Forget SPY: These 2 Dividend ETFs Beat the S&P 500

The default exchange-traded fund for most investors is the SPDR S&P 500 ETF Trust (NYSEARCA:SPY | SPY Price Prediction), which tracks the S&P 500. Investors then usually mix it with a Nasdaq-based ETF and some dividend ETFs, depending on their age.

However, it pays to look outwards more often, as plenty of ETFs on the market can land you even higher gains and give you dividends at the same time. I wouldn’t dump SPY entirely, but diversifying into outperformers can improve your portfolio. And if you are a buy-and-hold investor without significant taxable investments in the SPY, it may make more sense to just move into SPDR Portfolio S&P 500 ETF (NYSEARCA:SPLG) due to its lower fees (0.02% vs. SPY’s 0.0945%). Both do the same thing.

But without further ado, here are two ETFs that have trounced both SPLG and SPY.

Invesco S&P 500 Momentum ETF (SPMO)

Invesco S&P 500 Momentum ETF (NYSEARCA:SPMO) hasn’t gotten nearly as much love as it deserves, especially more recently. It has delivered explosive gains, and the drawdowns have been more or less similar to the S&P 500. You get significantly more upside, with a forward dividend yield of 0.71%. The gains are mainly why I like it here. It is an extremely powerful ETF that most investors are missing out on.

The ETF concentrates on momentum-driven stocks that exclude underperformers, and this works very well during bull markets. It has gained 36.18% in the past year and 143.49% over the past five years. Sometimes, the drawdowns here are even shallower than the S&P 500’s.

You’d think that this ETF comes with exorbitant fees, but that’s not the case either. It is a passively managed ETF, so the fee is just 0.13%, or $13 per $10,000 invested. The strategy is simply to select the top 100 stocks from the S&P 500, sorted by their momentum scores.

Here are its top holdings at the moment:

Holdings are rebalanced twice per year, so the fund will automatically reconstitute its holdings based on which stocks are the most popular in the market.

Fidelity High Dividend ETF (FDVV)

If you are willing to forego some upside potential in exchange for a solid dividend yield, this can be your go-to. Fidelity High Dividend ETF (NYSEARCA:FDVV) is a beta exchange-traded fund that tracks the Fidelity High Dividend Index. It focuses on large and mid-cap companies that have high dividend yields and a history of consistent payouts. It invests 80% of its assets in index securities by selecting stocks based on their payout ratios, dividend growth, and uses a hybrid weighting system that blends market cap with equal-weight adjustments.

Here are some of its top holdings:

Fidelity’s strategy of avoiding the top 5% of highest payout ratios has allowed it to filter out value traps and hold quality stocks. Ipso facto, FDVV has delivered 125.38% in total returns over the past five years. This is over 20% more than the SPY.

FDVV comes with a dividend yield of 3.83% and an expense ratio of just 0.16%.

This is an ETF that can lag if the market becomes more explosive, but I’m confident that this is a solid choice over the long run if you want a well-balanced holding that churns out competitive dividend yields and gets you gains that keep up.