“Don’t Sleep on Dividend ETFs”
A lot of people shun ETFs for various reasons. Whether the perception of the expense ratio not being worth it, the lack of personal control of the investment, or that the person thinks they can do better, i.e. “Beat the Market”, these reasons hide the fact that many dividend etfs perform just as good or even better than individual companies that we dividend investors cherish.
In the past I fell into the trap of wanting to control my investments by choosing individual companies, feeling that I could better decide which companies would be best over time without paying an investment company to pick for me. I have since loosened my stance on having dividend ETFs in my portfolio. I now have a balanced approach to individual / ETF allocation percentages and as time goes on I find myself drawn more and more to ETFs.
No one knows the future, and it is said that around 90% of all active fund managers can’t beat the index over a 10 year period, so why do we as individual investors think we can be in that top 10%? Beating the index for one or two years is possible, but over the long run, which is what we should be focused on, it is an extremely difficult feat to do. While it may be fun and exciting to research and pick individual companies, are we really making the best financial decision by doing so?
By investing in a diversified ETF that has rules and metrics in place to remove and replace the underperforming holdings we let the self-cleansing nature of ETFs do the monitoring and decision making for us.
Do your individual holdings beat the mix of current dividend, dividend growth, and capital appreciation that these ETFs produce? I know some of my individual holdings don’t, some not even close. Are we all really that confident that we make 100% good decisions with each holding, buying and selling as needed to outperform?
Not all dividend ETFs are great but there are some that are definitely top-notch and worthy of your consideration. Each ETF has a different investing philosophy and methodology on how they select stocks, so take a look into each one to understand how they operate and if you agree with their process.
Below are some of the recent metrics from some of the better ETFs available. The consistency and diversification that these dividend ETFs bring, along with the stable dividends and dividend growth, should remind all dividend investors to don’t sleep on dividend ETFs.
SCHD (2.83% Yield)
Dividends:
2021 total – $2.249
2020 total – $2.0284
1 year change – 10.87%
3 year CAGR – 16.04%
5 year CAGR – 12.32%
Total Returns:
1 year – 24.71%
3 year – 17.65%
5 year – 15.64%
VYM (2.80% Yield)
Dividends:
2021 total – $3.096
2020 total – $2.906
1 year change – 6.53%
3 year CAGR – 5.33%
5 year CAGR – 7.01%
Total Returns:
1 year – 22.20%
3 year – 10.67%
5 year – 10.84%
DGRO (1.96% Yield)
Dividends:
2021 total – $1.076
2020 total – $1.0287
1 year change – 4.60%
3 year CAGR – 9.77%
5 year CAGR – 10.30%
Total Returns:
1 year – 28.92%
3 year – 13.40%
5 year – 15.40%
NOBL (1.94% Yield)
Dividends:
2021 total – $1.86
2020 total – $1.70
1 year change – 9.4%
3 year CAGR – 9.01%
5 year CAGR – 10.11%
Total Returns:
1 year – 18.78%
3 year – 14.11%
5 year – 13.87%