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.

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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 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.

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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!*

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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.

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Investing in the stock market isn't all about trying to find the next big growth stock or swinging for the fences, hoping for a massive return. Many investors don't want to turn investing into a job that requires constantly monitoring stocks. They simply want investments that can generate recurring cash flow for years to come.

A good way to accomplish that is by investing in exchange-traded funds (ETFs) which can allow you to do that easily. Not only can you quickly diversify your portfolio through ETFs, but some of them also offer attractive yields.

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The ETFs listed below focus on blue chip dividend stocks and offer high yields. For long-term investors who don't want to worry about the market, these can be safe investments to buy and forget about.

Image source: Getty Images.

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) pays a yield of 4%, which is fairly high for such a diversified investment. By comparison, the average yield on the S&P 500 is just 1.4%.

Another great feature of this fund is that its expense ratio is fairly low at just 0.06%, which ensures that fees don't chip away at your overall returns.

The stocks selected for the fund pay dividends and have strong financials. Some of the fund's top holdings include Coca-Cola, Verizon Communications, and Home Depot. These are the types of big-name stocks that you can feel comfortable hanging on to for the long haul, and which can generate recurring dividend income for your portfolio along the way.

The majority of the stocks are in energy, consumer staples, and healthcare, with those three sectors accounting for about 56% of the entire portfolio. In total, there are currently 103 holdings in the ETF.

If you just want a good buy-and-forget investment that provides you with plenty of dividend income, the Schwab fund can be an excellent option. Over the past year, its total returns (which include dividends) are modest but stable at around 4%. While that trails the S&P 500 and its 13% performance over the same time frame, in return, you get a fairly diversified investment that doesn't contain as much risk as the overall market.

Vanguard High Dividend Yield Index Fund ETF

A more diversified ETF to consider is the Vanguard High Dividend Yield Index Fund ETF (NYSEMKT: VYM), which has nearly 600 stocks in its portfolio. This is also a low-cost fund whose expense ratio is 0.06%. Its yield is, however, slightly lower at right around 3%, but that is still above average.

There can be a bit less risk and volatility with this ETF simply because there are more holdings, which means that there's less vulnerability to how a single stock performs in the fund. The largest holding in the ETF is Broadcom, which accounts for 4% of the fund's total weight. Other recognizable names include JPMorgan and ExxonMobil.

The Vanguard fund's main three sectors are financials (20%), healthcare (14%), and industrials (13%). In the past 12 months, this ETF's total returns are just under 11%, making it the best-performing fund on this list.

iShares Core High Dividend ETF

Rounding out this list is the iShares Core High Dividend ETF (NYSEMKT: HDV). At just over 8%, its total returns over the past year put it in the middle of the pack. But overall, it's the same story: Investors are sacrificing some returns with these ETFs in exchange for safety. They can help protect you and make your portfolio less susceptible to large declines, but they usually underperform the market when it is doing well.

^SPX data by YCharts.

With the iShares ETF, you'll be collecting a yield of 3.5%. It has a slightly higher expense ratio than the other two ETFs listed here at 0.08%, but the difference is minor and won't have a drastic effect on your overall returns.

The fund is a bit more concentrated with 75 holdings in its portfolio. The focus is on high-quality dividend stocks, with a bit less diversification. ExxonMobil, Johnson & Johnson, and Progressive, which are its three top holdings, make up more than 18% of the ETF's overall weight. Consumer staples, energy, and healthcare are the three largest sectors here, representing close to 60% of the ETF's overall portfolio.

All three of the ETFs listed here can be great options for income investors for the long haul. You get some excellent diversification, incur low fees, and collect fairly high yields.

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

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JPMorgan Chase is an advertising partner of Motley Fool Money. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, JPMorgan Chase, Progressive, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom, Johnson & Johnson, and Verizon Communications. The Motley Fool has a disclosure policy.

The "Magnificent Seven" -- Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Tesla -- took the market by storm in 2023 and 2024 by contributing a sizable portion of gains in major indexes like the S&P 500 and Nasdaq Composite.

