July 22, 2024

10 Best High-Yield ETFs for 2024

Best High-Yield ETFs

As we begin the start of 2024, investors are already looking ahead, strategizing on how to maximize their returns this year.

One investment vehicle that has garnered significant attention is high-yield ETFs. These funds offer an enticing combination of high income, high returns, and high dividend yields, making them a popular choice for those seeking to boost their investment income.

High-yield ETFs are not just about the potential for high returns; they also play a pivotal role in income investing and retirement planning.

Whether you’re a novice investor just starting your journey or a seasoned pro looking to diversify your portfolio, high-yield ETFs offer a compelling investment proposition.

In this blog post, we will explore the world of high-yield ETFs, from low-cost options to dividend growth ETFs.

We will also unveil our top 10 high-yield ETF picks for the upcoming year, suitable for investors with varying risk tolerances.

So, whether you’re investing for passive income, planning for retirement, or simply aiming to grow your wealth, join us as we navigate the exciting terrain of high-yield ETFs in 2024.

 

High- Yield ETFs

 

What are High-Yield ETFs?

High-yield ETFs, as the name suggests, are Exchange-Traded Funds that aim to provide investors with a higher yield or return on their investment compared to other types of ETFs.

They achieve this by investing in a diverse portfolio of high-yielding assets such as dividend-paying stocks, real estate investment trusts (REITs), and high-yield bonds. The goal is to generate a steady stream of income in the form of dividends or interest payments.

One of the key reasons why high-yield ETFs are a good source of passive income is their structure. Unlike individual stocks or bonds where you have to research and invest in each one separately, an ETF provides exposure to a broad range of assets in one package.

This means you can earn income from multiple sources without having to manage each investment individually.

Moreover, the dividends or interest payments from these ETFs can be automatically reinvested, leading to compounding returns over time.

This makes high-yield ETFs an excellent tool for generating passive income, as you can earn money without having to actively manage your investments.

High-yield ETFs are also suitable for retirement planning. As people approach retirement, they often shift their investment focus from growth to income.

This is where high-yield ETFs come in handy. The regular income generated by these funds can be used to cover living expenses during retirement, reducing the need to sell off assets.

Furthermore, many high-yield ETFs invest in stable sectors like utilities or consumer staples, which tend to perform well even during economic downturns. This stability makes them a good fit for retirees who need a reliable source of income.

However, it’s important to note that while high-yield ETFs can offer attractive returns, they also come with higher risk compared to other types of ETFs.

The companies or sectors that offer high dividends may face financial difficulties, which could impact their ability to pay dividends in the future.

Therefore, it’s crucial for investors to thoroughly research any high-yield ETF before investing and consider their own risk tolerance.

 

The Appeal of Low-Cost High-Yield ETFs

In the world of investing, costs matter. This is particularly true when it comes to ETFs. Low-cost high-yield ETFs have a unique appeal that makes them an attractive option for both novice and experienced investors.

One of the primary benefits of low-cost high-yield ETFs is that they allow investors to keep more of their returns. ETFs, like mutual funds, charge a fee known as the expense ratio.

This fee is used to cover the fund’s operational costs, such as management, administration, and advertising. The expense ratio is deducted from the fund’s assets, which means it comes out of your investment returns. Therefore, a lower expense ratio can lead to higher net returns over time.

Low-cost high-yield ETFs are particularly beneficial for those seeking passive income or investing for retirement.

The reason is simple: the less money you spend on fees, the more you have to invest and earn returns. Over time, this can make a significant difference in your investment portfolio’s value.

Another advantage of low-cost high-yield ETFs is that they often have broad market exposure. This means they invest in a wide range of assets, which can help diversify your portfolio and reduce risk.

Diversification is especially important for those investing for retirement, as it can help protect your savings from market volatility.

But how exactly do low-cost high-yield ETFs maximize returns? It’s all about the power of compounding. When you invest in these ETFs, the dividends or interest payments you receive can be automatically reinvested.

This allows you to earn returns not just on your original investment, but also on the returns that investment generates. Over time, this compounding effect can lead to significantly higher returns.

However, it’s important to remember that while low-cost high-yield ETFs can offer attractive returns, they also come with risks.

High-yield assets often carry a higher risk of default or price volatility. Therefore, it’s crucial to consider your own risk tolerance and investment goals before investing in these ETFs.

 

Dividend Growth ETFs

 

The Power of Dividend Growth ETFs

Dividend growth ETFs are a specific type of Exchange-Traded Funds that focus on investing in companies with a strong track record of increasing their dividends over time.

