What exactly is a dividend ETF?

A dividend ETF is an exchange-traded fund that specifically invests in companies known for regularly paying dividends to shareholders. Unlike individual stocks, these ETFs contain a collection of dividend-paying companies, providing you with instant diversification. When these companies distribute profits to shareholders, the ETF passes those payments to you as dividends. This creates a steady income stream while giving you exposure to multiple companies in a single investment.

How often do dividend ETFs pay income to investors?

Dividend ETF payment schedules vary, but most distribute income quarterly (four times per year). Some ETFs might pay monthly or follow other schedules depending on their strategy. The ETF collects all dividends from the companies it holds and then distributes them to ETF shareholders according to their payment calendar. You can typically find the payment schedule in the ETF's prospectus or on the fund provider's website.

What is dividend yield and why is it important?

Dividend yield is the annual dividend payment expressed as a percentage of the current share price. For example, if an ETF trading at $100 pays $3 in dividends per year, it has a 3% dividend yield. This metric helps you compare the income potential of different investments regardless of their price. Higher yields offer more current income, but extremely high yields might indicate risk or unsustainability. When evaluating dividend ETFs, yield is an important factor, but should be considered alongside other aspects like dividend growth history and overall performance.

What is a REIT ETF and how is it different?

A REIT (Real Estate Investment Trust) ETF, like the Global X SuperDividend REIT ETF in this collection, invests specifically in companies that own, operate, or finance income-producing real estate properties. What makes REIT ETFs special is that they give you exposure to real estate markets without requiring you to directly buy property. REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends, which often results in higher yields compared to other dividend ETFs. This provides a way to add real estate exposure and potentially higher income to your investment portfolio.

Why would I choose international dividend ETFs over US-only options?

International dividend ETFs, like some in this collection, offer geographical diversification by investing in dividend-paying companies outside the United States. This approach provides several potential benefits: exposure to different economic cycles (when the US market struggles, other markets might perform well), access to industries that might be more developed in other countries, and potentially higher dividend yields in certain international markets. While international investments come with additional considerations like currency fluctuations and geopolitical factors, they can be an effective way to diversify your income sources beyond the US market.

5 handpicked stocks

Dividend ETFs

These carefully selected ETFs regularly share their profits with you. Handpicked by our professional analysts, they offer a smart way to earn consistent income while investing across multiple companies at once.

Han Tan | Market Analyst

Updated 2 days ago | Published at mai 11