Exchange-traded funds (ETFs) have changed the face of investing, helping investors to conveniently simplify their lives at low cost. But there are so many ETFs at this point that it can be confusing to find the ones that are best for your portfolio. Here are four of the best dividend ETFs for your portfolio if you lean toward dividend investing.

1. Vanguard Dividend Appreciation ETF

The first ETF up is the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG). It has the lowest yield here at around 1.8%. That's pretty miserly, but it is still notably higher than the 1.3% dividend yield of the S&P 500 index. The interesting overlay here is that, like the S&P 500 index, the Vanguard Dividend Appreciation ETF owns a fairly large number of stocks, with around 300 holdings.

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VIG data by YCharts.

The ETF's construction is fairly simple. The first step is to create a list of all U.S. companies that have increased their dividends annually for at least a decade. Then the highest-yielding 25% of the companies are eliminated (high yield is clearly not the focus here). The companies that are left are put into the Vanguard Dividend Appreciation ETF with a market-cap weighting.

The ETF hasn't kept pace with the S&P 500 index over time, but if you like the idea of a broadly diversified portfolio filled with stocks that have a history of regularly hiking their dividends, this could be the right ETF for you. Notably, the dividend has doubled over the past decade, which suggests that a lower starting yield can still have a big income effect if you hold this ETF for the long term.

Image source: Getty Images.

2. Vanguard High Dividend Yield ETF

Next up is the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). This exchange-traded fund is pretty simple, too. It takes all of the dividend-paying stocks on U.S. exchanges and then buys the 50% of the list with the highest yields. The portfolio is weighted by market cap. This ETF has over 500 holdings, so its portfolio is even more diversified than the Vanguard Dividend Appreciation ETF. The dividend yield is around 2.9%.

VOO Dividend Yield data by YCharts.

Given the focus on yield here, the Vanguard High Dividend ETF has lagged the S&P 500 index over time by an even greater amount than the Vanguard Dividend Appreciation ETF. But if your goal is to maximize the income your portfolio generates, it could be a great foundational investment. Essentially, these two Vanguard ETFs offer wide diversification and dividends in ways that will meet the investment needs of dividend growth investors and, in this situation, high yield investors.

3. SPDR Portfolio S&P 500 High Dividend ETF

The SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD), meanwhile, allows you to stick with S&P 500 index stocks, but do so with a high-yield focus. It simply buys the 80 highest-yielding S&P 500 stocks, weighting them equally. Equal weighting allows each stock to affect performance to the same degree and helps to reduce the risk that any one stock will overly hamper performance. The dividend yield is an attractive 4.5%, the highest on this list.

SPYD data by YCharts.

Don't buy this ETF looking for material dividend growth over time. The dividend is going to make up a material portion of an investor's total return, but it hasn't risen much over time. However, if you want to maximize income with a hand-selected portfolio of large market capitalization and economically important businesses, the SPDR Portfolio S&P 500 High Dividend ETF should be a top contender.

4. Schwab US Dividend Equity ETF

The Schwab US Dividend Equity ETF (NYSEMKT: SCHD) is by far the most complicated ETF on this list. But it might also be the most attractive, as it manages to mix dividend growth with an attractively high yield. The process starts with the list of companies that have increased their dividends annually for 10 consecutive years. A composite score is created for each of the companies that includes cash flow to total debt, return on equity, dividend yield, and a company's five-year dividend growth rate. The 100 highest-rated companies get included in the ETF and are market-cap weighted.

SCHD data by YCharts.

The end result has been a strongly performing share price, a growing dividend payment, and, today, a roughly 4% yield. The Schwab US Dividend Equity ETF isn't the most diversified, and it isn't the highest-yielding. But it provides a very attractive mix of the two. And, interestingly, it has managed to grow its dividend at a faster clip than the Vanguard Dividend Appreciation ETF.

For many dividend investors, the Schwab US Dividend Equity ETF's approach of using a fairly complex composite score to select stocks will be the most attractive choice. That said, investors need to recognize that this ETF isn't a simple one to understand. If you don't buy into the screening approach, you probably shouldn't buy the ETF.