These ETFs are built around the principle that companies that consistently grow their dividends are often financially stable and well-managed, making them attractive investments.

The power of dividend growth ETFs lies in their potential to provide a steadily increasing stream of income. Unlike high-yield ETFs, which focus on companies that pay high dividends, dividend growth ETFs focus on companies that are increasing their dividends.

This means that the income you receive from these ETFs can grow over time, keeping up with inflation and potentially increasing your purchasing power.

Dividend growth ETFs are a good option for income investing for several reasons. Firstly, they provide a source of passive income that can grow over time.

This is particularly beneficial for investors who rely on their investment income to cover living expenses or fund their retirement.

Secondly, dividend growth ETFs often invest in financially stable companies. These companies are typically less volatile than those that pay high dividends but have uncertain financial futures. This makes dividend growth ETFs a potentially safer choice for income investors.

Finally, dividend growth ETFs can offer capital appreciation potential in addition to income. Companies that consistently increase their dividends often see their stock prices rise over time, which can lead to capital gains for investors.

However, like all investments, dividend growth ETFs come with risks. The main risk is that the companies in the ETF could stop increasing their dividends or cut them altogether. This could happen if the company’s financial situation deteriorates or if economic conditions change.

 

10 High-Yield ETFs for 2023

 

Top 10 High-Yield ETFs for 2024

Here are the top 10 high-yield ETFs for 2024 based on their past performance, dividend yield, and cost:

 

1. iShares Core Dividend Growth ETF (DGRO)

This ETF has a current price of $48.59. It has a dividend yield percent of 2.6238. The fund focuses on companies that have a record of consistently increasing their dividends.

This makes it a suitable choice for both beginners and experienced investors who are looking for a steady income and the potential for capital appreciation.

 

2. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

With a current price of $39.21, this ETF has a dividend yield percent of 5.54. It selects companies with a track record of paying dividends and solid yield expectations, making it an excellent choice for investors looking for a balance between higher yield and inherent risks.

 

3. Global X Super Dividend ETF (SDIV)

This ETF has a current price of $21.16 and a dividend yield percent of 13.14. It focuses on companies that have consistently increased their dividends for at least 20 consecutive years, making it an excellent choice for investors looking for stable earnings and solid fundamentals.

 

4. SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

This ETF had a return of -9.35% year-to-date (YTD) and -0.94% in the last 12 months. It seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P ® 500 High Dividend Index (the “Index”) A low-cost ETF that seeks to provide a high level of dividend income and the opportunity for capital appreciation.

 

5. iShares International Select Dividend ETF (IDV)

This ETF has a current price of $24.61 and a dividend yield percent of 7.2955. The fund focuses on companies that have a record of consistently increasing their dividends.

This makes it a suitable choice for both beginners and experienced investors who are looking for a steady income and the potential for capital appreciation.

 

6. iShares Russell Mid-Cap Value ETF (IWS)

This ETF seeks to track the investment results of an index composed of mid-capitalization U.S. equities that exhibit value characteristics. As of October 13, 2023, the Net Asset Value (NAV) of IWS was $102.81.

The ETF had a Year-To-Date (YTD) total return of -1.04%. The expense ratio for IWS is relatively low at 0.23%, which means the cost of investing in this ETF is quite affordable.

 

7. Vanguard Mid-Cap Value ETF (VOE)

This ETF seeks to track the performance of the CRSP US Mid-Cap Value Index. As of June 30, 2023, it had a net asset value return of 33.84% and a market price return of 43.82. The expense ratio is 0.07%, making it a low-cost option.

 

8. iShares S&P Mid-Cap 400 Value ETF (IJJ)

This ETF seeks to track the investment results of an index composed of mid-capitalization U.S. equities that exhibit value characteristics. As of October 13, 2023, the NAV was $97.79 and the YTD total return was -0.87%. The expense ratio is relatively low at 0.18%.

 

9. Schwab U.S. Mid-Cap ETF (SCHM)

This ETF seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index. As of October 13, 2023, the NAV was $66.73 and the YTD total return was -0.87%. The expense ratio is relatively low at 0.04%.

 

10. SPDR S&P MIDCAP 400 ETF Trust (MDY)

This ETF seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P MidCap 400 Index. As of September 30, 2023, it had a YTD total return of 3.0% and a dividend yield percent of 1.4%.

Please note that while these ETFs have performed well in the past, past performance is not indicative of future results. Always do your own research or consult with a financial advisor before making investment decisions.

 

 

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