James Brumley, The Motley Fool
7 min read
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The ProShares S&P 500 Dividend Aristocrats® ETF holds the most proven and resilient blue-chip dividend stocks.
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Schwab's U.S. Dividend Equity exchange-traded fund offers the highest dividend yield to new investors now.
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It’s the lowest-yielding of the major dividend-oriented ETFs, however, that may be most investors’ best bet.
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10 stocks we like better than Vanguard Dividend Appreciation ETF ›
Are you on the hunt for an all-weather income investment you can just "set and forget"? That's fine if you are. In fact, it's good -- less is often more when it comes to investing. That is to say, attempting an active investing strategy often leads to weaker net returns than you would have gotten through a more passive approach.
As such, if you're after passive income, buying specific interest-bearing bonds or individual dividend stocks may not be the best fit for you. Plenty of investors would be better served to put their money into one of several fantastic dividend-oriented exchange-traded funds (ETFs).
And one in particular stands out among all your options.
Most retail investors have likely already heard of some -- if not all -- of the market's most popular dividend ETFs, like the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) or the ProShares S&P 500 Dividend Aristocrats® ETF (NYSEMKT: NOBL). (The term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC.) Schwab's fund tracks the performance of the Dow Jones U.S. Dividend 100 index, while ProShares' ETF is, of course, based on the S&P 500 Dividend Aristocrats® index. Either one would be a solid addition to almost anyone's portfolio.
However, none of these alternatives is arguably quite as compelling as the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG).
Vanguard's fund is largely designed to produce reliable increases in its quarterly dividend payments. It's based on the S&P U.S. Dividend Growers index, and to be considered for inclusion in that index, a company must have increased its per-share dividend for a minimum of 10 consecutive years. That weeds out a lot of potential components that income-seeking investors wouldn't actually want to own.
There's something else about the rules for inclusion in the S&P U.S. Dividend Growers Index, however, that counterintuitively makes a world of difference to anyone interested in income investing.
If you've already done some homework on the market's top dividend exchange-traded funds, then you may already know they're about as similar as they are different. For instance, they all predominantly hold blue chip stocks, and their dividend yields are all in the same ballpark. The Schwab U.S. Dividend Equity ETF boasts the highest with a yield of just under 4%, the Vanguard Dividend Appreciation ETF's trailing yield is 1.7%, and the ProShares S&P 500 Dividend Aristocrats ETF's yield is nearly 2.5%.