Dividend options for every kind of dividend investor

Everyone has a slightly different approach to investing. This quartet of dividend-focused ETFs offers up four different dividend investing styles -- from dividend growth to high yield, and a notable choice that successfully manages to bring different investment tactics into one complex and high-yielding ETF. If you are looking for the best dividend ETF for your portfolio, one of these four ETFs will likely be exactly what you are trying to find.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

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*Stock Advisor returns as of June 2, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

Dividend investors are often drawn to high yields like moths to a flame. When it comes to yields today, there are few that are loftier than AGNC Investment's (NASDAQ: AGNC) 15%-plus dividend yield. Yet if history is any guide, most investors would be better off buying the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) instead, even though it only has a relatively modest 1.8% yield. Here's why.

What do AGNC Investment and Vanguard Dividend Appreciation ETF do?

AGNC Investment is a mortgage real estate investment trust (mREIT). That's a fairly complex niche within the broader REIT sector. AGNC Investment buys mortgages that have been rolled up into bond-like investments, often making use of leverage to do so. Mortgage securities prices can be impacted by interest rates, housing market dynamics, and mortgage repayment trends, among other things. And they trade all day, so stocks like AGNC Investment can be fairly volatile.

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Image source: Getty Images.

The Vanguard Dividend Appreciation ETF is a diversified exchange-traded fund (ETF). It tracks the S&P U.S. Dividend Growers index. That index starts by taking all of the U.S. companies that have increased their dividends for at least 10 consecutive years and then removes the highest yielding 25% of the list. The rest get into the index (and the ETF) based on a market cap weighting. Note that it is specifically avoiding the highest-yielding stocks.

Income versus total return and back to income again

Here's the interesting thing: AGNC Investment is very clear that income is not its primary goal. Management says its goal is "Favorable long-term stockholder returns with a substantial yield component." That means that delivering a strong total return, which assumes dividend reinvestment, is the main goal, and AGNC Investment has done reasonably well at hitting that target.

AGNC Total Return Level data by YCharts.

Looking at the entire span that both AGNC Investment and Vanguard Dividend Appreciation ETF have existed, AGNC Investment has provided a slightly better total return. But take a look at the dividend and price history of each of these investments. After early spikes in the dividend and price of AGNC, it has been all downhill. By contrast, the Vanguard Dividend Appreciation ETF's dividend payouts and share price have both generally risen over time.

AGNC data by YCharts.

A strong total return is great, but that metric is based on the assumption that you're reinvesting your dividends. Income investors are usually looking to live off of the dividends their investments generate, which means spending them. As the chart above makes very clear, AGNC Investment's dividend payouts haven't been sustainable, while the smaller payouts from Vanguard Dividend Appreciation ETF were sustainable and generally grew over time.

In fact, AGNC Investment has over time reduced its payouts by more than 60% while the total payouts from the components of the Vanguard Dividend Appreciation ETF have increased by more than 200%. For someone whose plans over that period involved using the dividends their portfolio generated to help cover their living expenses, it's pretty clear which investment would have been the better choice.

AGNC isn't a bad investment

AGNC Investment isn't a bad investment -- it's just one that requires a more nuanced view. Yes, its dividend yield is huge, but that doesn't necessarily make it a good income stock. The real gains from owning it come from reinvesting the dividends and focusing on total return, which is not what most dividend investors are likely to be doing. If you are trying to live off of the income your portfolio generates, the Vanguard Dividend Appreciation ETF, despite its much lower yield, will probably be a better choice for your portfolio.

Should you invest $1,000 in AGNC Investment Corp. right now?

Before you buy stock in AGNC Investment Corp., consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AGNC Investment Corp. wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.

Dividend ETFs come in all shapes and sizes. Some Dividend ETFs focus on a balanced approach, some focus on dividend growth, and some focus on higher yield. One of my favorite Dividend ETFs is the Schwab US Dividend Equity ETF (NYSEMKT: SCHD) because it is well balanced with a high yield and strong dividend growth, meaning you get the best of both worlds. SCHD is also a great complement to tech-heavy portfolios, as it helps offset that exposure.

Watch this short video to learn more, consider subscribing to the channel, and check out the special offer in the link below.

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*Stock prices used were end-of-day prices of May 9, 2025. The video was published on May 10, 2025.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,385!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $842,015!*

Now, it’s worth noting Stock Advisor’s total average return is 987% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Mark Roussin, CPA has positions in Schwab U.S. Dividend Equity ETF, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF, and iShares Trust-iShares Core Dividend Growth ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

Mark Roussin is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) isn't the most popular exchange-traded fund (ETF) on the market. With $83.7 billion in assets under management, it's not even among the five largest ETFs in the Vanguard family. But it is the biggest name in dividend-oriented ETFs, making it a leading choice for income investors who don't want to worry about picking individual dividend stocks.

