Investing into dividend stocks is a great way to diversify your S&P 500 index fund exposure. It’s a known fact that dividend paying stocks tend to be less volatile than non dividend paying stocks on average. These equities provide both income and growth potential.
Over the past 10 years, the worst years for the best dividend ETFs to buy ranged from -4% to -10%. Meanwhile, these same funds delivered roughly 10-13% annual returns, similar to the market index with dividends reinvested. Yields range from 1.5-3.5%. You can buy stock in these funds just like individual stocks.
Most of these ETFs provide qualified dividends. Hold the fund for more than 60 days around its ex-dividend date, and those dividends are taxed at the long term capital gains tax rates – that’s 0%, 15%, or 20% instead of ordinary income tax at 10-37%. This tax advantage benefits investors and equities holders alike.
But here’s the key: you want growth along with the cash flow. A 12% annual return with a 3% yield means your investment still grows 9% if you take the income. But a 4% return with an 8% yield? Taking that cash flow means you actually lose 4% that year. Smart investing requires balancing both factors.
Knowing that, let’s get straight to it by first going over the iShares Core Dividend Growth ETF with the ticker DGRO.
» Start investing today: Explore top brokerage accounts with our detailed review
SoFi Invest Webull Vanguard Fees $0 per trade Fees $0 per trade Fees $0 per trade Account Minimum $0 Account Minimum $0 Account Minimum $0 Promotion Get up to $3,000 in stock when you open and fund a new account with at least $50. Offer ends 10/18/26. Promotion Receive 12 free shares (valued $3-$300 each) and 1 month of Webull Premium when you open and fund a new account with at least $100. Promotion None no promotion available at this time on SoFi's website on Webull's website on Vanguard's website
1. iShares Core Dividend Growth ETF (DGRO)
According to iShares, this fund tracks the Morningstar US dividend growth index where it has 397 holdings, with the top ones being Johnson and Johnson and JPMorgan.1 You’ll also notice how much weight each company has in the fund where Johnson and Johnson carries the most weight at 3.04%, and the top ten holdings make up about 26% of the entire fund. These dividend paying stocks form the core of this investing strategy.
Combining all of the stocks inside of this fund, it comes out to be that the healthcare sector has the most exposure covering just over 18% of the fund, with financial and technology thereafter. These equities give investors exposure to established companies across multiple sectors. The fund’s holdings include stocks from different industries, creating a diversified investment approach for those investing in dividend growth.
Another nice thing about DGRO is that it comes at a 0.08% expense ratio, which is the total cost it takes to own the fund per year. That means if you invest $10,000 into this fund, after a full year, it would have cost you $8, literally the price of a pizza. The amount of dividends and growth easily outweighs this cost. The fund’s fees are automatically distributed throughout the year as you own the fund, it’s not something you need to pay separately.
Moving on from there, the average dividend yield over the trailing twelve months is at 1.98%. So $10,000 invested generates roughly $198 per year, or about $50 every quarter. The dividends have grown 10.84% over the past year, and they’re 100% qualified for favorable tax treatment. This combination of dividend income and qualified status makes these stocks attractive for long-term investing.
DGRO has 45% overlap with the S&P 500. Its best year over the past decade: 29.87%. Worst year: -5.56%. Past year returns: 21.96%. Five-year average: 13.93%. Ten-year average: 13.51% [NAV]. Even taking dividends as income every year, your investment portfolio would still see strong growth.
Let’s now go onto the next option, number 2, that is the WisdomTree US quality dividend growth fund ticker DGRW.
» Stay ahead of your finances: Join our newsletters today
2. WisdomTree U.S. Quality Dividend Growth Fund (DGRW)
This fund tracks the WisdomTree US quality dividend growth index that has 301 holdings which consist of companies like Microsoft and Apple.2 You’re probably thinking this is just the market all over again, but if you keep looking, the fund also includes companies like Johnson and Johnson, Procter and Gamble, Home Depot, Coca Cola, UnitedHealth Group – all some of the strongest dividend paying companies – where the top ten holdings make up 37% of the entire fund. These stocks represent quality dividend investing.
The top sector is info tech, then healthcare, industrials, financials, and consumer staples thereafter. And knowing that, of the 6 funds I’m covering in this article, DGRW has the highest expense ratio of 0.28%. Although that is high compared to many other index funds, these fees are included in the historic returns, and even with that, DGRW would have grown your money the most of all the funds I’m mentioning here. The equities inside this fund focus on quality and growth.
The dividend yield in the trailing twelve months is 1.50%. There is a 48% overlap between DGRW and the S&P 500, so if we think back to DGRO, that fund is 45% overlap so they’re not too far off.
