I've long maintained that exchange-traded funds (ETFs) offer investors one of the best ways to make money over the long term. They can provide diversification, allowing you to own a large number of stocks in one basket. They come in all varieties -- whatever your investing style is, you can find an ETF that meets your needs.
Income investors have lots of great alternatives. You might even argue there are too many choices. I think one ETF, though, especially stands out. Here's my pick for the smartest dividend ETF to buy with $1,000 right now.
"High dividend" is in its name
I like it when the name of an ETF tells you pretty much what you need to know about it. That's the case with the SPDR Portfolio S&P 500 High Dividend ETF (SPYD 0.65%). This fund has "high dividend" in its name, and that's what it offers.
NYSEMKT: SPYD
Key Data Points
The ETF is managed by State Street, one of the top financial services companies in the U.S. Its 30-day SEC yield (an annualized yield based on income generated by the fund over the last 30 days) is 4.41%.
The S&P 500 High Dividend ETF can provide such a high dividend yield because of its investment approach. The fund tries to track the performance of the S&P 500 High Dividend Index, which consists of the 80 stocks in the S&P 500 with the highest yields.
Some ETFs with juicy dividend yields don't have great track records of high yields. This fund, though, consistently delivers strong income. Its current yield is even lower than its average over the last five years.
Looking beyond the dividend
However, the dividend isn't everything. Investors should also consider other advantages that the SPDR Portfolio S&P 500 High Dividend ETF offers.
Near the top of the list, in my view, is its low costs. The ETF's annual expense ratio is only 0.07%. You won't have to worry about fees eating up much of your total returns with this State Street fund.
Stability isn't a problem, either. The ETF's assets under management total nearly $6.3 billion. It's a big fund managed by a solid investment firm. The companies in which the ETF has stakes are among the largest in the U.S., including Altria, Citigroup, and Morgan Stanley.
The fund is performing relatively well, too. So far in 2024, it's up over 10%. With dividends included, the ETF has delivered a year-to-date total return of nearly 13%. Since the fund's inception in October 2015 through June 30, 2024, it has generated an average annual total return of 8.44%. And that is even higher now thanks to a recent surge.
One main drawback
Is there anything not to like about this ETF? Yep, I think it has one main drawback.
I mentioned that the SPDR Portfolio S&P 500 High Dividend ETF has performed relatively well. But that "relatively" is compared to other dividend ETFs. The fund's performance has lagged behind the S&P 500's.
This trade-off between higher dividends and lower gains is one that income investors often must make. Overall, though, I stand by my view that this fund is the smartest dividend ETF to buy right now.