But that momentum has ground to a halt this year. As of the time of this writing, all seven stocks are underperforming the S&P 500 in 2025. The best of the bunch, Microsoft, is down 8.1% year-to-date, while Tesla has tumbled over 35% even when factoring in its post-earnings rebound on Wednesday and Thursday.

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Here's why investors looking for low-cost exchange-traded funds (ETFs) that don't include the Magnificent Seven may want to take a closer look at the Vanguard High Dividend Yield ETF (NYSEMKT: VYM).

Image source: Getty Images.

In defense of the Magnificent Seven

Before diving into the attractive qualities of the Vanguard High Dividend Yield ETF, it's worth mentioning that it's a mistake to bail on the Magnificent Seven just because their stock prices are lower this year.

The group boasts numerous competitive advantages and robust balance sheets. And the sell-off has only made their valuations more attractive for long-term investors. Risk-tolerant investors may want to consider top names in the Magnificent Seven, such as Meta Platforms, which has strong free cash flow, an inexpensive valuation, and a clear runway for future growth.

However, there are also compelling reasons not to buy Magnificent Seven stocks. The simplest is that you already have your desired exposure to the group, either by directly investing in individual names or through Magnificent Seven-heavy ETFs.

The Magnificent Seven are so large that they comprise a massive amount of the major indexes. The Vanguard S&P 500 ETF has 29.9% in the Magnificent Seven, and the Invesco QQQ Trust -- which mirrors the performance of the Nasdaq-100 -- has a staggering 40.5% in the group.

Investors seeking to deploy new capital in a diversified ETF while avoiding the Magnificent Seven may want to consider income and value funds. One fund that is especially appealing right now is the Vanguard High Dividend Yield ETF.

Industry leadership across value-focused sectors

Many of the top holdings in the Vanguard High Dividend Yield ETF are industry-leading companies from non-tech-focused sectors -- like JPMorgan Chase and Bank of America for financials; ExxonMobil and Chevron for energy; UnitedHealth Group, Johnson & Johnson, and AbbVie for healthcare; and Procter & Gamble, Coca-Cola, and Walmart for consumer staples. The tech stocks the ETF holds -- like Broadcom, Cisco Systems, and International Business Machines -- pay growing dividends.

This ETF has an expense ratio of just 0.06%, which is slightly higher than the Vanguard S&P 500 ETF's 0.03%. However, the subtle difference won't significantly impact most investors, as it amounts to only 30 cents more in annual fees per $1,000 invested.

The Vanguard High Dividend Yield ETF targets companies with strong track records of dividend growth. The lack of exposure to the Magnificent Seven makes the fund much more balanced across sectors than the S&P 500.

Data source: Vanguard.

By overweighting sectors such as financials, healthcare, industrials, consumer staples, energy, and utilities relative to the S&P 500, the Vanguard High Dividend Yield ETF achieves a 2.9% dividend yield, roughly double the 1.4% yield of the Vanguard S&P 500 ETF. The High Dividend Yield ETF fund also has a lower price-to-earnings ratio at 18.1 compared to 23.9 for the S&P 500 ETF.

A plug-and-play option for all kinds of investors

The Vanguard High Dividend Yield ETF is a straightforward and effective way to gain exposure to several top dividend-paying value stocks without incurring high fees. The fund could be a good fit for risk-averse investors, income investors, or even balanced investors who don't want to increase their exposure to companies they already own.

During times of heightened market volatility, it can be useful to have a list of stocks and ETFs to turn to when you're trying to filter out noise and make a calculated decision not based on emotion. The Vanguard High Dividend Yield ETF certainly checks the "value" and "income" boxes, making it a useful tool for folks targeting those objectives.

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Before you buy stock in Vanguard Whitehall Funds - Vanguard High Dividend Yield 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 $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

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*Stock Advisor returns as of April 21, 2025

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Bank of America, Chevron, Cisco Systems, International Business Machines, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard S&P 500 ETF, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends Broadcom, Johnson & Johnson, and UnitedHealth Group 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.

The stock market has been rocked by volatility this year. The S&P 500 was recently down by about 10% since the calendar flipped the page to 2025. That volatility likely has your portfolio down deep in the red.