But from there, the best year over the past 10 years for DGRW was 29.55%, where the worst was -6.34%. And over the past year DGRW grew 24.05%, over the past 5 years was 14.59%, but best of all, over the past 10 years, DGRW grew 12.91% which includes all the expenses to own the fund and dividends being reinvested, where the tool states the market index was 13.02%, just 0.1% higher.
Not only is the growth of DGRW great for a dividend ETF, but the dividends are paid monthly and as of 2023, they are 100% qualified dividends. This combination of stocks and equities from quality companies makes DGRW a strong investment option for those investing in dividend growth. So knowing that, let’s now move onto the next option that is the Vanguard High Dividend Yield ticker VYM.
» Earn more on your savings: Explore top high-yield savings accounts today
SoFi Checking and Savings Openbank High Yield Savings CIT Bank Platinum Savings APY Up to 4.20% With eligible direct deposit. No minimum balance required. APY Up to 4.15% $0 min. balance required for APY. APY Up to 4.10% $5,000 min. balance required for APY. Promotion Up to $400 bonus + 0.90% APY boost six-month APY boost for new customers with eligible direct deposit. Offer ends by 12/31/2026. Terms apply. Promotion 0.35% APY boost six month APY boost for new customer when you open and fund a new account by 11/03/2026. Promotion 0.35% APY boost Enter promo code "CITBOOST" to receive a 0.35% APY boost for six months from account opening. Terms apply. on SoFi's website our partner on CIT Bank's website
3. Vanguard High Dividend Yield ETF (VYM)
Understand that you only really need one or two dividend ETFs for proper exposure. Individual investors can build diversified portfolios without owning every fund. Consider the pros and cons as you decide.
But for VYM, according to Vanguard, this fund tracks the FTSE high dividend yield index with 551 holdings.3 Top names include Broadcom and JPMorgan, where the top ten make up 24% of the fund. Financials lead at 21.1%, with industrials, healthcare, consumer staples, energy, technology, and consumer discretionary all around 10%. These dividend stocks provide steady income across sectors.
Lower market overlap at 34% compared to the previous ones. The fund charges just 0.06%, offers a 2.87% trailing yield, with 6.83% dividend growth. These stocks provide steady investment income for investors focused on current yield.
Past decade best: 26.21%. Worst: -5.91%. Last year: 19.82%. Five-year average: 10.28%. Ten-year average: 9.8%. Strong dividends, but the lowest historical returns of the funds mentioned here.
VYM pays 100% qualified dividends quarterly. But if growth matters more than yield, check out VIG.
4. Vanguard Dividend Appreciation ETF (VIG)
This fund tracks the S&P US dividend growers index with 339 holdings.4 Apple, Broadcom, and Microsoft lead, with the top ten making up 30% of assets. Info tech dominates at 23.5%, followed by financials and healthcare. The mix of stocks and equities appeals to investors seeking growth. These dividend growth stocks prioritize increasing payouts over high current yields.
VIG shows 42% market overlap with a 0.06% expense ratio and 1.74% yield growing at 8% annually. Best year over the past decade: 29.62%. Worst: -9.81%. Last year: 22.15%. Five-year average: 12.18%. Ten-year average: 11.72%. This investment approach prioritizes dividend growth over high current yield, making it ideal for long-term investing.
Pays 100% qualified dividends quarterly. Between VIG and VYM, remember that growth compounding over the years creates far more wealth for investors than chasing today’s highest yield. Your investment portfolio benefits more from stocks that grow dividends annually.
Now let’s move onto number 5, that is a new interesting one you may be interested to look into that is the Fidelity High Dividend ETF ticker FDVV.
» Ready to invest for retirement? Check out our review on the top IRA accounts
SoFi Invest IRA Robinhood IRA Fidelity Investments IRA Fees $0 per trade Fees $0 per trade ($0.50-$0.75 per futures contract) Fees $0 per online equity trade ($0.65 per options contract) Account Minimum $0 Account Minimum $0 Account Minimum $0 Promotion Earn a 1% match on rollovers and contributions to a SoFi IRA. Promotion Unlimited 1% IRA match after opening a Robinhood IRA and make eligible contributions, transfers, and rollovers. Terms apply. Promotion None no promotion available at this time on SoFi's website on Robinhood's website on Fidelity's website
5. Fidelity High Dividend ETF (FDVV)
Now FDVV tracks the Fidelity High dividend index with 110 holdings.5 Apple, NVIDIA, and Microsoft lead, with strong dividend stocks filling out the rest. Top ten: 30% of assets. This smaller fund provides focused exposure to quality dividend payers. The equities blend growth stocks with income-generating investments.
