U.S. companies are lavishing their investors with more dividend income this year. Dividend payments from companies based in the U.S. hit a record $164.3 billion in the first quarter, according to the latest Janus Henderson Global Dividend Index. That's up 7% from last year's Q1.
Several companies contributed to the record, including Costco, which paid a massive $6.7 billion in dividends (including a one-time special dividend of $15 per share). Many others raised their payouts or initiated a dividend, including Meta Platforms, which made its first-ever dividend payment of $1.3 billion in March.
There are lots of ways to get a slice of this dividend income. You can invest directly in some of the top dividend stocks or buy an exchange-traded fund (ETF) focused on dividends. Here's a look at two top dividend ETFs to buy to add some passive income to your portfolio.
Focused on the 100 best dividend stocks
Schwab U.S. Dividend Equity ETF (SCHD 0.07%) aims to track the total return of the Dow Jones U.S. Dividend 100 Index. That index features 100 higher-yielding U.S. dividend stocks with strong records of consistently paying dividends. It focuses on companies with quality and sustainable dividends backed by strong financial metrics compared to their peers.
NYSEMKT: SCHD
Key Data Points
The fund's top holdings have long histories of paying a growing dividend:
|
Dividend Stock |
Fund Weighting |
Current Yield |
Dividend History |
|---|---|---|---|
|
Texas Instruments |
4.8% |
2.6% |
20 consecutive annual increases |
|
Amgen |
4.3% |
3% |
12 consecutive annual increases |
|
4.3% |
2.8% |
21 consecutive annual increases | |
|
Pfizer |
4.2% |
5.9% |
31 consecutive annual increases |
|
4.2% |
3.1% |
52 consecutive annual increases | |
|
4.1% |
4.1% |
37 consecutive annual increases | |
|
4% |
3.1% |
62 consecutive annual increases | |
|
3.9% |
6.8% |
17 consecutive annual increases | |
|
Cisco Systems |
3.8% |
3.4% |
12 consecutive annual increases |
|
3.8% |
2.6% |
15 consecutive annual increases |
Data sources: Google Finance, Schwab, Koyfin, and company press releases. NOTE: Data as of May 28, 2024.
Each of its top-10 holdings pays a dividend that yields more than double the S&P 500 (currently around 1.3%). That has helped support a higher-dividend yield for the ETF (3.5% over the past 12 months).
The fund also focuses on companies with long histories of growing their dividends. That has helped support steadily rising dividend payments by the ETF:
SCHD Dividend data by YCharts.
The fund offers investors access to 100 of the top dividend-paying stocks for an ultra-low cost of 0.06%. That low ETF expense ratio enables investors to keep more of the dividend income the fund's holdings generate.
High-quality, high-yielding dividend stocks
SPDR S&P Dividend ETF (SDY +0.24%) aims to track the total returns of the S&P High Yield Dividend Aristocrats Index. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.) That index holds companies that have consistently increased their dividend for at least 20 straight years and weights those stocks by their yields. The fund currently has 135 holdings.
NYSEMKT: SDY
Key Data Points
Its top-10 holdings are:
|
Dividend Stock |
Fund Weighting |
Current Yield |
Dividend History |
|---|---|---|---|
|
3M |
2.7% |
2.8% |
3M recently cut its dividend (ending 60+ years of consecutive increases) |
|
Realty Income |
2.5% |
6.1% |
107 straight quarterly increases |
|
The Southern Company |
1.8% |
3.7% |
23 years of consecutive dividend increases |
|
T. Rowe Price |
1.8% |
4.2% |
38 years of consecutive dividend increases |
|
Chevron |
1.8% |
4.1% |
37 years of consecutive dividend increases |
|
Edison International |
1.8% |
4.2% |
20 years of consecutive dividend increases |
|
Xcel Energy |
1.8% |
4.1% |
21 years of consecutive dividend increases |
|
NextEra Energy |
1.7% |
2.7% |
30 years of consecutive dividend increases |
|
Kenvue |
1.7% |
4.1% |
Spun off from Johnson & Johnson last year (62 years of dividend increases) |
|
Consolidated Edison |
1.6% |
3.5% |
50 years of consecutive dividend increases |
Data sources: Google Finance, State Street, Koyfin, and company press releases. NOTE: Data as of May 28, 2024.
This ETF tilts more heavily to utility stocks (five of the top 10), which tend to offer higher-yielding dividends that slowly rise each year. Because of that, this ETF has a higher-dividend yield than the S&P 500 (2.5% over the past year).
The fund has a higher-expense ratio (0.35%) than Schwab U.S. Equity Dividend ETF. However, it should also provide investors with an above-average and steadily rising stream of dividend income backed by companies with long histories of increasing their payouts.
Easy ways to start collecting some dividend income
Dividend payments continue rising in the U.S. as companies grow their earnings. Those desiring to get a share of that income can easily do so by investing in a dividend-focused ETF like Schwab U.S. Dividend Equity ETF or SPDR S&P Dividend ETF. They both focus on companies that pay higher-yielding dividends and have excellent track records of increasing their payouts. Because of that, these ETFs should supply investors with a growing stream of passive income.