While you can't eliminate market volatility from your portfolio, you can reduce its sting. One way to do that is by investing in dividend stocks. They provide you with a tangible return in the form of income. On top of that, companies that grow their dividends have historically been less volatile than the S&P 500 as a whole.

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Vanguard makes it easy to add dividend stocks to your portfolio through its many exchange-traded funds (ETFs). Three top Vanguard dividend ETFs to buy to help mute volatility are Vanguard Utilities ETF (NYSEMKT: VPU), Vanguard High Dividend Yield ETF (NYSEMKT: VYM), and Vanguard Real Estate ETF (NYSEMKT: VNQ). As the chart below showcases, they haven't slumped nearly as much as the S&P 500 this year:

^SPX data by YCharts

Real estate helps diversify a portfolio and reduce volatility

The Vanguard Real Estate ETF focuses on owning real estate investment trusts (REITs). These companies own income-generating real estate. They use that rental income to pay dividends and invest in additional income-generating real estate.

Investing in real estate is a great way to diversify your portfolio and insulate it from some of the risks of investing in stocks and bonds. REITs have historically been much less volatile than the broader stock market. For example, of the 16 REITs that have been members of the S&P 500 over the past three decades, all but two have betas less than the S&P 500, meaning they've historically been less volatile than that index.

A big driver of the lower volatility of REITs is their dividends, which tend to grow over the long term. The Vanguard Real Estate ETF currently has a dividend yield of around 3.5%, which is a lot higher than the S&P 500's 1.4% yield. That higher income yield provides investors with a higher base return, which also helps cushion some of the impact of volatility.

High-quality, high-yielding dividend stocks help a port

The Vanguard High Dividend Yield ETF focuses on companies that pay high-yielding dividends. The fund currently has a dividend yield of around 2.7%, nearly double the S&P 500's dividend yield. Because of that, it provides investors with a higher base return.

While the fund focuses broadly on stocks with higher dividend yields, most of its top holdings also have excellent records of growing their dividends, which helps mute volatility. For example, its top holding is semiconductor and software giant Broadcom. The technology company currently offers a dividend yield right around the S&P 500's level. However, Broadcom has a terrific record of delivering above-average dividend growth. Late last year, Broadcom hiked its payment by 11%. That extended its dividend growth streak to 14 straight years. The company has boosted its payout by a jaw-dropping 8,333% during that period.

Another top holding is oil giant ExxonMobil. The big oil company currently offers a much higher dividend yield of around 4%. Exxon has a fantastic record of growing its dividend. The oil giant raised its payment by another 4% earlier this year, its 42nd straight year of increasing its dividend.

Energize your portfolio with these defensive stocks

The Vanguard Utilities ETF owns companies that distribute electricity, water, or gas to customers or produce power that they sell to other utilities and large corporate customers. Most utilities generate very stable cash flow because government regulators set their rates while demand for their services tends to be very steady, even during a recession. In addition, many utilities and utility-like companies produce additional revenue backed by long-term, fixed-rate contracts, providing them with additional sources of stable cash flow.

The low-risk business models of most utilities enable them to generate stable cash flow to pay dividends and invest in expanding their operations. As a result, utilities tend to have a higher yielding dividend (The Vanguard Utilities ETF yields 2.9%) that slowly rises.

For example, Duke Energy, one of its top holdings, has paid dividends for 99 straight years. While Duke Energy hasn't increased its payment every single year, it has raised its payment for the past 18 years in a row. That growth should continue as Duke invests heavily in supporting the growing demand for electricity in the regions it serves.

Dividend stocks can help lessen the impact of stock market volatility

Adding one or more Vanguard ETFs focusing on dividend stocks to your portfolio is a great way to reduce volatility. Dividend stocks have tended to be less volatile because their growing income payments help cushion the blow. That can help you sleep a little better at night knowing your portfolio has some added downside protection.

Should you invest $1,000 in Vanguard World Fund - Vanguard Utilities ETF right now?

Before you buy stock in Vanguard World Fund - Vanguard Utilities 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 World Fund - Vanguard Utilities 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 $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% 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 10, 2025

Matt DiLallo has positions in Broadcom. The Motley Fool has positions in and recommends Vanguard Real Estate ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Duke Energy. The Motley Fool has a disclosure policy.