Info tech leads sectors with 39% market overlap – less than DGRW’s 48% or DGRO’s 45%. Charges 0.15% with a 2.88% yield, though that’s declined recently. Individual investors should watch how this investment performs as it matures. Investing in FDVV gives you a portfolio with concentrated holdings focused on quality.
Since launching in 2016, best year: 29.28%. Worst: -4.19% (lowest downside of all six). Last year: 26.89%. Five-year average: 14.1%. Without 10-year data yet, it’s early, but excluding DGRW, this would top the five-year performance list.
Pays dividends quarterly. In 2022, 93% qualified for favorable tax treatment.
» Advanced research and analysis tools: Try Seeking Alpha Premium free today
6. Schwab U.S. Dividend Equity ETF (SCHD)
SCHD tracks the Dow Jones US dividend 100 index,6 that currently has 103 holdings that consist of Lockheed Martin, and pretty much all other strong dividend investments where each one has roughly 4% weight toward the fund that make a total toward the top ten holdings to be roughly 41.5%. These are high-quality dividend stocks selected for financial strength.
Of all the companies in the fund, the financial sector has the highest amount of exposure at 17.3%, then healthcare, consumer staples, industrials, and energy thereafter. One of my favorite things about this is that there is only an 8% market overlap, so adding this just helps diversify your investments where over the past 10 years, this fund averaged an annual return of 11.33%. These stocks and equities provide investors with exposure distinct from broad market index funds. The fund holds dividend-paying stocks and equities that prioritize shareholder returns.
For SCHD, the fund comes at a low 0.06% expense ratio, has a dividend yield of 3.42% over the past twelve months, that has also grown 8.86%. The best year for SCHD over the past 10 years was 29.87%, where the worst was -7.9%, and over the past year SCHD grew 16.17%. Over the past 5 years it has averaged 12.11%, and over the past 10 years it was 11.33%.
The dividends are 100% qualified dividends and are distributed on a quarterly basis. And because I own this and researched all to compare with SCHD, it comes out to be that DGRW has a 22% overlap with SCHD, DGRO has a 21% overlap, FDVV is 15%, VIG is 13%, and VYM is 22%.
Where if you were to pair any of them with SCHD, if it were DGRW that would be an average dividend yield of 2.49%, with DGRO that would be 2.81%, FDVV would be 3.15%, VIG would be 2.58%, and VYM would be 3.15%. Because of that, many of these ETFs could pair very well with SCHD for a diversified investment portfolio holding multiple dividend equities.
Now this is a complete personal decision but pairing SCHD with DGRW in a defensive portfolio provides both the growth you would need, diversification against other high growth investments, while still earning a potential dividend income that are taxed as long term capital gains, where you’ll reap monthly and quarterly income from it.
» Analyze different investment portfolios: Try StockRover’s 2-week free trial today
SoFi Invest Webull Vanguard Fees $0 per trade Fees $0 per trade Fees $0 per trade Account Minimum $0 Account Minimum $0 Account Minimum $0 Promotion Get up to $3,000 in stock when you open and fund a new account with at least $50. Offer ends 10/18/26. Promotion Receive 12 free shares (valued $3-$300 each) and 1 month of Webull Premium when you open and fund a new account with at least $100. Promotion None no promotion available at this time on SoFi's website on Webull's website on Vanguard's website
Moving Forward With Your Dividend Strategy
Whether you pick one fund or combine two, these best dividend ETFs offer a simple path to building passive income alongside long term growth. The nice thing about exchange traded funds is getting instant diversification across hundreds of stocks without picking individual companies or trying to time the market.
Remember that past performance doesn’t guarantee future investment returns, but dividend growth investing has proven itself over decades. Companies that consistently raise their dividend payments typically maintain strong fundamentals and shareholder-friendly management teams. Individual investors benefit from this strategy because it requires minimal ongoing research compared to stock picking.
If you’re ready to get started, check out our guide on how to invest in ETFs for the basics. You’ll want to use one of the best brokerage accounts that offer commission-free ETF trading. And for more investing principles that can help you succeed, review the 10 Commandments of ETF Investing.
The key is starting early and staying consistent with your investing approach. Whether you’re building wealth through equities for retirement or generating income for near-term needs, dividend ETFs give you options. Time in the market beats timing the market, and these funds make it easy to stay invested through all market conditions.
» Get your free InvestLane score: See how your portfolio aligns with your financial health.