So this Vanguard fund is well respected, but is it a good ETF to buy right now? I'll help you take a look. First, let's see what makes this ETF tick.

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Image source: Getty Images.

Inside the Vanguard Dividend Appreciation ETF

As usual, Vanguard isn't hand-picking stocks for this ETF. It's actually an index fund, tracking the components of the S&P U.S. Dividend Growers index. By handing off the heavy research work to another organization -- S&P Global (NYSE: SPGI) in this case -- Vanguard can automate the fund management and offer the resulting ETF with very low management fees.

So I need to take one more step to figure out how this ETF is designed. As it turns out, the underlying market index picks out proven dividend growth stocks among companies headquartered in the United States.

There's a minimum requirement for the stock's daily dollar-based trading volume. Real estate investment trusts (REITs) aren't allowed because they belong in a different S&P index. Each candidate must have increased its annual dividend payout for at least the last 10 years. Oh, and the highest-yielding 25% of this filtered list are also excluded. The idea here is to reduce the risk that often comes with excessive yields.

That's the selection process. Easy-peasy. Buying shares of the Vanguard Dividend Appreciation ETF gives you exposure to more than 300 consistent dividend growth stocks. The ETF is weighted by market cap, and Vanguard charges a tiny annual fee of 0.05%.

Comparing the Vanguard Dividend Appreciation ETF to its famous S&P 500 cousin

The resulting stock list has a lot in common with the better-known Vanguard S&P 500 ETF (NYSEMKT: VOO). Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) are the two largest holdings on both lists. Despite the dividend fund's focus on high-quality payouts, its 1.9% yield is just a little bit higher than the S&P 500 ETF's at 1.4%. Their long-term performance tends to be quite similar, whether you account for reinvested dividends or not:

VOO data by YCharts

But there are significant differences, too. The third- and fourth-largest holdings in the dividend fund are Broadcom (NASDAQ: AVGO) and JPMorgan Chase (NYSE: JPM). Their rankings on the general S&P 500 list are No. 8 and No. 11, respectively. Many of the leading S&P 500 stocks are not in the habit of paying dividends at all, not to mention raising their payouts every year.

The sector-by-sector composition is very different, too. As expected, the dividend appreciation fund owns more stocks in the industrial, healthcare, and finance segments, with a milder focus on consumer goods and technology.

Finally, it's less top-heavy than the ordinary S&P 500 tracker. The top five holdings in the dividend ETF add up to 18.3% of the total portfolio, compared to 24.9% for the five largest S&P 500 components. From this point of view, the smaller fund with just 338 components is more diversified than the 505-ticker S&P 500 ETF.

Who should consider this dividend-focused ETF right now?

Now you know what the Vanguard Dividend Appreciation ETF looks like, and it's time to answer the real question on everyone's mind: Is it a good ETF to buy in April 2025?

Most people should prefer the good old S&P 500 fund, most of the time. Its modest long-term performance advantage can make a significant difference when you're building a nest egg over decades.

But I understand if you prefer a more balanced portfolio in these uncertain times. The tech giants that recently lifted the S&P 500 to all-time highs might be due for a price correction, after all. It's not easy to keep the growth engines running in every possible economy. And the lower-risk dividend fund does have a history of strong performance in troubled times.

The S&P 500-beating periods tend to be fairly short, though. Even if you time your market calls to perfection, you'd still probably be better off in five or 10 years with the ultra-reliable S&P 500 ETF under your belt.

Then again, everyone's financial situation is unique. The Vanguard Dividend ETF can be the way to go if you prefer its blend of stable stocks, robust dividend payouts, and broader diversification. So I'm not throwing this interesting fund under the bus. It can be the right fund for some people, especially in a shaky economy like the current situation. Still, you should take a closer look at the standard S&P 500 option before committing too much capital to this idea.

Should you invest $1,000 in Vanguard Dividend Appreciation ETF right now?

Before you buy stock in Vanguard Dividend Appreciation ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Dividend Appreciation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

Now, it’s worth noting Stock Advisor’s total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Anders Bylund has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Microsoft, S&P Global, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.