2 Dividend ETFs with Higher (and Better) Yields than VPU

Dividend investors on the search for yield and relative stability in this market have plenty of work to do to identify the specific stocks that can outperform the broader market. And for those looking for passive income streams generated from a highly-diversified pool of stocks, specific exchange traded funds (ETFs) such as the Vanguard Utilities Index Fund ETF (VPU) is an excellent option with its 2.9% dividend yield (more than twice that of the S&P 500, for example). 

That said, considering how often I discuss VPU as a top option for long-term investors (and it is), I thought I’d highlight two other dividend ETFs with similar defensive characteristics and higher yields for investors who are looking for a higher up-front return on their investment.

Let’s dive in!

Global X SuperDividend ETF (DIV)

An investor counting their dividend income

One of the more exciting and powerful high-yield dividend ETFs I’ve had my eye on for some time is the Global X SuperDividend ETF (DIV). This fund provides investors with not only a sky-high dividend yield of 6.3% relative to most other dividend ETF options, but also focuses in on rebalancing its portfolio in a way to minimize volatility.

Given that this particular ETF holds the 50 largest and highest-yielding U.S. equities, its yield is going to consistently be much higher than that of the overall market (and even most fixed income securities as well). Accordingly, the companies held in this particular ETF can traditionally carry much higher-than-average volatility, which is where the fund’s rebalancing strategy comes into play. 

The idea behind this particular ETF is to deliver as high a yield as possible while minimizing the effect of outsized moves for investors thinking long-term. Indeed, for those looking to create bond-like income, and who believe that interest rates could drop over the coming year or two (boosting the value of higher-yielding dividend stocks), this is an ETF to consider.

That said, I think the higher volatility and implied risk with DIV is also worth noting. This is a particular holding I think investors should consider strategically, but this isn’t the one basket I’d ever recommend putting all one’s eggs in. Trade accordingly. 

Invesco S&P SmallCap High Dividend Low Volatility ETF (XSHD)

Volatile stock chart

Rounding out this list of high-yield ETFs to consider, we have the Invesco S&P SmallCap High Dividend Low Volatility ETF (XSHD). 

As its name suggests, this ETF is also focused on providing investors with relatively low-volatility exposure to higher yielding dividend stocks. Impressively, this ETF actually offers a dividend yield of 7.2%, which makes it an even higher-yielding option than DIV. That said, this fund’s expense ratio of 0.3% is much higher than most index ETFs investors opt for, so that’s something to take into account. 

This fund specifically tracks the S&P SmallCap 600 High Dividend Low Volatility index, which tracks some of the smallest companies in the S&P 500 with the highest yields. I’m still unsure as to the strategy behind how XSHD maintains a relatively low volatility ratio relative to investors picking these individual stocks themselves. But with a portfolio of companies that continue to generate stable revenue and solid cash flow generation, these small caps could be positioned to outperform particularly if this bull market rally we’re seeing continues.

Again, there’s a higher risk profile with XSHD that investors need to take into consideration. But for those bullish on small cap stocks, or are under-exposed to such names with other index funds or large-cap funds dominating their portfolios, this is an excellent option to balance out a given portfolio.