Investing has taken a heavy dividend focus in recent years, as the Fed has frozen interest rates at near-zero levels. As a result, investors have put a heavy focus on dividend ETFs, as steady income streams can be pivotal for a portfolio. With the dividend craze came a bundle of new ETFs trying to find ways to deliver the best yield or payout for shareholders. To help investors get a better grip on the ETF dividend world, we broke it down to find the funds that pay out the most in dividends.
The following table takes a look at the top 10 ETFs by total annual dividends paid. Obviously, the results here are a bit skewed given that a fund with high assets is more likely to have a larger dividend; nonetheless, there were still a few surprising results (data as of 3/6/2015):
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| ETF | Annual Dividend Payout |
|---|---|
| SPDR S&P 500 (SPY ) | $3,532,180,000.00 |
| iShares MSCI EAFE ETF (EFA ) | $1,937,398,200.00 |
| Emerging Markets ETF (VWO ) | $1,287,903,700.00 |
| Core S&P 500 ETF (IVV ) | $1,252,742,400.00 |
| REIT ETF (VNQ ) | $995,535,500.00 |
| iShares iBoxx $ High Yield Corporate Bond ETF (HYG ) | $981,609,900.00 |
| Total Stock Market ETF (VTI ) | $942,419,900.00 |
| Europe Pacific (VEA ) | $874,795,500.00 |
| iShares U.S. Preferred Stock ETF (PFF ) | $784,353,000.00 |
| iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD ) | $731,652,600.00 |
For the most part, the above ETFs are probably funds that you are familiar with and may even own. When it comes to your individual portfolio, you could probably care less about how much SPY pays out each year in dividends, which is a fair line of thinking. The next table displays ETFs that pay out the most in dividends per share each year:
| ETF | Annual Dividend Per Share |
|---|---|
| iShares Global Telecom ETF (IXP ) | $7.45 |
| iShares iBoxx $ High Yield Corporate Bond ETF (HYG ) | $5.00 |
| iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB ) | $4.96 |
| Total Return Exchange-Traded Fund (BOND ) | $4.50 |
| 0-5 Year High Yield Corporate Bond Index Fund (HYS ) | $4.49 |
| E-TRACS 2x Leveraged Long Alerian MLP Infrastructure Index (MLPL ) | $4.40 |
| ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN (CEFL ) | $4.17 |
| Dow Jones Industrial Average ETF (DIA ) | $4.09 |
| High Yield Interest Rate Hedged ETF (HYHG ) | $4.06 |
| iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD ) | $4.04 |
Surprising Results
The second table likely had a few names you have not seen or are less familiar with than the funds in the first table. Obviously, share price and yield are other big factors when it comes time to make a dividend allocation, but those factors are constantly changing throughout each and every trading session. Looking at the dividend per share is a more stable figure that will be able to help you get a more predictable income stream.
Investors should take a look at the dividend history prior to investment to ensure that a fund has made consistent payouts and is not just having a good year as far as its payout is concerned. IXP, for example, made an abnormally large payout in June of 2014, which gave it such a high annual dividend. The ETF may very well carry on with that payment, but its payout history suggests that it is an unsustainable rate.
Note that MLPL is a 200% leveraged fund and will be very volatile. It should only be used by those who have a firm grasp on the risks associated with investment.
The Bottom Line
Investing for income has become a major theme in today’s market environment (though it has always been a prevalent strategy for some). The ETF world can help offer investors a diversified approach to dividend investing all the while maintaining a balanced portfolio. Be sure to always look under the hood of a fund’s payout and dividend prior to investing to ensure that you fully understand where you are putting your money.
Follow me on Twitter @JaredCummans.
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Disclosure: No positions at time of writing.
