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The best ETFs for Global Dividend Stocks

How do I invest in dividend stocks worldwide?

An investment in high-dividend-yielding stocks is seen as a solid investment. Dividends are usually paid by profitable and established companies. For investors seeking regular income in times of low interest rates, dividend stocks can provide attractive yields.

There are different index concepts available for investing with ETFs in global high-dividend equities. This Investment Guide for global dividend stocks will help you to differentiate between the most important indices and to select the best ETFs tracking indices on global dividend stocks.

% p.a. - % p.a.

annual total expense ratio (TER) of global dividend ETFs

12 Indices

on global dividend stocks, which are tracked by ETFs

15 ETFs

on global dividend stocks

 

The best indices for global dividend ETFs

The best global dividend ETF by 1-year fund return as of

All global dividend ETFs ranked by fund return

 

The largest global dividend ETF by fund size in EUR

All global dividend ETFs ranked by fund size

 

The cheapest global dividend ETF by total expense ratio

All global dividend ETFs ranked by total expense ratio

 

 

Indices on Global Dividend Stocks compared

Methodologies of the compared indices

Dow Jones Global Select DividendFTSE All-World High Dividend YieldS&P Global Dividend Aristocrats
Number of ETFs 1 ETF 2 ETFs 1 ETF
Number of constituents 97 () 1, () 96 ()
Investment universeS&P Developed Broad Market Index (BMI): 8, (31/03/21) shares from developed countries worldwide (without REITs) FTSE All-World index: 4, () stocks from developed and emerging markets worldwide (without REITs) S&P Global Broad Market Index (BMI): 12, (31/03/21) shares from developed and emerging countries worldwide
Index rebalancingAnnually
(December)
Semi-annually
(March and September)
Annually
(January)
Selection criteriaDividend quality, trading liquidity, indicated dividend yieldExpected dividend yieldControlled dividend policy with rising or stable dividends for at least 10 consecutive years
Index weightingBy dividend yieldMarket cap (free float)By dividend yield

 

SG Global Quality IncomeSTOXX® Global Select Dividend MSCI World High Dividend Yield
Number of ETFs 1 ETF 2 ETFs 2 ETFs
Number of constituents 75 () ()
Investment universeDeveloped countries worldwide (excluding financials)STOXX® Global index: stocks from developed countries worldwide MSCI World index: 1, () stocks from developed countries worldwide (without REITs)
Index rebalancingQuarterlyAnnually
(March)
Semi-annually
(May and November)
Selection criteriaDifferent quality factors, balance sheet valuation, dividend yieldDividend quality, non-negative payout ratio, indicated dividend yieldQuality factors, dividend yield of at least 30% above the average of the underlying index, non-negative dividend growth over 5 years
Index weightingEqual weightingBy dividend yieldMarket cap (free float)

Source: justETF Research; as of 31/03/21

 

Dow Jones Global Select Dividend index

The Dow Jones Global Select Dividend index focuses on companies from developed countries worldwide that meet certain demands for dividend quality and liquidity. For this purpose, the index compares firms’ previous year to their five-year average. The final stock selection is based on the indicated dividend yield. Furthermore, the selected stocks are weighted by their indicated dividend yield. The investment universe is based on the S&P Developed Broad Market Index (BMI), excluding REITs.

 

Methodology of the Dow Jones Global Select Dividend FactsheetMethodology

  • Appr. stocks from developed countries worldwide
  • Investment universe: S&P Developed Broad Market Index (BMI), which includes 8, stocks (as of 31/03/21), excluding REITs
  • Stock selection is based on the indicated dividend yield. In addition, companies must meet certain requirements with respect to dividend quality and trading liquidity
  • Selection criteria: Dividend-per-share ratio (previous year greater than or equal to the five-year average) and dividend coverage ratio (% or greater for USA and EU; % or greater for other countries)
  • Index rebalancing takes place annually in December
  • Index weighted by indicated dividend yield
  • The weight of any individual company is capped to 10%

 

FTSE All-World High Dividend Yield index

The FTSE All-World High Dividend Yield index tracks high dividend stocks from developed and emerging economies worldwide. Selecting the stocks with the highest dividend yields from its parent index, the FTSE All-World index (excluding REITs), the FTSE All-World High Dividend Yield index aims to reflect 50 percent of the parent index. With 1, constituents (as of ), the FTSE All-World High Dividend Yield index is by far the largest available dividend index. The selection method is rather straightforward and based on the expected dividend yield for the next 12 months. The selected companies are weighted by their free float market cap.

 

Methodology of the FTSE All-World High Dividend Yield FactsheetMethodology

  • 1, stocks from developed and emerging economies worldwide (as of )
  • Investment universe: FTSE All-World index, which comprises 4, constituents (as of ), excluding REITs
  • Stock selection is based on the expected dividend yield for the next 12 months
  • Selection criteria: stocks with the highest dividend yields from investment universe (appr. 50 percent of the investable market capitalisation)
  • Index rebalancing takes place semi-annually in March and September
  • Index weighted by free float market capitalisation

 

MSCI World High Dividend Yield index

The MSCI World High Dividend Yield index focuses on the highest dividend stocks from developed countries worldwide. This dividend index includes companies (as of ) which are selected according to quality factors and dividend strength. The selection criteria include a dividend yield of at least 30 percent above the average of the underlying index (MSCI World index) and a non-negative dividend growth rate over the last 5 years. The selected stocks are weighted by their free float market capitalization.

