Reviewed by Charles Potters
Dividend-paying exchange-traded funds (ETFs) have been growing in popularity, especially among investors looking for high yields and more stability in their portfolios. As with stocks and many mutual funds, most ETFs pay their dividends quarterly—once every three months. However, ETFs that offer monthly dividend returns are also available. While many ETFs pay out regular dividends, we look at just eight of them here.
Monthly dividends can be more convenient for managing cash flows and help in budgeting with a predictable income stream. Further, these products give greater total returns, if the monthly dividends are reinvested.
Key Takeaways
- For investors looking for income from their holdings, regular dividend payments are key.
- While many dividend stocks pay quarterly or semi-annual dividends, some ETFs manage to pay out dividends on a monthly basis.
- Here, we look at eight such ETFs that the income investor may want to consider for their portfolio.
Range of Choices and Risks
Luckily, there are a plethora of monthly dividend ETF funds offered by the major firms, including State Street Global Advisors, Vanguard Group, and BlackRock, Inc. However, there are also smaller firms such as the Global X Funds that have increased their presence in the ETF arena. These investment products have become nearly household names and include the popular Spider SPDR and iShares products.
Before any investor falls too head-over-heels in love with these products, they must do their due diligence and review the ETF for its expenses and risk. While getting dividend income every month may sound appealing, the investor must offset the expenses of the holding against its benefits.
Fund managers sometimes offer high double-digit yields that they cannot sustain in order to attract investors who would otherwise ignore them. It is important to pay attention to expense ratios, as well. Remember, the less money that goes into a manager’s pocket the better. Some funds may return their high income through the use of leverage which may not suit the risk tolerance of all investors.
Note
The following list of exchange-traded funds is not in any particular order and is offered only as an example of some of the funds that fall into the category of monthly-dividend paying ETFs.
1. Global X SuperDividend ETF (SDIV)
- Net Assets as of Nov. 15, 2024: $778.92 million
- Expense Ratio: 0.58%
- Distribution Yield (12 mo.): 11.02%
- Inception Date: 6/8/11
- Price as of Nov. 15, 2024: $21.39
The Global X SuperDividend (SDIV) fund tracks an index of 100 equally weighted companies that rank among the highest-dividend payers around the world.
The fund includes common stocks, real estate investment trusts (REITs), and master limited partnerships (MLPs) that must combine top returns with lower-than-average volatility to be included in the index.
Some of the main holdings of the fund are:
- Yue Yuen Industrial Hldg
- Kinetik Holdings Inc
- HKBN Ltd
- Adaro Energy Ind
- Van Lanschot Kempen NV
2. Global X SuperDividend U.S. ETF (DIV)
- Net Assets as of Nov. 15, 2024: $648.03 million
- Expense Ratio: 0.45%
- Distribution Yield (12 mo.): 5.91%
- Inception Date: 3/11/13
- Price as of Nov. 15, 2024: $18.57
Established in 2013, the Global X U.S. SuperDividend (DIV) fund focuses on a basket of low-volatility, high-yielding securities. The objective is to track the performance of 50 equally weighted common stocks, MLPs, and REITs within the U.S.
Securities listed in the index are among the highest-yielding in the United States, and they have lower relative volatility than the market. It pairs very nicely with SDVI for investors who want a truly global grip on high-yielding equities.
Holdings in the fund include:
- Virtu Financia-A
- International Paper Co
- Kinder Morgan Inc
- Spire Inc
- National Health Investors Inc
3. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
- Net Assets as of Nov. 15, 2024: $3.46 billion
- Expense Ratio: 0.30%
- Distribution Yield (12 mo.): 3.40%
- Inception Date: 10/18/12
- Price as of Nov. 15, 2024: $49.95
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) looks for stocks that pay high dividends and offer low volatility. It invests 90% of its assets in the common stocks of companies listed in the S&P 500 Low Volatility High Dividend Index. The fund is concentrated in consumer defense and utilities. Holdings include:
- Altria Group Inc
- Kinder Morgan Inc
- Bristol-Myers Squibb Co
- AT&T Inc
- Verizon Communications Inc
4. WisdomTree U.S. High Dividend Fund (DHS)
- Net Assets as of Nov. 15, 2024: $1.20 billion
- Expense Ratio: 0.38%
- Distribution Yield (12 mo.): 2.59%
- Inception Date: 6/16/06
- Price as of Nov. 15, 2024: $97.47
The WisdomTree U.S. High Dividend Fund (DHS) mimics the WisdomTree High Dividend Index. This fundamentally weighted index features companies ranked by dividend yield.
