Why VIG, SCHD and VYM Are Top Dividend ETFs Worth Buying Right Now

Income investors looking for ways to supplement their fixed income and alternative asset holdings do have plenty of options to consider in the equity markets. The good news for investors is that there are plenty of companies paying above-market yields (that’s what makes an average, after all). So, for stock pickers out there, it can be quite a journey to build a portfolio of blue-chip companies paying reasonable yields right now.

That said, it’s a journey I’ve long thought is one worth taking. That’s because as recessionary forces continue to build and analysts and market participants everywhere begin pricing in a greater amount of uncertainty into stocks (while also buying government bonds, which brings yields down), the Federal Reserve may have to follow other central banks in lowering their benchmark yields much lower.

In such an environment, owning a well-diversified portfolio of dividend stocks makes sense. So, for those who aren’t willing to put in the work and locate some of the best individual dividend stocks out there, looking to dividend exchange traded funds (ETFs) that provide that low-cost diversification can be a great option.

Here are three of the top such ETFs I think are worth considering right now.

Vanguard Dividend Appreciation ETF (VIG)

The Vanguard Dividend Appreciation ETF (VIG) happens to be the largest dividend ETF out there, with total assets under management sitting around $80 billion. That’s a massive chunk of change, and signals to investors that this is the premier option in the market for broad dividend growth over time.

As the fund’s name suggests, VIG focuses on companies that have increased their dividend distributions for at least a decade. Thus, for investors who value quality over all else, this is a top ETF I think is worth considering. That’s largely because companies that have raised their distributions consistently are not only likely to continue that trend over time, but are also far less likely to cut or eliminate their dividends in times of struggle. 

This is also a fund that has a relatively high tech weighting (nearly 1/4 of the ETF’s overall portfolio), so there’s plenty of growth upside as well with this fund. For investors seeking a solid mix of dividend growth, stability, and capital appreciation upside – this is a top ETF to consider right now, in my view. 

Schwab U.S. Dividend Equity ETF (SCHD)

Another top dividend ETF I continue to pound the table on (and it’s one of my core holdings) is the Schwab U.S. Dividend Equity ETF (SCHD). Like the Vanguard Dividend Appreciation ETF, SCHD focuses on dividend stocks traded on the Dow Jones U.S. Dividend 100 Index. This means that the stocks held in this fund are among the 100 largest blue-chip dividend paying names out there.

So, for investors who are looking for Warren Buffett-like exposure to the markets, this would be the top option I’d recommend considering. The fund’s impressive dividend yield of 3.7% is nearly triple that of the overall market. And despite this fact, SCHD has actually kept pace with the overall market in recent years, as investors appear to be prioritizing defensiveness over growth.

In an environment where growth stocks may continue to stable, investors of all stripes have good reason to consider a high quality dividend ETF to buy right now. In my books, SCHD is among the best in this space, and I think that’s likely to continue for some time to come. 

Vanguard High Dividend Yield ETF (VYM)

For investors seeking a bit more yield in their portfolios, the Vanguard High Dividend Yield ETF (VYM) is a great option to consider. 

Yield matters, and on this front, VYM surprisingly does not take the cake when compared to the aforementioned ETFs. However, with a dividend yield of roughly 2.7%, this is still a fund that many investors choose for its much broader exposure to the market. 

Tracking more than 500 stocks, this ETF is more heavily weighted toward financials and consumer discretionary stocks. I’d suggest that investors who believe interest rates could come down materially could do better owning such an ETF, with this fund’s heavy exposure to financials likely to provide ballast in a declining rate environment. 

No one knows what the future holds, and if a recession does bare its teeth, this ETF could also have more downside than its peers. Thus, I think this is an intriguing pick for investors with a one-sided view of where interest rates and the economy are ultimately headed over the course of the next few years. 

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