 

Methodology of the MSCI World High Dividend Yield FactsheetMethodology

  • dividend stocks from developed countries worldwide (as of )
  • Investment universe: MSCI World index, which comprises 1, shares (as of ), excluding REITs
  • Stock selection is based on the indicated dividend yield
  • Selection criteria: quality factors, dividend yield of at least 30% above the average of the underlying index, non-negative dividend growth over 5 years
  • Index rebalancing takes place semi-annually in May and November
  • Index weighted by free float market capitalization
  • Maximum weight per individual stock is 5%

 

S&P Global Dividend Aristocrats index

The S&P Global Dividend Aristocrats index aims at long-term and sustainable dividend growth. It is based on the S&P Global Broad Market Index (BMI), which tracks stocks from developed and emerging economies worldwide. A company is only included in the S&P Global Dividend Aristocrats index if it has at least 10 consecutive years of a controlled dividend policy with rising or stable dividend payments. In addition, pre-defined yield criteria must be met. Despite the strict inclusion rules, the limits for individual securities, sector and country weightings ensure that no cluster risks arise in the index. The selected stocks are weighted by their indicated dividend yield.

 

Methodology of the S&P Global Dividend Aristocrats FactsheetMethodology

  • Appr. dividend stocks from developed and emerging economies worldwide
  • Investment universe: S&P Global Broad Market Index (BMI), which includes 12, stocks (as of 31/03/21)
  • Stock selection is based on the indicated and the historical dividend yield
  • Selection criteria: controlled dividend policy with rising or stable dividends for at least 10 consecutive years
  • Index rebalancing takes place annually in January
  • Index weighted by indicated dividend yield
  • Weight per individual stocks is capped at 3%; weight per sector/country is capped at 25%; maximum of 20 stocks per country

 

SG Global Quality Income index

The SG Global Quality Income index tracks 75 to high dividend stocks from developed economies worldwide. Financials are excluded. The selection process of the SG Global Quality Income index is based on comprehensive quality criteria (with respect to profitability, solvency, internal efficiency) and balance sheet valuation. To be selected, a firm’s dividend yield must be at least 4 percent (or percent if less than 75 companies meet the criteria mentioned above). Both the expected and the indicated dividend yield are taken into account. A special feature of the index is the equal weighting of all selected dividend stocks.

 

Methodology of the SG Global Quality Income FactsheetMethodology

  • 75 to dividend stocks from developed countries worldwide (excluding financials)
  • Stock selection is based on dividend yield
  • Selection criteria: quality factors, balance sheet valuation, dividend yield (at least 4%)
  • Index rebalancing on quarterly basis
  • Equal weighting of all securities in the index

 

STOXX® Global Select Dividend index

The STOXX® Global Select Dividend index includes a selection of companies from developed countries worldwide that meet criteria for high dividend quality. The global index is formed from the three regional indices STOXX® Europe Select Dividend 30, STOXX® North America Select Dividend 40 and STOXX® Asia/Pacific Select Dividend Securities are selected in the sub-regions based on their indicated dividend yield and their historical dividend policy. The selected stocks are weighted by their indicated dividend yield.

 

Methodology of the STOXX® Global Select Dividend FactsheetMethodology

  • dividend stocks from developed countries worldwide
  • The index contains 40 stocks from North America, 30 stocks from Europe and 30 stocks from Asia-Pacific
  • Investment universe: The STOXX® Global index
  • Stock selection is based on the indicated dividend yield. In addition, companies must meet certain requirements with respect to dividend quality and payout ratio
  • Selection criteria: positive dividend growth over five years, dividend payments in four of the last five years, non-negative payout ratio (max. 60%)
  • Index rebalancing takes place annually in March
  • Index weighted by indicated dividend yield

 

Global Dividend ETFs in comparison

The most important factors at a glance

When choosing a global dividend ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all global dividend ETFs with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all global dividend ETFs in detail
Compare all global dividend ETFs in a chart

Source: justETF.com; As of

 

Find the best Global Dividend ETF

Return comparison of all global dividend ETFs

The table shows the returns of all global dividend ETFs in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

Source: justETF.com; As of ; Calculations in EUR including dividends

 

Sours: https://www.justetf.com/en/how-to/dividend-etfs-world.html

8 Reasons Why I’m Not a Dividend Income Investor

This post largely originated after seeing all the misinformation surrounding dividends floating around Reddit and YouTube recently. Most users on the M1 Finance subreddit, for example, seem to be very pro-dividend, almost unwaveringly so and nearly cult-like, so I’m a little afraid to even open this can of worms for fear of being pitchforked. It’s scary how much cavalierness, misinformation, myths, and downright harmful advice in regard to dividends that I’ve seen thrown around on some of these forum posts and in YouTube videos promoting dividend investing. Moreover, most of these people seem to be doing this in taxable accounts, which makes me cringe even more. So I felt the need to illuminate some perhaps lesser known truths surrounding dividends and help people preserve their capital and returns.

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It makes sense, considering the nature of the M1 Finance platform renders it attractive to “dividend investors.” Also, “dividend investing” is usually the first camp that novice investors flock to when starting out, due to the countless blogs, YouTube channels, and newsletters perpetuating the strategy’s supposed benefits. This post is geared toward those novice investors who are interested in a dividend-yield-chasing strategy but perhaps don’t know the information presented here.

To be clear, I am not a dividend investor. I would even say I’m anti-dividend. Yes, blasphemy, I know. Sorry to rain on the parade. Hear me out.

First, let’s define what we’re referring to here. There’s a strategy in which dividend growth – a company increasing their dividend payment over time – is used as an indicator to identify strong, stable, successful companies to invest in. There is nothing inherently wrong with this, and could even potentially allow you to beat the market (though historically dividend yield per se has actually been shown to be a suboptimal indicator of value, and is not an empirical factor that influences stock performance), as buying high-dividend-yield and dividend growth stocks incidentally gets you exposure to empirical equity factors like Value, Quality, Profitability, and lower volatility in likely-mature, conservative companies. This is actually a big part of how Warren Buffett picks stocks.

