-year NAV return is more than 19%, while the five-year tops 8%.
How to choose
The right dividend ETF for you depends on what’s needed in your portfolio. But there are a few things to keep in mind.
Vanguard has the lowest expense ratio; iShares’ ratio is four times higher. The iShares ETF also has 50% of its assets in either utilities or industrials, while the other two have a broader mix in the top sectors. But Vanguard’s top 10 companies represent almost 35% of its total assets compared to about 21% for iShares and 27% for WisdomTree.
So if you really need some Dow exposure and don’t have it elsewhere — or have a hankering for utilities — consider the iShares ETF. If expense ratios top your list of concerns, then Vanguard may be the best pick. Or you could stick to the middle of the road with the dependable mixed bag, WisdomTree.
Foolish final thoughts
Dividend ETFs offer a chance for income investors to get in on some high-yielding, big-name companies at a cheaper price than investing in individual companies. And an ETF spread across several industries reduces general risk.
I’m personally leaning toward Vanguard High Dividend Yield ETF (NYSEARCA:VYM) because of the low expense ratio and its decent spread across sectors, but it’s important to do your own research and see what fits in best with what you already own.
The article 3 Launchpads for Dividend Investors originally appeared on Fool.com and is written by Brandy Betz.
Brandy Betz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
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