The fund’s holdings are well diversified among sectors such as real estate, healthcare, utilities, IT, and consumer staples. Top holdings include:
- Exxon Mobil Corp
- Altria Group Inc
- AbbVie Inc
- Chevron Corp
- International Business Machines Corp
5. Invesco Preferred ETF (PGX)
- Net Assets as of Nov. 15, 2024: $4.42 billion
- Expense Ratio: 0.50%
- Distribution Yield (12 mo.): 5.81%
- Inception Date: 1/31/08
- Price as of Nov. 15, 2024: $12.01
The Invesco Preferred Fund (PGX) is another preferred stock ETF that delivers on yield. PGX’s objective is to replicate the performance and yield of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. Its portfolio holds more than 200 preferred stocks with a heavy weighting towards the financial sector. Some of the investments include:
- JPMorgan Chase & Co
- Wells Fargo & Co
- AT&T Inc
- Bank of America Corp
- Capital One Financial Corp
6. Invesco KBW High Dividend Yield Financial ETF (KBWD)
- Net Assets as of Nov. 15, 2024: $398 million
- Expense Ratio: 2.02%
- Distribution Yield (12 mo.): 11.95%
- Inception Date: 12/2/10
- Price as of Nov. 15, 2024: $15.19
Based on one of the prestigious Keefe, Bruyette & Woods Nasdaq indexes, the Invesco KBW High Dividend Yield Financial Portfolio ETF (KBWD) fund is heavily weighted (at least 90%) towards publicly held financial companies, which should perform better in a rising interest rate environment.
Holdings include:
- Trinity Capital Inc
- BlackRock TCP Capital Corp
- FS KKR Capital Corp
- Ares Commercial Real Estate Corp
- AGNC Investment Corp
7. iShares Preferred and Income Securities ETF (PFF)
- Net Assets as of Nov. 15, 2024: $15.24 billion
- Expense Ratio: 0.46%
- Distribution Yield (12 mo.): 6.16%
- Inception Date: 3/26/07
- Price as of Nov. 15, 2024: $32.59
The iShares Preferred and Income Securities ETF (PFF) is a viable alternative for investors seeking high yields. PFF aims to mirror the performance and yield of the S&P U.S. Preferred Stock Index. The portfolio is well-diversified; however, it does tend to favor banks, diversified financials, and utilities. Some of the main holdings include:
- Wells Fargo & Co
- Citigroup Inc
- Apollo Global Management Inc
- Albemarle Corp
- NextEra Energy Inc
8. SPDR Dow Jones Industrial Average ETF Trust (DIA)
- Net Assets as of Nov. 15, 2024: $37.53 billion
- Expense Ratio: 0.16%
- Distribution Yield (12 mo.): 1.57%
- Inception Date: 1/14/98
- Price as of Nov. 14, 2024: $434.51
The SPDR Dow Jones Industrial Average ETF (DIA) does not offer the highest yield, but investors who prefer some capital appreciation potential with their income might find its portfolio attractive. Launched in January 1998 (making it one of the oldest ETFs still standing), the fund is one of the few to play the Dow Jones Industrial Average (DJIA) directly—itself the grandpa of stock indexes, composed of 30 of the bluest blue chip companies.
Its holdings include:
- UnitedHealth Group Inc
- Goldman Sachs Group Inc
- Microsoft Corp
- Home Depot Inc
- Sherwin Williams Co
What Are Some Other High-Yielding Dividend ETFs?
While they may not pay monthly dividends, the following ETFs do tend to have above-average distribution yields. Some of the most popular such dividend ETFs include:
- Vanguard Dividend Appreciation ETF (VIG)
- Fidelity International High Dividend ETF (FIDI)
- iShares Core High Dividend ETF (HDV)
- SPDR S&P Global Dividend ETF (WDIV)
- Schwab U.S. Dividend Equity ETF (SCHD)
Which ETF Has the Highest Dividend Yield?
The dividend yield of an ETF will depend on its share price since a lower share price, given the same dividend payment, will equal a higher yield.
As of November 2024, the ETF with the greatest dividend yield is the YieldMax MRNA Option Income Strategy ETF, with a yield of 181.81%.
How Are ETF Dividends Taxed?
ETF dividends are taxed similarly to how dividends on stocks are taxed and depend on whether they are qualified or non-qualified dividends. Qualified dividends are taxed as capital gains, which are taxed at either 0%, 15%, or 20%, depending on the holder’s income, and are generally more beneficial. To qualify, the ETF must be held for more than 60 days before the dividend is issued. Non-qualified dividends are taxed as ordinary income; the tax rate will depend on the holder’s income tax bracket.
The Bottom Line
High-dividend ETFs offer an affordable and easy way to add an extra stream of income to your portfolio. These types of ETFs are suitable for all investors, such as those looking to diversify their portfolios or retirees looking for additional cash flow.
With any investment, it is critical to do thorough research beforehand to determine if the investment is suitable for your risk tolerance and investment time horizon. If ever in doubt, reach out to a financial advisor to determine whether an investment is right for you.