There are funds that aggregate these exact types of stocks, and they sometimes ironically have a lower dividend yield than a broad index fund. Vanguard’s VIG is the most popular one. However, recent research has shown this is still probably not the optimal approach. We’ll dive into these funds and that research more specifically later.

What I’m referring to, and what I see more often, is what are sometimes called dividend chasers – those seeking out individual high-dividend-yield stocks or funds for the sake of the dividend itself, which is usually what’s being referred to any time you see any of these words or phrases in relation to an investing strategy:

  • “Income”
  • “Passive income”
  • “Income investing”
  • “Dividend investing”
  • “Living off the dividends”
  • “$X per month”

For the sake of clarity, in this post I’m referring to chasing dividend yield as “dividend investing” or “dividend chasing,” and I’m referring to investing in companies that have a history ofincreasingtheir dividend over time as “dividendgrowthinvesting.” It’s a subtle but important distinction, and the different terms are sometimes thrown around interchangeably, adding to the confusion.

I should also probably point out that some of the math and assessments below assume a zero-trading-fee brokerage like M1 Finance. At the time of writing, I think we’re seeing the race to zero for these brokerages anyway, as others like Fidelity and Schwab are slashing fees and introducing fractional shares.

I get it. Dividend chasing as a strategy is easy to sell, and proponents are good at selling it, either sweeping the data and math under the rug, ignoring it altogether, or simply not knowing it in the first place. I can see the attraction at first glance – predictable cash payments into your account while keeping the same number of shares. Sounds great!

In fairness, I suspect most novice investors also simply don’t know some of the underlying mechanics that can make dividends per se drag down your net total return, which is what you should always be focused on. What saddens me is these same novice investors will likely read and watch most of the pro-dividend forum posts and videos and jump in without hesitation, screening for high dividend yield stocks and throwing them in their portfolios.

Here are the reasons why I don’t chase dividends, and why you shouldn’t either:

1. Dividends result in a larger tax burden.

Arguably the most important point here, but one that I think is often misunderstood and simply repeated platitudinously. If you’re holding dividend-paying assets in a taxable account, you are invariably paying more in taxes than if you were holding non-dividend-paying assets. If you are chasing dividends, you are consciously paying more in taxes than you have to.

Whether you call it a “dividend” or “withdrawal” or “income” doesn’t matter; it is a taxable event. Period. Even if your dividends are reinvested (in which case, what’s the point of chasing them?), they’re still taxed upon distribution. Thus they create a net loss in taxable accounts compared to the same securities if they didn’t pay a dividend.

Imagine selling shares of stock and immediately buying them back at the same price. You have accomplished nothing, but you’ve been taxed as a result. This is precisely how dividends work in a taxable account.

One of the pro-dividend points often raised in regard to taxation is that qualified dividends are taxed at a lower rate, which is true. Unfortunately, dividend chasers, in going after high yields, end up holding things like REITs in their taxable accounts, which distribute non-qualified dividends that are taxed at marginal income tax rates.

Moreover, even qualified dividends are taxed at capital gains rates, which is what you would pay anyway when you sell shares. Selling shares at the LTCG rate to realize only the withdrawal amount you actually needwhen you need it, allows you to postpone that taxation. Also, if the amount of your withdrawal is lower than the forced periodic withdrawal of your dividends, you’ll pay less in taxes.

This is why I always try to stress that if you’re aiming to maximize long-term total return, dividend-paying securities, especially high dividend payers like REITs, should not be held in a taxable account if you can avoid it. Specifically, put high dividend yield assets in a tax-advantaged retirement account where they can do no harm, turn on automatic reinvestment, and use growth stocks (growth stocks pay no or low dividends) in your taxable account.

I would also concede that a dividend income strategy is particularly attractive for many retirees who simply want to “live off the dividends” without selling shares. That’s a perfectly valid approach, though allowing corporate dividend policy to dictate one’s withdrawal and spending policy strikes me as odd. But again, if we’re talking about a taxable account, the better strategy is to buy dividend stocks at that point at which you’re ready to use the dividend payments as regular income. Until then, they’re just a tax drag. The same argument would apply to the yield from bonds, which the retiree is likely also holding.

2. Dividends are not “free money.”

A company’s or fund’s dividend has already been intrinsically factored into its value and subsequently, its share price. That is, it has already been “priced in.” Markets are reasonably efficient. You are not gaining anything extra by receiving a dividend. $1 is $1 is $1; there is no free lunch in the market.

For a simplistic, hypothetical example, let’s say you own Company ABC and you transfer $1 from its company bank account to your personal bank account. Your net worth has not increased as a result; you own the company, so you owned that $1 the whole time. You’ve just subtracted it from somewhere – in this case the company’s value – and added it somewhere else – your pocket.

Similarly, your partial ownership of a different company (in the form of shares) may be worth $1 that the company holds. Upon transferring it to you in the form of a dividend, you are no wealthier as a result, as the company’s value has just decreased by the amount of its dividend payment. Specifically, with the dividend, you own more shares at a lower price. Without the dividend, you own fewer shares at a higher price. They are identical. Here’s a graphical summary of this concept:

Essentially, you are being paid with your own money. This concept is similar to how some people get excited about receiving a tax refund each year. It was your money all along.

Note that this is not saying that dividends are not important as a return of value to the shareholder. They comprise a significant portion of investor returns in some cases (more on this in a second). The important distinction is that a company’s dividend policy is irrelevant to the valuation of shares after you account for its investment policy.

Here’s an example to illustrate.

A firm with no debt wants to finance a project, but it also still wants to use their cash on hand to pay a dividend to shareholders. After paying the dividend, the company must then issue new shares to finance the project. So existing investors are compensated for their now-diluted shares. New shares are issued at the lower price equal to the previous share value minus the dividend payment. Now the firm has cash again to finance their project, and everyone’s happy. But the company now has more shares outstanding at a lower average share price.

