It’s never a bad time to look for the best dividend ETFs to protect your portfolio. Exchange-traded funds (ETFs) are a great, low-cost way to diversify your portfolio. They're even better if they pay out dividends.
And with markets as volatile as they've been, having passive income flow into your portfolio automatically serves as a hedge against inflation concerns.
As you might expect, you have many options to choose from. However, to help narrow your search, here are three of the best dividend ETFs that you can own today.
Best Dividend ETFs: ProShares S&P 500 Dividend Aristocrats ETF
My first pick is the ProShares S&P 500 Dividend Aristocrats ETF (BATS: NOBL). The fund is wholly invested in a special group of companies known as dividend aristocrats. This is one of the best ways to generate a reliable income because dividend aristocrats are among the most reliable dividend payers.
Not only have these stocks paid out dividends for more than 25 years, but they're also some of the most reliable companies on the planet, even in the worst of times. Some of NOBL's top holdings include Albemarle (NYSE: ALB), Cardinal Health (NYSE: CAH), Nucor Corp. (NYSE: NUE), Dover Corp. (NYSE: DOV), Caterpillar (NYSE: CAT), Chubb Inc. (NYSE: CB), Johnson & Johnson (NYSE: JNJ) and Walmart (NASDAQ: WMT).
The fund yields 2.52% with a reasonable expense ratio of 0.35%. NOBL also paid out a dividend of just over 54 cents per share on September 30. Before that, it paid out a dividend of just over 55 cents on July 1.
You could always buy a basket of these aristocrats, but with the NOBL ETF, you get exposure to all 69 of them.
Best Dividend ETFs: Schwab US Dividend Equity ETF
You may also want to consider the Schwab US Dividend Equity ETF (NYSEARCA: SCHD). The ETF tracks the total return of the Dow Jones U.S. Dividend Index. An attractive feature of the ETF is its ultra-low expense ratio of just 0.06%.
The EFT includes a total of 102 dividend stocks. So, by buying into the ETF, you’re diversified with a great selection of dividend stocks. Some of the top holdings include: Amgen (NASDAQ: AMGN), AbbVie (NYSE: ABBV), Home Depot (NYSE: HD), Cisco Systems (NASDAQ: CSCO), Broadcom (NASDAQ: AVGO), Chevron (NYSE: CVX), UPS (NYSE: UPS), and Coca-Cola (NYSE: KO).
As of this writing, the SCHD ETF has a 3.93% yield. The ETF paid a dividend of just over 27 cents per share on December 15. Before that, it paid a dividend of just over 26 cents on September 29. And before that, it paid just over 26 cents on June 30.
Best Dividend ETFs: Schwab U.S. Large Cap Value ETF
The third pick on this list is the Schwab U.S. Large Cap Value ETF (NYSEARCA: SCHV). The fund tracks the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index (the Index). The Fund’s index comprises the large-cap value portion of the Dow Jones U.S. Total Stock Market Index, which is available to investors in the marketplace.
With an expense ratio of 0.04%, the SCHV ETF holds a portfolio of 561 large-cap value stocks, including Berkshire Hathaway (NYSE: BRK-B), Exxon Mobil (NYSE: XOM), JP Morgan Chase (NYSE: JPM), Pfizer (NYSE: PFE), and Merck (NYSE: MRK), to name a few.
Finding the Best Dividend ETFs is an Effective Sector Rotation Strategy
Sector rotation is common at the end/beginning of a quarter. And when the quarter comes at the end of the year, the rotation can be more pronounced.
Investors are seeing a flight out of many of the Magnificent 7 stocks. That money isn’t just sitting on the sidelines, investment managers are putting it to work in the sectors they believe will benefit as the market broadens out.
Many of those sectors, like consumer staples or consumer discretionary, even utilities, are known for dividend-paying stocks. Rather than picking individual names, finding the best dividend ETFs, like the ones above, is a solid strategy that gives you the benefits of compounding with the diversity of owning stocks across a range of sectors.
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