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| Title | 8 of the Best High Dividend ETFs to Buy Now |
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| Description | Look to these seven ETFs for a high yield and the potential for growth. |
| Content | ![]() High-dividend exchange-traded funds, or ETFs, are an increasingly popular asset class, and it's not hard to understand why. A high dividend is synonymous with high investment income. Everyone likes to see their investment capital grow, but growth is not the only benefit of investing in the capital markets. Some investors, in fact, have income as their primary objective with capital appreciation being a secondary consideration. In many cases, ETFs that pay have above-average dividend yields can offer the best of both worlds. That is, provide a high and growing dividend and the potential for growth over time. What Is a Dividend?A dividend is a share of revenues and profits that a company distributes to shareholders. Generally, dividends are paid in cash. The company's board of directors declares a dividend of a specific amount per share to be paid to shareholders who own the stock as of a certain date, called the record date. On another date – usually not far in the future – called the payment date, the company pays the dividend which is automatically deposited in the shareholder's brokerage account. A company can declare a dividend at any time. Most public companies that pay regular dividends make distributions quarterly, although some – about 80 in number – make monthly payments. What Are the Benefits of Dividends?Dividend distributions are part of a stock's total return. In other words, the income a stock produces is a factor in calculating overall performance. In that sense, dividends can be seen as enhancing returns in a tangible way. Further, dividends can have the effect of cushioning against downturns and bear markets. Once a dividend is paid, it can be saved in a money market or savings account, used to defer current expenses or reinvested back into the market. Regardless of how an investor chooses to use a dividend, once it's paid, it's a realized gain. Companies that can afford to pay dividends are generally more mature, more stable and more financially sound than companies that can't. Savvy investors see dividends as a sign of a company's fiscal health and commitment to shareholders. Why Invest in High-Dividend ETFsETFs are pooled investment funds that offer investors diversification and professional management in a single security that trades on major exchanges just like shares of stock. Most high-dividend ETFs invest in income-producing securities, such as dividend-paying stocks and interest-bearing bonds, that have above-average yield when compared with their peers. Some others hold less-well-known kinds of investments, such as business development companies, floating-rate bank loans, preferred stocks and collateralized loan obligations. The most aggressive high-dividend ETFs use derivative securities, such as options, futures and swap contracts, to generate the superior income they distribute to shareholders. |