Had the company not wanted to issue new shares, they would have to finance the project from their liquid cash, so no dividend this time, but existing shareholders have the same claim on future profits as their share value is unchanged.

The only difference between these two cases is how the returns are distributed to the investor. In that sense, dividend policy is just a financing decision.

In short, a company has profitability and investment policy, which tells us the quality of the company and why we’re investing in it in the first place (hint: factors). After we account for those things, the subsequent dividend policy is irrelevant to the valuation of shares.

3. Dividends limit total returns.

Because of the nature of #2 above, you are effectively withdrawing money from your account each time a dividend is distributed. If they are not reinvested, you have now taken out capital that could have been left in to appreciate more, ultimately actually lowering your total returns. That is, those dividends are missing out on the compounding. This is another hugely important distinction in considering whether or not to reinvest dividends.

For a simplistic, theoretical, ad hoc example, if you bought 1 share of Company A at $ and it increases by 10% to $, your unrealized return is 10%. Company A does not pay a dividend. Let’s suppose you also have 1 share of Company B, which also has a share price of $, and that Company B just paid you a $1 dividend that you chose not to reinvest but take as income. Company B also grew by 10%. Company B’s share price is now $99, which has now grown by 10% to $ Adding in your $1 dividend distribution you took equals $, for a total return of %. Your initial investment capital is the same in both examples, yet your total return on Company B is lower than Company A.

Disregarding taxation, we could even simplify that example and exclude the 10% growth aspect to show that $ in Company A = $99 in Company B + $1 dividend, meaning the dividend puts you right back where you started. At scale, in the market as a whole, this is all usually happening somewhat invisibly behind the scenes, but rest assured it is happening​1​. Again, $1 is $1 is $1.

Had you put $10, in an S&P index fund in and let it sit for 34 years through without adding anything and reinvested the dividends, you would have ended up with $, for a total return of %, an effective CAGR of %. Without reinvesting dividends, you would have ended up with capital appreciation of $, and dividend payments of $37, for a total of $, and a total return of %, an effective CAGR of %. That’s less than half the return!

As another simplistic, somewhat extreme but very telling example, “A Single Share of Coca-Cola Bought for $40 in the IPO With Dividends Reinvested Is Now Worth $9,, vs $, Without Dividends Reinvested.”​2​

These examples still do not even factor in the tax on the dividends you took as income. Pre-tax returns of dividend-paying and non-dividend-paying stocks are indentical (which is why dividends are harmless in a retirement account if reinvested), but taxation invariably, unequivocally results in a lower total return for the dividend investor in a taxable account.

Compound these issues across many stocks with much more money over many years and you can see the huge problem this creates. We’ll illustrate this specific problem with some more realistic examples later.

4. Dividends are a forced withdrawal.

Extending #3 above, dividends are simply a withdrawal forced upon you by the very company you’re invested in. If you’re truly investing with a long time horizon, chances are you don’t need the dividend distribution as income monthly, quarterly, or even annually. Even if you did, you could simply withdraw what and when you wanted as discussed above.

Instead, dividend distributions force you to withdraw money at regular intervals regardless of whether or not you want to. This can be particularly problematic if you are purposely trying to keep your taxable income low in a specific year.

The market tends to go up more than it goes down. That’s the whole reason we’re investing in it in the first place. Because of this, selling shares as needed is mathematically preferable to using dividends as income, because it allows more money to stay invested longer. While the difference may be marginal, on average this will result in higher returns over the long term. This is the same principle that explains why dollar cost averaging is suboptimal, and is also why market timing tends to fail.

5. I don’t want dividends.

With a company’s earnings, they can choose to pay for things like R&D, future projects for growth, and mergers and acquisitions. If they are in a position in which they can do none of those things, they can return value to shareholders via dividends or stock buybacks. On average, all these things achieve the same net result for shareholders.

If I’m invested in Company A, the dividend is the last outcome I want out of the aforementioned options. After all, I’m invested in Company A because I think it will grow! Warren Buffett, arguably the most respected investor in history, feels the same way, which is why Berkshire Hathaway doesn’t pay a dividend​3​.

I would also argue that share repurchases are slightly better than dividends anyway, given that you’re essentially taxed twice on dividends since the company [hopefully] had to pay corporate income taxes on that cash.

6. Dividends only possess a psychological benefit.

This is the reason why I think dividend chasing intuitively seems attractive at first glance and why many people illusively buy into it as a strategy. It simply feels good to have cash show up in your account regularly and predictably. This part I understand somewhat.

Hersh Shefrin and Meir Statman actually looked into the phenomenon of dividend preference in They found 2 main reasons why some investors chase dividend yield: 1) those investors recognize they are unable to delay gratification and adopt a “cash flow” approach to pay for regular expenses, and 2) the psychological principle of loss aversion causes investors to prefer the feeling of receiving a dividend over “losing” shares in order to realize capital gains of an equal amount​4​.

I try to stay pragmatic and scientific with my investing and leave emotions out as much as I can. If for some reason the mental accounting fallacy of dividend chasing keeps an investor more disciplined or lets them sleep better at night than selling shares in a buy-and-hold strategy would, then I guess I’d have to support it. I would rather see someone chase dividend stocks than penny stocks.

7. Dividend chasing decreases diversification.

By solely chasing dividend stocks, you’re missing out on roughly 60% of the US market, thereby posing a concentration risk and resulting in a lack of diversification. This also means you’re missing out on the potential outperformance of that 60%, which is of some significance considering Growth has crushed Value over the past decade. Apple, Amazon, Facebook, and Visa are just a few well-performing Growth stocks that you would have missed out on. Moreover, most dividend income investors are doing so with large-cap dividend stocks, which means they’re also missing out on small- and mid-caps, which have outperformed large-caps historically.

Second, there is no sound evidence that dividend-paying stocks are any better – in terms of total return – than non-dividend-paying stocks. Remember, the dividend itself does not account for a stock’s performance.

