Despite yesterday's strong rally in the stock market, investors still want tangible proof that their stocks are going to deliver the returns they need. The clearest evidence of a fruitful investment is one that puts cash in your pocket, and that's why dividend-paying stocks have become as popular as they are today.
But individual stocks aren't the only way to get access to the best dividend payers in the market. Through exchange-traded funds that focus on dividend-paying companies, you can invest in a basket of stocks that will give you the income you need.
Finding the best dividend ETFs
As with many other popular categories of investments, though, the rise of dividend stocks has spawned many different ETFs that include them in their portfolios. For instance, when Standard & Poor's MarketScope Advisor letter screened more than 1,100 ETFs, it found that more than 10% of them had trailing dividend yields of at least 3%. Even after S&P removed sector-specific funds that didn't provide enough overall diversification, it still had more than six dozen ETFs that met its qualifications.
But in its final cut, only 13 ETFs had what it took to earn S&P's seal of approval. Many of those ETFs are all-purpose broad-market funds, but four ETFs focused in on dividends specifically. Let's take a closer look at these big dividend producers.
From wisdom, Foolishness
The first top ETF provider is WisdomTree, which produced a couple of worthy ETFs. Its WisdomTree Total Dividend
For the most part, WisdomTree LargeCap Dividend
Following the Vanguard
Another fund that made S&P's list was Vanguard High-Yield Dividend
With a market-cap weighting method, the usual suspect, ExxonMobil, leads the holdings list. But with more than 400 stocks in the ETF, you'll get plenty of diversification to go with your healthy payout. And with an expense ratio of only 0.18%, it's hard to beat the price.
The not-so-itsy-bitsy SPDR
Finally, the SPDR S&P Dividend
The quarter-century history requirement is a tough one to meet, and as a result, you'll find some unlikely names among the stocks within the fund. Pitney Bowes
Never stop looking
Any of these four ETFs will give you a reasonable place to start your journey toward becoming a better dividend investor. Although they each have their particular quirks, all of them have the benefit of rewarding fund investors with the healthy payouts they've earned. In a rocky market, that's exactly what many investors just like you want to see.
For more on exchange-traded funds, make sure you've taken a look at The Motley Fool's free special report on ETFs. You'll find the names of three ETFs we think have the potential to hit home runs over the long haul.