Should You Forget High-Yield Dividend ETFs and Buy a Dividend Growth ETF Instead?

When deciding between high-yield dividend ETFs and dividend growth ETFs, the choice depends on an investor's priorities. High-yield ETFs, such as the Global X SuperDividend U.S. ETF, focus on stocks with the highest dividend yields, often including REITs. These ETFs tend to have high distribution yields, such as 6.55% for the Global X ETF, but may offer lower long-term returns.

For example, the VIG ETF has a 5-year average annualized return of 10.2%, compared to 6.4% for the Global X ETF. On the other hand, dividend growth ETFs, like the Vanguard Dividend Appreciation ETF, prioritize stocks with a history of increasing dividends annually. While the 12-month distribution yield for VIG is lower at 1.48%, the long-term returns tend to be higher, as seen in the 10.2% 5-year average annualized total return for VIG.

The Schwab U.S. Dividend Equity ETF offers a middle ground, with a 3.13% 12-month distribution yield and a strong record of returns, including a 10% 5-year average annualized total return. Investors should consider their goals and preferences when choosing between these ETF options, as they each have their own advantages and potential drawbacks.