Lastly, we know that picking individual stocks is extremely unlikely to outperform a broad market index over a time horizon of 30+ years anyway.

8. Dividends are not guaranteed.

Dividend investors usually like to claim that their predictable dividend payments will still be there during market turmoil. This is not necessarily true. Companies can decrease or eliminate their dividend payment at will​5​.

Even worse, companies will sometimes borrow in order to pay their dividends so as to not spook shareholders by decreasing or eliminating the dividend, in which case you effectively just borrowed with interest to pay yourself your own money.


Of course, Merton Miller and Franco Modigliani figured all this out in , so it’s frustrating to see the myths of dividend chasing and “income investing” persist​1,6​. Again, I suppose since it’s an active strategy, it’s easier for people to create blogs and YouTube videos and newsletters around it and make money providing information to people who are new to investing or who may not know any better. It’s also a lot more exciting than saying “Buy VTI and don’t touch it for 30 years.”

So now let’s circle back to our first “type” – “dividend growth” investing – and look at some specific funds. Again, note that I am in no way against this strategy of investing in stocks with a history of increasing their dividend over time (“dividend growth“). It may allow you to beat the market in the long run.

VIG is probably the most popular of this type, and rightfully so. It “seeks to track the performance of the NASDAQ US Dividend Achievers Select Index (formerly known as the Dividend Achievers Select Index).” So it focuses on large-cap blend stocks with a history of dividend growth (increasing their dividend payment over time). There’s also an international version, VIGI.

Dividend chasers seem to like VYM due to its yield. It “seeks to track the performance of the FTSE® High Dividend Yield Index, which measures the investment return of common stocks of companies characterized by high dividend yields.” So here we’re looking at large-cap value stocks that happen to have a high dividend yield, not necessarily an increasing dividend over time. I think because of that fact, because Growth has outperformed Value in recent years, and because tech has performed well in recent years, VIG has crushed VYM recently. Granted, because VIG is looking at dividend growth and VYM is looking at the dividend yield per se, these funds aren’t really the same thing. I wrote a detailed comparison of these 2 funds here.

Even with dividends reinvested, through , VIG would have given you an extra CAGR of % compared to VYM since VYM’s inception in late (illustrated below; VIG is the blue line, VYM is the red line). VYM also lagged the S&P, while VIG beat it and had a higher Sharpe ratio, better max drawdown and Worst Year figures, and less volatility. Interestingly too, VIG fared much better than both VYM and the S&P through the crisis and the recent Q4 correction.

vig vs vym

Despite offering these funds, Vanguard themselves investigated the strategies contained in VYM and VIG and concluded, as I pointed out earlier, that the stocks’ performance was fully explained by exposure to equity factors like Value, Quality, and lower volatility. Specifically, the returns of high-dividend-yield equities are explained by the factors of Value and low volatility, and the returns of dividend growth equities are explained by Quality and low volatility​7​. This is not a bad thing, just something to note – that the dividend payment itself is not responsible for the [out]performance of VIG compared to the S&P Again, VIG may allow you to beat the market in the long run.

SCHD is another popular fund like VYM. Both have lagged the S&P since SCHD’s inception in This makes some sense when we look at the valuation metrics of these types of funds. Since the crisis, many investors have flocked to low-volatility funds to the point where the strategy has been “cursed by popularity.” The valuation metrics (source) for these are now higher than their “normal” Value ETF counterparts and the S&P index, indicating lower expected future returns for these low-volatility funds.

DGRO from iShares should perform similarly to VIG, with slightly more volatility since it’s more inclusive with its 5-year-growth requirement instead of VIG’s year. As a result, DGRO should have more exposure to comparatively smaller companies than those in VIG. Maybe slightly more reward for slightly more risk. It will be interesting to see going forward. Here’s a comparison of those. Nearly identical, with a tiny bit more volatility, though interestingly VIG had a worse max drawdown during the Q4 correction. Unfortunately DGRO has only been around since

NOBL from ProShares claimes to be the “only ETF focusing exclusively on the S&P Dividend Aristocrats—high-quality companies that have not just paid dividends but grown them for at least 25 consecutive years, with most doing so for 40 years or more.” Its ER of % is much higher than VIG’s %. Like DGRO, NOBL may slightly outperform VIG over the long run, albeit with more volatility. Here’s a backtest comparing NOBL and VIG since NOBL’s inception in late , using the S&P as a benchmark. The S&P has actually slightly outperformed NOBL since then, though again the dividend appreciation ETF’s fared better through the Q4 correction with smaller drawdowns.

I did run some of the other popular players in this space – SDY, SPLV, SPHD, DVY, etc. – but they were all very similar and I think VIG beat them on all performance metrics and has the highest AUM by far, so I’m sort of holding VIG as the gold standard in that category of dividend-oriented ETF’s. Though note that these others should have lower valuation metrics than VIG precisely because people are flocking to VIG.

A lot of people have also been raving about QYLD, a covered call fund with a huge dividend. I’m not a fan.

For me, a dividend-oriented portfolio, made with a pie for M1 Finance, might look something like this.

But since we now know that dividend investing is essentially just a Value tilt and since the high-dividend low-volatility strategy is being “cursed by popularity,” you may be better off just investing in large-cap Value​8​. I compared some large cap value funds here. Moreover, we know that dividends per se are not responsible for a stock’s performance, and that they are a suboptimal proxy for accessing known equity factors like Value and Profitability. The Dividend Aristocrats (NOBL), for example, have outperformed the market historically not because of their dividend payments, but because of their possessing excess exposure to these factors that tend to pay a premium.

Thankfully – and somewhat ironically – dividend growth investing (NOBL, VIG, DGRO, etc.) sort of “accidentally” gets you some exposure to those factors, but I would argue buying dividend stocks is still a suboptimal way to access those factor premia. This somewhat “accidental,” partial exposure to the factors comes at the cost of less diversification.

