The financial investment landscape sees an increasing interest in ETFs emphasizing dividend payouts. Investors, significantly retirees, are keen on ETFs which promise stable returns by targeting dividend-heavy stocks. The Schwab US Dividend Equity ETF (SCHD) is often highlighted as an attractive option given its combination of capital gains and a steady yield around 4%. However, for those interested in dividend growth and diversification, there are alternatives worth considering. This article examines two such ETFs that provide distinct advantages for different investment strategies.
While traditionally popular, the SCHD has faced competition from ETFs focused on dividend growth rather than immediate yields. The Vanguard Dividend Appreciation ETF (VIG), which emphasizes companies that consistently increase dividends, offers a different approach. Historically, even with a lower yield, VIG’s capital gains have outpaced SCHD. Another contender, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), focuses on a more exclusive set of companies known for longstanding dividend increases, providing another layer of security for investors. These ETFs illustrate the benefits of diversification and strategic dividend growth, addressing investors’ varied needs beyond just immediate returns.
How Does Vanguard Dividend Appreciation ETF Compare?
The Vanguard Dividend Appreciation ETF has garnered attention due to its focus on dividend growth. It tracks the S&P U.S. Dividend Growers Index and includes firms elevating dividends for at least a decade. Despite a limited 1.7% yield, VIG’s appeal lies in its consistent dividend growth, backed by notable capital gains outperforming SCHD in recent years. Such attributes offer investors a defensive strategy, safeguarding against potential downturns.
Is ProShares S&P 500 Dividend Aristocrats ETF Right for You?
The ProShares S&P 500 Dividend Aristocrats ETF emphasizes long-term dividend growth. The ETF includes companies increasing their dividends for a minimum of 25 years, appealing to those prioritizing dividend reliability. With a 2.1% yield, NOBL presents a richer dividend growth profile compared to VIG, balancing risk through lower single holding allocations. Its higher expense ratio reflects this specialized selection of dividends.
A distinguishing factor for NOBL is its diversification, whereby it minimizes risk by ensuring no more than 2% allocation per holding. Meanwhile, its expense ratio stands at 0.35%, surpassing VIG’s 0.05%. Each ETF exhibits unique benefits, deciding depends on investor priorities, be it dividend certainty or cost-effectiveness.
Providing quotes from key insights, it was noted:
“NOBL really stands out as a more exclusive class of dividend growers.”
Alternatively, another perspective highlighted:
“VIG still trails the S&P, I must say that I’m a fan of the lower correlation…”
These statements reflect the varying opinions on the ETF market landscape, demonstrating each fund’s individual appeal.
In evaluating these options, investors must weigh the balance between immediate yield and growth potential. SCHD provides a robust yield, yet VIG and NOBL offer compelling growth and diversification. Different investors may prioritize characteristics like growth history, expense ratios, or defensive positioning. Ultimately, an informed decision requires considering long-term goals and risk tolerance, offering a broader perspective on dividends and yields.
