đź’´ 2024's top dividend ETFs

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Dividend-Paying ETFs: Strong Performers Amid Growth Stock Buzz

While growth stocks have been dominating the headlines recently, dividend-paying exchange-traded funds (ETFs) have quietly delivered impressive total returns. With potential tailwinds from Federal Reserve rate cuts and corporate tax reforms, dividend-focused investments may continue to gain momentum.

In this issue, we’ll talk about some of the best performing dividend ETFs in the previous year. However, remember that while dividends are a key feature of these ETFs, they represent only part of the total return. Share price movements also play a significant role in overall performance.

Top Performing Dividend ETFs of 2024

  • Total Return: 26%

  • Yield: 2.63% (30-day SEC yield)

  • Expense Ratio: 0.45%

Launched in March 2023, this actively-managed fund seeks companies that offer both dividends and potential for long-term capital appreciation. Tech stocks dominate its portfolio, with Apple (7.15%) and Nvidia (6.87%) as its top holdings.

While the year has only started, its YTD stands at 1.82% lower than the S&P 500's 2.18% (appreciation).

We think it can be a good option in 2025 as it is heavily invested in stocks, a sector that is expected to continue to grow this year.

  • Total Return: Nearly 22%

  • Yield: 2.82%

  • Expense Ratio: 0.16%

This ETF balances high yield with high quality, earning it a five-star and silver rating from Morningstar. Analyst Ryan Jackson described it as "a rare and attractive combination" likely to support long-term outperformance. Its top holdings as of late November 2024 were also concentrated in tech stocks.

While the year has only started, its YTD stands at 1.71% lower than the S&P 500's 2.18% (appreciation).

We think 2025 can be a good year to consider this ETF, despite it being a little constantly. However, Fidelity also has some other interesting dividend ETFs, including Fidelity International High Dividend ETF, which might do even better this year.

  • Total Return: Nearly 21%

  • Yield: 3.03%

  • Expense Ratio: 0.59%

Debuting in November 2023, this actively-managed fund focuses on companies committed to dividend growth, which portfolio manager David Bahnsen views as a strong indicator of financial health. Key holdings at the end of 2024 included Energy Transfer LP, IBM, Simon Property Group, and Gilead Sciences.

It has a high yield and a more consistent growth pattern as it does not contain names that are likely to fluctuate too much. For this reason, it can be a good 2025 pick but we don’t expect it to mirror 2024’s track record.

  • Total Return: Just over 20%

  • Yield: 2.38%

  • Expense Ratio: 0.34%

This ETF was created to give investors a portfolio of consistent and sustainable high dividend paying large-cap and mid-cap equities

While the year has only started, its YTD stands at 0.87% lower than the S&P 500's 2.18% (appreciation).

We expect this ETF to do similar numbers in 2025, making it a good investment option for income seeking investors.

  • Total Return: Just over 20%

  • Yield: 2.84%

  • Expense Ratios: 0.05%

Started on Sep 11 2023, this fund has an estimated EPS growth of over 10%. Its competitive yields and low expense ratios make it an attractive option for income-seeking investors.

We think this can be a good option for people looking for affordable ETFs in 2025 as it has a very low expense ratio.

Outlook for Dividend ETFs in 2025

As interest rates decrease and companies benefit from possible tax reforms, dividend-paying ETFs could remain appealing. Investors should balance their portfolio between yield-focused funds and those targeting dividend growth to capture both income and potential capital appreciation.

For those looking to diversify, dividend ETFs offer a reliable way to combine steady income with exposure to equity markets.

Why You Should Consider Dividend Stocks in 2025

Dividend stocks often thrive in a lower interest rate environment, as their yields become more competitive compared to Treasury bonds. Although the Federal Reserve is now expected to implement two rate cuts in 2025—down from the four originally anticipated—any reduction in rates could provide a boost to dividend payers.

In fact, US ETFs focused on dividend-paying stocks have experienced a significant increase in inflows since the Federal Reserve began its rate-cutting cycle the prior month.

Additionally, potential corporate tax cuts could enhance companies' cash flows. This could lead to more firms initiating dividends or increasing payouts, further improving the attractiveness of dividend-paying stocks.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.