Let's Talk Money! with Joseph Hogue, CFA: The video ranks seven popular dividend ETFs, highlighting their suitability for different investment goals based on risk, return, and dividend yield.
Let's Talk Money! with Joseph Hogue, CFA - 7 Best Dividend ETFs from SCHD to VIG | 2025 Ranking
The discussion begins with the NASDAQ 100 Covered Call ETF (QYLD), which offers a high 12.5% dividend yield but has a 22% price loss over five years, resulting in a 7.6% annual return. This ETF is suitable for those prioritizing high dividend income over long-term portfolio value. The S&P 500 Dividend Aristocrats ETF (NOBL) offers a 2% yield and 7.9% annual return, focusing on companies with 25+ years of dividend growth, making it ideal for stable cash flow. The Vanguard Dividend Appreciation Fund (VIG) is criticized for its low 1.7% yield despite a 10% dividend growth, as its earnings growth is unsustainable. The Vanguard High Dividend Yield ETF (VYM) offers a 3% yield and 9.5% annual return, focusing on large-cap dividend payers. The JP Morgan Equity Premium Income ETF (JEPI) provides a 7.3% yield with a 10-12% annual return, using a covered call strategy for cash flow. The Schwab U.S. Dividend Equity ETF (SCHD) offers a 3.6% yield and 10.9% annual return, focusing on quality dividend-paying companies. The JP Morgan NASDAQ Equity Premium ETF (JEPQ) offers a 9.7% yield and 16.6% annual return, focusing on tech stocks with a covered call strategy. The video emphasizes the importance of aligning ETF choices with personal investment goals and understanding tax implications of dividend types.
Key Points:
- QYLD offers a high 12.5% yield but has a 22% price loss over five years, suitable for income-focused investors.
- NOBL provides a stable 2% yield with 25+ years of dividend growth, ideal for consistent cash flow.
- VIG criticized for low 1.7% yield and unsustainable earnings growth, not ideal for dividend-focused investors.
- VYM offers a 3% yield with a focus on large-cap dividend payers, balancing yield and growth.
- JEPI and JEPQ use covered call strategies for high yields, with JEPQ focusing on tech stocks for higher growth.
Details:
1. 🎉 Introduction to Dividend ETFs
- Dividend ETFs provide a diversified investment option for generating income through dividends, focusing on companies with a reliable dividend payment history.
- They are particularly appealing in low-interest-rate environments as they offer a passive income stream.
- Investing in dividend ETFs spreads risk by diversifying across multiple companies, reducing the impact of any single stock's poor performance.
- For instance, popular dividend ETFs like the Vanguard Dividend Appreciation ETF have shown consistent returns, making them a strategic choice for income-focused investors.
- Dividend yields, which are calculated as annual dividends per share divided by the share price, are a critical metric for evaluating these ETFs.
- While dividend ETFs offer stability, investors should be aware of potential risks such as market volatility and interest rate changes that could affect dividend payments.
2. 📊 Ranking Popular Dividend ETFs
- Evaluate if your current dividend ETFs align with your investment goals to ensure optimal returns.
- Joseph Hog's analysis ranks seven popular dividend ETFs, offering insights into their performance.
- Prioritize understanding each ETF's strategy and how it fits within your broader financial objectives.
- Consider factors such as dividend yield, expense ratio, and historical performance when selecting ETFs.
- Aligning ETF choices with personal financial goals can lead to better investment outcomes.
3. 🔍 In-depth Analysis of NASDAQ 100 Covered Call ETF (QLD)
3.1. ETF Strategy and Performance
3.2. Comparison with Other Dividend ETFs
3.3. Risks and Market Conditions
4. 🏆 S&P 500 Dividend Aristocrats (NOBL) Overview
- ETF manages $11.7 billion in assets, highlighting its popularity and investor trust.
- Offers a 2% dividend yield, which is 53% higher than the broader market average dividend yield, making it an attractive option for income-focused investors.
- Achieves a total annual return of 7.9%, indicating solid performance despite a lower yield.
- Includes companies that have increased dividend payouts for at least 25 consecutive years, ensuring stable cash flow and reliability.
- The fund is adjusted annually to include new qualifying stocks and exclude those that no longer meet the criteria, maintaining a high standard of dividend growth.
- Notably includes stable companies such as Clorox, Walmart, and Kimberly Clark, known for their consistent performance.
- Though the ETF is heavily weighted towards consumer staples and industrials, it maintains a diversified portfolio across various sectors.
- Despite other funds offering higher yield and growth, NOBL's focus on long-term stability with 25+ years of dividend growth makes it a strategic choice for securing stable cash flows.
5. 🏡 Exploring Alternative Income Sources with Arrived Homes
- Arrived Homes platform allows direct investment in rental real estate as LLCs for less than $100.
- Investors earn dividends from rental income with annualized returns ranging from 3% to 8%.
- Dividends are paid monthly, providing consistent cash flow.
- Price appreciation is possible upon property sale, enhancing investment value.
- The platform's homes available for investment tend to sell out quickly, indicating high demand.
6. 🏅 Vanguard Dividend Appreciation Fund (VIG) Insights
6.1. Vanguard Dividend Appreciation Fund (VIG) Performance Analysis
6.2. Alternative Investment Option: Vanguard High Dividend Yield ETF
7. 📈 Evaluating JPMorgan Equity Premium Income ETF (JEPI)
7.1. JEPI Portfolio Composition
7.2. JEPI Performance Insights
8. 🎯 Importance of Aligning ETFs with Investment Goals
- Align your ETF investments with your specific financial goals, considering both short-term needs and long-term growth objectives.
- Instead of focusing solely on total annualized return, evaluate ETFs based on how their price return and yield align with your personal investment goals.
- Examine the specific stocks within an ETF to ensure they match your goals, such as prioritizing dividend-producing stocks for immediate income or growth stocks for long-term capital appreciation.
- Before purchasing an ETF, conduct a thorough review of its dividend yield, price return over the past five years, and its holdings by visiting the fund's official website and analyzing the portfolio composition.
9. 💡 Schwab U.S. Dividend Equity ETF (SCHD) Details
9.1. JPMorgan Equity Premium Income ETF (JEPI) Performance
9.2. Schwab U.S. Dividend Equity ETF (SCHD) Overview
10. 💸 Understanding Tax Implications on Dividends
- Not all dividends are taxed equally, potentially costing thousands of dollars.
- Highest yielding dividend ETFs are taxed at higher rates, reducing net income.
- US taxes dividends as either ordinary or qualified with qualified taxed at 0%, 15%, or 20%.
- Ordinary dividends are taxed at higher income tax rates.
- Some income strategies and dividend ETFs do not qualify for lower tax rates.
- Covered call options and certain dividend ETFs are taxed at higher rates regardless of holding duration.
- A high dividend yield can be significantly reduced by taxes; e.g., a 125% dividend in a 33% tax bracket becomes 88.4%.
- It's essential to research if a dividend stock or ETF pays qualified dividends before buying.
- Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs), and certain income ETFs often do not qualify for lower tax rates.