The problem with focusing on dividend stocks is that not all dividend stocks have exposure to the equity factors, and not all stocks with exposure to the factors pay dividends. Until recently, dividend growth investing was admittedly perhaps the best way for retail investors to access that exposure (at least for Value and Quality) historically, but now we’re seeing products that directly target those factors, e.g. VLUE, QVAL, QUAL, AVUV, etc. I explored the best Value funds across various geographies and cap sizes in a separate post here.

Interestingly, Fama and French actually used Miller’s and Modigliani’s mathematical illustrations of dividend policy irrelevance to the valuation of shares (from their paper) in their construction of the 5 Factor Model. We know this “worked” because we don’t observe unexplained alphas when applying the 5 Factor Model to dividend portfolios.

After spending much time researching the subject, Meb Faber succinctly summarizes some of these points as follows here:

  1. Dividend yield investing is rooted in value investing.
  2. Historically, focusing on dividend yields rather than value, has been a suboptimal way to express Value.
  3. If you have to focus on dividends, you MUST include a valuation screen or process to avoid high yielding but expensive, junky stocks.
  4. The hunt for yield has caused dividend stocks to reach valuations levels never seen before relative to the overall market.
  5. Since dividend stocks are currently expensive, we prefer a shareholder yield approach combined with a value composite screen.
  6. Once you have a preferred value methodology, AVOIDING dividend stocks in the strategy could result in additional post tax alpha of approximately % to % for taxable investors.

He shows in following table (source) that investing in Value and avoiding high dividend payers (far right column) came out ahead in all taxable environments. EW stands for “equal weight.”

If anyone knows of any large-cap value ETF’s or mutual funds that consciously avoid high dividend payers, let me know.

TL;DR: If you’re set on dividend orientation, I would say feel free to utilize dividend growth/appreciation stocks and ETF’s like these as a small tilt, but please stop chasing dividends for the sake of the dividend itselfespecially in a taxable account.

Specifically, hold anything with regular distributions – dividend stocks, REITs, bonds, etc. – in a tax-advantaged retirement account and reinvest the dividends. Hold Growth stocks that do not pay a dividend in taxable accounts and sell shares as needed for any “income.”

Here’s some additional reading material on the subject if you’re interested:

  1. Swedroe: Dividend Growth Demystified
  2. Buffett: You Want a Dividend? Go Make Your Own
  3. The Yield Illusion: How Can a High-Dividend Portfolio Exacerbate Sequence Risk?
  4. Swedroe: Vanguard Debunks Dividend Myth
  5. Investing Lesson The Road to Riches Isn’t Paved with Dividends
  6. Dividend Investing: A Value Tilt in Disguise?
  7. The Mystery Behind Dividend Yield Investing
  8. Using Factor Analysis to Explain the Performance of Dividend Strategies
  9. Swedroe: Why Chasing Yield Fails
  10. Why Chasing Dividends is a Mistake
  11. Swedroe: Mutual Funds Lace Portfolios With Dividend ‘Juice’
  12. Don’t buy into the dividend ‘fallacy,’ new academic paper warns
  13. Swedroe: Irrelevance Of Dividends
  14. The Dividend Disconnect
  15. The Dividend Puzzle
  16. Dividend Stocks are the Worst
  17. How Much Are Those Dividends Costing You?
  18. What You Don’t Want to Hear About Dividend Stocks
  19. Slaughtering the High-Dividend Sacred Cow

References

  1. Miller MH, Modigliani F. Dividend Policy, Growth, and the Valuation of Shares. J BUS. January doi/
  2. Shefrin HM, Statman M. Explaining investor preference for cash dividends. Journal of Financial Economics. June doi/x(84)
  3. HARTZMARK SM, SOLOMON DH. The Dividend Disconnect. The Journal of Finance. June doi/jofi

Disclaimer:  While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.

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Sours: https://www.optimizedportfolio.com/dividends/
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In this article we discuss the 10 best dividend ETFs to buy according to Reddit. If you want to skip our detailed analysis of these ETFs, go directly to the 5 Best Dividend ETFs to Buy According to Reddit.

The volatility in the prices of technology stocks over the past few weeks has reinforced the importance of a diverse investment portfolio that finds the perfect balance between growth and value investing. Since most of the market interest in the recent past was devoted to the skyrocketing value of growth stocks, investors are now scrambling for some much-needed cover against the price volatility in the technology sector. Dividend paying ETFs can serve as a dependable option in this regard, as they market stable outlooks and offer regular payouts.

Some of the other advantages of owning dividend ETFs instead of individual stocks are that the funds are diversified across the industry, potentially lowering the overall risk associated with owning a stock in one sub-sector of the broader industry. It is also easier to manage price volatility in ETFs, although a certain level of risk is ever-present, as with any other investment. ETFs can offer investors significant respite from following the latest developments related to individual companies, freeing up important time that can be spent elsewhere.

Some sectors of the economy are in a better position to offer steady dividend payments and make it to the ETF indexes, such as established business segments like energy, finance, communications, and mining. Some companies that spring to mind in this regard include Rio Tinto Group (NYSE: RIO), Vale S.A. (NYSE: VALE), and Exxon Mobil Corporation (NYSE: XOM). These firms represent some of the top holdings of the best-performing dividend ETFs in the world over the past year.

Rio Tinto Group (NYSE: RIO), Vale S.A. (NYSE: VALE), and Exxon Mobil Corporation (NYSE: XOM) all have an impressive dividend history and are generally less susceptible to the price fluctuations that seem to sweep the market more often than not lately. These traits are generally what set dividend ETFs apart from the crowd in the finance world. However, the fees associated with owning ETFs and the effect an economic downturn might have on the fortunes of the fund are some of the factors that investors should take into account before committing to an ETF.

