ETFS for dividends

If you want dividend-paying stocks for your portfolio, you could study the vast universe of stocks and find great ones on your own, or you could plunk your dollars in one or more dividend-focused mutual funds (which often have the word “income” in their names). Another good option is investing in dividend-focused exchange-traded funds (ETFS), which are like a cross between mutual funds and stocks — funds you can easily invest in through most brokerages. Here are some top dividend ETFS to consider:

• Proshares S&P 500 Dividend Aristocrats ETF (NOBL). This ETF holds the stocks in the Dividend Aristocrats index, limited to companies with at least 25 consecutive years of dividend payments — and dividend increases. The ETF recently sported a five-year average annual return of almost 9.6 percent and yielded 2.3 percent.

•Schwab U.S. Dividend Equity ETF (SCHD). This ETF tracks the Dow Jones U.S. Dividend 100 Index by holding the same stocks. That index focuses on companies that have paid dividends for at least 10 consecutive years, and only includes those that seem healthy, with meaningful dividend yields and dividend growth rates. The ETF recently sported a five-year average annual return of 10.6 percent and yielded 3.4 percent.

•Vanguard High Dividend Yield ETF (VYM): This ETF tracks the FTSE High Dividend Yield Index, which includes many U.S. stocks with above-average dividend yields. Since a high dividend yield is often due to the stock price having fallen, focusing on high yields tends to fill the index with relatively undervalued stocks, including many from the financial services, health care and consumer defensive sectors. The ETF recently sported a five-year average annual return of 6.6 percent and yielded 3.6 percent.

Remember that simply investing in a low-fee, broadmarket index fund that tracks the S&P 500, such as the SPDR S&P 500 ETF (SPY), will also deliver growing dividend income. That particular ETF recently sported a fiveyear average annual return of almost 11.6 percent and yielded nearly 1.6 percent.

Learn more about ETFS in the “Investing Basics” nook at Fool.com.