3 Best Dividend ETFs of 2022 (and 1 to Avoid)

Many investors flock to dividend ETFs because of their higher yields. In contrast, I like dividend ETFs for their lower valuation metrics. Given the high valuations in the S&P 500, an argument can be made to add a dividend ETF or mutual fund as a way to bring down the P/E ratio of a portfolio.

In that light, here are 3 excellent dividend ETFs to consider. We dive into each to understand how the portfolio is constructed and how each has performed over the past decade. We also look at one dividend ETF we should avoid. Finally, I'll walk through what a simple portfolio would look like that included my #1 dividend ETF pick.

We look at the following funds:

The Schwab U.S. Dividend Equity ETF (SCHD)
The Vanguard Dividend Appreciation ETF (VIG)
SPDR S&P Dividend ETF (SDY)
The SuperDividend® U.S. ETF (DIV)

NOTE: While originally published in the fall of 2021, these 3 dividend ETFs are still solid choices in 2022.

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ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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[noveltyrobot]

Lots of people misunderstanding The Professor's stance on dividends. He doesn't hate them, he says you shouldn't chase yields. The fact is total return is the ultimate measure, and super high yield funds simply can't get even close to SPY or VTI on this front.

[johnbeeck]

Rob this analysis from two years ago has held up well! Continued success and good health!

[timotahowhitehawk]

VTI, VXUS, SCHD = 3 (1to avoid BND) Others to review = DIV, SDY, VIG,

[richardcarlin]

I'm treating my portfolio as one giant annuity. Stock market dropping, but my dividends aren't and that is what I'm living on in retirement. Leaving the principle alone, and with a downed market, I've shifted some transfer to bank account back to reinvest so I get more shares.

[videodvd]

Diversifying in Value, that's how I found SCHD and why I cont to add to it. Div is a bonus and very welcome in this market. Small cap value also doing great today. Actively managed inexpensive small cap ETF = AVUV. Would love to hear your take on REITs in this environment. Currently holding OLP and Stagg

[leomortimer]

Rob, Thank you so much for given actual examples of what you picked and the visual portfolio visualizer!

[tannerzabik]

Great in depth video. I've been struggling to decide whether to include SCHD in my Roth IRA but this video has made up my mind. Would it be irrational to hold an equal amount of VTI and SCHD? Or would it make more sense to lean more on VTI?

[JK-rtxx]

This is the best video on div ETF! Thank you so much. Could you also compare SCHD and JEPI, if you happen to have some time? I know they work with different strategies, but wondered if I can mix these two ETFs for my cashflow, or just stick to SCHD.

[thedoctorate]

Thank you for this share. Very informative.

[davidbrooks]

Great Information as always..you're the Best!

[ericzeisel]

Is SCHD a US only fund ? If so then my guess is that the reason your three fund plus schd portfolio outperformed a little bit is that you have a lower allocation to the foreign stock fund. Perhaps a more fair comparison would substitute vigi for the 5% you took from the intl fund, or compare to a portfolio with 25% intl instead of 30%.

[InfamousKiddXD]

I have made my portfolio of 6 etfs total
Schd
Vti
Vxus
Dhs
Vnq
Jepi


Equally divided or so
Though there may be some overlap I believe this yields the most dividend returns at just 20k you can bring in 100/mo minus expenses which isn't much if you add expenses
Can you possibly try and simulate this on your end and give some feedback?

[bharatdalal]

I have three funds portfolio(vti, VXUS and bnd) in my rollover IRA now what should I include in my Roth IRA. I am retired and 77years old.

[alex]

I think FUTY (utility index etf) is a pure dividend fund. Electric plant has no growth no decline, only dividend. 3+%

[marshallhosel]

Thanks. Do you think for folks with 20+ years until retirement that adding a dividend ETF allocation could replace a bond allocation? 2.5-3% dividend yield and market gain participation with moderate increased risk vs similar bond yielding ETF?

[edgibbs]

Not sure the advice here will age well.

[nickdoyle-achievefinancial]

Agree @ not being a fan of dividend tilt. Monthly payments don't matter. Total return matters most, and can be converted to monthly payments. If I wanted to make a factor bet (ie: value comeback), I would do something like 80% total market, 20% small-cap value.

[letmecee]

I just bought SCHD last week before I saw this video. I'm new to investment and feel that dividend ETFs are safer for me to invest. I have learned a lot watching your videos, new subscriber of yours. Thanks

[EJJ-EvArms]

Rob, at 26:00 you express surprise that adding schwab increased performance. I think you have to remember that you didn't just replace the overall stock fund, you also replaced a portion of the international fund, and intl funds have been comparatively dreadful and a drag on every portfolio for far more than a decade, with just a couple a brief blip exceptions.

I know you're about diverse investments & being involved across a lot of sectors, understandably so, but I got almost completely out of intl about a year ago after decades of intl being nothing but a drag, and thus far, I have no regrets.

Your mileage may vary, past performance, etc. ;-)

[Ryan_Tinney]

I feel dividend funds are a good fit for a value type fund that gives some diversification outside of a market cap weighted fund.