No sector of the market has been shielded from the profound changes that technology has brought about in our lives. Retail investors, who use internet platforms like Reddit, are having an increasingly important influence on the overall financial dynamics. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P ETFs by more than percentage points since March Between March and February 26th our monthly newsletter’s stock picks returned %, vs. % for the SPY. Our stock picks outperformed the market by more than percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

best dividend ETFs

With this context in mind, here is our list of the 10 best dividend ETFs to buy according to Reddit. These dividend ETFs are very popular in Reddit communities.

Best Dividend ETFs to Buy According to Reddit

iShares Asia/Pacific Dividend ETF (NYSE: DVYA)

Yield: %

iShares Asia/Pacific Dividend ETF (NYSE: DVYA) is an exchange traded fund that tracks the investment returns of the Dow Jones Asia/Pacific Select Dividend 50 Index which comprises companies that pay a sizeable dividend and are listed on exchanges in Australia, Hong Kong, Japan, Singapore, and New Zealand. The ETF invests at least 80% of total assets in stocks of the underlying index.

iShares Asia/Pacific Dividend ETF (NYSE: DVYA) has more than $45 million in net assets under management. It has a year-to-date daily total return of % and a net expense ratio of %. The week price range of the ETF lies between $31 and $

One of the top holdings of this fund is Fortescue Metals Group Limited (ASX: FMG.AX), the Australia-based mining company that has stakes in operations related to iron, copper, and gold deposits. The fund has invested close to % of total assets under management in shares of Fortescue Metals Group Limited (ASX: FMG.AX).

9. First Trust Dow Jones Global Select Dividend Index Fund (NYSE: FGD)

Yield: %

First Trust Dow Jones Global Select Dividend Index Fund (NYSE: FGD) is an exchange traded fund that tracks the investment results of the Dow Jones Global Select Dividend Index which is an indicated annual dividend yield weighted index comprising companies that fall under the developed market class of the Dow Jones World Index. The fund invests almost 90% of net assets in stocks of the dividend index.

First Trust Dow Jones Global Select Dividend Index Fund (NYSE: FGD) has more than $ million in net assets under management and the year-to-date daily total return of the fund is a remarkable %. The price of the fund has hovered between $17 and $27 over the past 52 weeks.

A leading holding of the fund is Centamin plc (LSE: CEY.L), a Jersey-based mining company with interests in precious metals projects in Egypt, Burkina Faso, Australia, and the United Kingdom. The fund has invested close to % of total assets under management into shares of Centamin plc (LSE: CEY.L).

8. Global X MSCI SuperDividend EAFE ETF (NASDAQ: EFAS)

Yield: %

Global X MSCI SuperDividend EAFE ETF (NASDAQ: EFAS) is an exchange traded fund that tracks the investment results of the MSCI EAFE Top 50 Dividend Index which comprises equally weighted companies that pay a sizeable dividend and are working in Europe, Australia, and the Far East.

Global X MSCI SuperDividend EAFE ETF (NASDAQ: EFAS) has more than $ million in net assets under management. The year-to-date daily total return of the fund is %. The net expense ratio is % and the week price range of the fund lies between $11 and $

A premier holding of the fund, in which it has invested close to % of total assets under management, is the London-based mining company named Rio Tinto Group (NYSE: RIO) which engages in the exploration, mining, and processing of mineral sources worldwide. Rio Tinto Group (NYSE: RIO) markets aluminum, copper, diamonds, and gold, among other products. Like GlaxoSmithKline plc (NYSE: GSK), Vale S.A. (NYSE: VALE) and Exxon Mobil Corporation (NYSE: XOM), RIO is one of the best dividend stocks to buy.

7. iShares International Select Dividend ETF (BATS: IDV)

Yield: %

iShares International Select Dividend ETF (BATS: IDV) is an exchange traded fund that tracks the investment results of the Dow Jones EPAC Select Dividend Index which comprises stocks of companies that pay high dividends and are working in developed markets outside the United States. It is a fund that invests at least 80% of total assets in securities of the underlying index.

iShares International Select Dividend ETF (BATS: IDV) has more than $ billion in net assets under management with a year-to-date daily total return of %. The net expense ratio is %, with the week price range of $$

One of the top holdings of the fund is GlaxoSmithKline plc (LSE: GSK.L), the United Kingdom-based pharmaceutical firm. GlaxoSmithKline plc (LSE: GSK.L) develops and markets vaccines, over-the-counter medicines, and health-related products that treat respiratory diseases, HIV, immuno-inflammation, and other problems. GlaxoSmithKline plc (NYSE: GSK) is also trading in the US.

6. WisdomTree Emerging Markets High Dividend Fund (NYSE: DEM)

Yield: %

WisdomTree Emerging Markets High Dividend Fund (NYSE: DEM) is an exchange-traded fund tracking the investment results of the WisdomTree Emerging Markets High Dividend Index. It is a fund that invests at least 95% of total assets in the underlying stocks of the index. The index is a fundamentally weighted one that comprises high dividend paying firms on the WisdomTree Emerging Markets Dividend Index.

WisdomTree Emerging Markets High Dividend Fund (NYSE: DEM) has close to $2 billion in net assets under management with a year-to-date total daily return of %. The net expense ratio of the fund is % with a week price range of $$

A top holding of the fund is Vale S.A. (NYSE: VALE), the Brazil-based mining company. The fund has invested % of assets under management into the firm. Vale S.A. (NYSE: VALE) is mainly engaged in the iron and steel-making business. Like GlaxoSmithKline plc (NYSE: GSK), Rio Tinto Group (NYSE: RIO) and Exxon Mobil Corporation (NYSE: XOM), VALE is one of the best dividend stocks to buy.

Click to continue reading and see 5 Best Dividend ETFs to Buy According to Reddit.

