The search for top dividend ETFs is always on, particularly for investors who don’t have the time or energy to invest in researching hundreds or thousands of potential options in this universe. Having capital to invest is one thing. But it’s the time commitment to really diving into which individual stocks (or ETFs for that matter) are worth one’s hard-earned capital.
In this article, I’m going to highlight two top dividend ETFs I think are unique in many ways to the more “vanilla” offerings out there. These are funds come with a unique blend of holdings, but are each still highly diversified and certainly fit into the low-cost bucket. That’s ultra-important for long-term investors looking to compound their wealth over a significant time frame.
Vanguard International Dividend Appreciation ETF (VIGI)
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One of the top Vanguard ETFs I don’t think gets enough love, especially among dividend investors, is the Vanguard International Dividend Appreciation ETF (VIGI). This ETF picks its core holdings from the Nasdaq Dividend Achievers Select Index which tracks only the highest-quality international growth stocks that have a proven track record of raising their dividends consistently over time.
In other words, investors looking for ex-North American exposure (perhaps due to being over-indexed to domestic exchanges) can sleep well having at least a slice of their portfolio dedicated to a fund with high-quality global companies to further diversify over-exposure to one market (or one sector).
This ETF has continued to see its payouts increase in recent years, highlighting just how resilient the portfolio’s core holdings have been to global turmoil. And the added benefit is that if the U.S. market does falter relative to other developed markets around the world (as it did in April following Trump’s tariff announcements), outperformance is possible for funds that include at least some exposure to international ETFs.
Now, VIGI did see some selling pressure in April and briefly dipped below $75 per share. But with this ETF now trading around $88 per share, good for a gain of around 20% since then, it’s hard to make an argument that there are definitively better options for geographic diversification, particularly for dividend investors. With a yield of 1.9% and an expense ratio of 0.1% (both reasonable for international ETFs), this is a winner in my books.
Vanguard High Dividend Yield ETF (VYM)
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Another top dividend ETF brought to investors courtesy of Vanguard I think is worth considering is Vanguard High Dividend Yield ETF (VYM).
With this ETF, investors gain exposure to blue-chip U.S. stocks tracked via the FTSE High Dividend Yield Index. With a current expense ratio of 0.06% and a dividend yield of more than 2.6%, one could make the argument that this is the dominant option when compared to the likes of VIGI, or other internationally-focused ETFs.
Again, I think the diversification piece is important. But it’s also important to remember that the U.S. market is the 8,000 lb. gorilla in the room. As such, finding a way to gain ultra-low-cost exposure to high-quality dividend stocks in this market is where most investors are going to spend the majority of their time. Thus, I’d be remiss to ignore VYM, particularly for investors who are seeking more meaningful up-front yields to start their dividend investing journey.
It’s worth noting that there are other more growth-oriented dividend ETFs out there for those seeking a total return mix that’s tilted a bit more toward capital appreciation. In other words, this fund has underperformed some other top dividend ETFs which have positioned their portfolios more aggressively.
But with a more conservative portfolio mix of large-cap value stocks, and a relative underweight in most growth areas of the market (relative to other ETFs), this is one of my sleep at night picks I thought I’d share with readers.
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