Investing in dividend stocks can be a good strategy if you want steady passive income and the relative security of owning well-established, consistently profitable companies. But which dividend ETF is the best choice for your portfolio?
Two Popular Dividend Stock ETFs Are ProShares S&P 500 Dividend Aristocrats® etf(NYSEMKT:NOBL) and this Vanguard International High Dividend Yield ETF(NASDAQ: VYMI). (syllable aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.)
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These funds use different investment approaches. NOBL has a relatively small portfolio of 69 stocks, focused on S&P 500 Dividend Aristocrats®, are companies that have paid consistently high dividends for the last 25 years.
VYMI has a more international flavor and holds more stocks – 1,532 in total. it international stock etf Focuses on global companies that are expected to deliver above-average dividend yields.
Let’s take a look at how investors can choose between NOBL vs. VYMI, and see which stock ETF may be a better buy for most people’s portfolios.
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If you’re concerned about the high valuations of tech stocks and want to expose your portfolio to a few different sectors of the U.S. stock market, the ProShares S&P 500 Dividend Aristocrats ETF can offer you some dividend-focused diversification. The fund pays a dividend yield of 2.59%, and invests mostly in US non-tech sectors, such as consumer staples (23.3% of the fund), industrials (21.3%), financials (12.4%), materials (12.1%), and health care (10.03%).
Over the last 12 years since the fund’s inception in October 2013, it has delivered an average annual return (by net asset value) of 10.4%. It has underperformed the S&P 500 index and VYMI over the past five years – during that time, NOBL shares have increased by about 22%, VYMI shares have increased by about 49%, and the S&P 500 index has increased by about 70%.
NOBL charges an expense ratio of 0.35%, which is not very expensive but higher than usual. low cost index fund. The fund’s price-to-earnings ratio is 21.4, which is slightly lower than the S&P 500 Index P/E ratio of 29.9.
The Vanguard International High Dividend Yield ETF gives you a wide range of companies and countries. And it has a stronger track record of performance than NOBL while charging lower fees. Over the last 10 years since its inception, VYMI has delivered an average annual return (by net asset value) of 10.9%, and it carries a low expense ratio of only 0.07%.
This international stock ETF lets you hold 1,532 stocks of companies mostly from the regions of Europe (43.2% of the fund), the Pacific (27.4%), and North America (7.8%). Top holdings include stocks like Novartis AG, HSBC Holdings, Roche Holding AG, shellAnd to shelter.
Over the last five years, VYMI has gained about 49.4%. During that time, the fund has underperformed the S&P 500 (which is up 70.1%), but outperformed Vanguard Total International Stock Index Fund ETFIn which there has been an increase of 28.6%.
VYMI has a P/E ratio of 14.8, which is much cheaper than NOBL’s P/E multiple.
Both of these dividend stock ETFs have a track record of underperforming the S&P 500 Index. High yields on dividends don’t always translate into strong stock returns. But if I had to choose one of these dividend ETFs to buy, I would buy VYMI.
When comparing NOBL vs VYMI, VYMI has a lower expense ratio (0.07%) and gives you more diversification with exposure to over 1,500 stocks from dozens of international markets. Shares held by NOBL have a solid track record of dividend growth, but haven’t delivered strong enough annual returns to justify the 0.28% higher fee than VYMI. VYMI also has a high dividend yield (3.64%).
The diversification and low P/E ratio of the Vanguard International High Dividend Yield ETF offers more interesting advantages than the NOBL portfolio of just 69 U.S. stocks. For most long-term dividend investors, VYMI is likely to be a better buy than NOBL.
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HSBC Holdings is an advertising partner of Motley Fool Money. ben gran There are positions in the Vanguard Total International Stock ETF. The Motley Fool has positions in and recommends the ProShares S&P 500 Dividend Aristocrats ETF and the Vanguard Total International Stock ETF. The Motley Fool recommends HSBC Holdings, Nestle and Roche Holding AG. The Motley Fool has one Disclosure Policy.
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