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Disclosure: None. 10 Best Dividend ETFs to Buy According to Reddit is originally published on Insider Monkey.

Sours: https://finance.yahoo.com/news/best-dividend-etfs-buyhtml
Top 5 Dividend Stocks To Buy In 2021 (High-Yield)

WallStreetBets posters are buzzing about these eight Reddit stocks.

Reddit has become an unlikely hub for stock trading in Groups of online retail traders have successfully orchestrated targeted buying campaigns in some of the market's most shorted stocks, generating massive short squeezes in so-called "meme" stocks. Some of Reddit's favorite meme stocks have skyrocketed in price, but the extreme volatility and risk associated with these stocks is not for the faint of heart. Congress has even held a hearing to better understand the Reddit trading phenomenon. Here are eight Reddit stocks generating the most buzz in Reddit's WallStreetBets community in October, according to Swaggy Stocks.

Tesla Inc. (ticker: TSLA)

Electric vehicle maker Tesla and its controversial CEO Elon Musk are two of the most divisive subjects on Wall Street, so it's no surprise that Tesla has been among the top trending Reddit stocks all year. Musk's most recent controversial decision was the announcement that he is moving Tesla's headquarters from California to Austin, Texas. Tesla shares hit new all-time highs above $ earlier this year, but the stock is now trading at times forward earnings and 18 times sales. Reddit traders may agree with Tesla bulls who believe the company will eventually grow into its $ billion market cap.

Alibaba Group Holding Ltd. (BABA)

Chinese e-commerce and cloud computing giant Alibaba has been at the mercy of regulators throughout Despite reporting % revenue growth in the most recent quarter, Alibaba shares were down % year to date at market close on Oct. 8. The problems started in late when Chinese regulators halted the initial public offering of digital payment giant Ant Financial, in which Alibaba holds a 33% ownership stake. Chinese regulators have subsequently hit Alibaba with multiple antitrust fines as part of a broader tech crackdown. Reddit traders may see the sell-off as a long-term buying opportunity in one of China's largest and fastest-growing tech companies.

Tilray Inc. (TLRY)

Tilray has been one of the most volatile stocks in the cannabis space in The Canadian cannabis producer recently completed a merger with Aphria, making it the world's largest cannabis company. Tilray shares soared as high as $67 back in February, driven in large part by a cannabis stock short squeeze triggered by social media traders. However, optimism about near-term U.S. federal cannabis legalization has since faded and so has Tilray's early-year rally. Tilray's stock price is now back down below $11, but Reddit traders may see another cannabis short squeeze coming at some point.

Smiledirectclub Inc. (SDC)

Smiledirectclub has been one of the most heavily shorted stocks in the market since the company completed its initial public offering in Smiledirectclub priced its IPO at $23 per share. The stock has been a disaster for investors up to this point and now trades under $7. Ortex Analytics recently named Smiledirectclub one of its top potential short squeeze candidates for the month of October. In fact, around 50% of the stock's float, or fee-trading shares, is held in short positions. Reddit traders must agree that the company has all the ingredients for a major short squeeze at some point.

ContextLogic Inc. (WISH)

E-commerce company ContextLogic is another example of an IPO flop that Reddit traders see as a potential buying opportunity. ContextLogic went public in December at an IPO price of $ Less than a year later, the stock is barely trading above $5. In the most recent quarter, ContextLogic reported a % drop in revenue and a $ million net loss, which are discouraging trends in the high-growth e-commerce space. Monthly active users also dropped 22% in the quarter. Despite the lackluster quarter, Reddit traders must see the potential for a ContextLogic turnaround given all the recent buzz surrounding the stock.

Facebook Inc. (FB)

Social media giant Facebook has navigated a whirlwind of negative headlines in recent weeks. On Oct. 4, Facebook and subsidiary platforms Instagram and WhatsApp suffered major outages lasting more than six hours. That same week, former Facebook employee Frances Haugen testified before Congress after leaking a trove of internal Facebook documents to the Wall Street Journal and said that Facebook knew that its platforms harmed its users. Facebook shares are down more than 12% in the past month, but Reddit traders may believe the company's latest issues are merely another bump in its road of long-term growth.

Apple Inc. (AAPL)

Reddit users have a reputation for betting on unprofitable, high-risk "stonks." But Apple is one of the highest-quality blue-chip stocks in the market. The iPhone maker generated $ billion in net income and invested $ billion in dividends and buybacks in fiscal Apple rolled out the new iPhone 13 product family in September, and analysts are optimistic about another big upgrade cycle. Reddit traders don't seem to be concerned about potential supply chain disruptions in Asia or recent changes to Apple's App Store rules lowering commissions and allowing third-party apps to direct customers outside the Apple ecosystem.

Advanced Micro Devices Inc. (AMD)

Shares of chipmaker Advanced Micro Devices have skyrocketed 1,% in the past five years. AMD has exposure to some of the fastest-growing markets within the tech sector, including PC gaming, data centers and autonomous vehicles. Amid a global semiconductor shortage, AMD reported 99% revenue growth in the second quarter and guided for full-year sales growth of 60%. Like many other high-growth stocks, AMD investors are paying a steep price for their shares, which are currently trading at about times sales. However, Reddit traders seem undeterred and are betting on even more upside ahead for AMD stock.

Reddit stocks trending in October:

-- Tesla Inc. (TSLA)

-- Alibaba Group Holding Ltd. (BABA)

-- Tilray Inc. (TLRY)

-- Smiledirectclub Inc. (SDC)

-- ContextLogic Inc. (WISH)

-- Facebook Inc. (FB)

-- Apple Inc. (AAPL)

-- Advanced Micro Devices Inc. (AMD)

Sours: https://news.yahoo.com/8-top-reddit-stocks-gaininghtml

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5 Top Dividend Stocks for October!

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