Top 10 High-Yield ETFs to Boost Your Portfolio in 2023: An In-Depth Analysis

Welcome to our comprehensive analysis of the top 10 high-yield ETFs (Exchange-Traded Funds) that investors should consider adding to their portfolios in 2023. These ETFs have a proven track record of delivering impressive yields and are well-positioned to capitalize on various market trends. In this article, we’ll provide an overview of each ETF, including its investment strategy, performance history, and key holdings.

1. iShares Select Dividend ETF (DVY)

This ETF focuses on large-cap U.S. stocks with a strong dividend history, making it an attractive choice for income-focused investors. With a yield of approximately 2.5%, DVY has outperformed the S&P 500 index in recent years.

2. SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

SPYD tracks the performance of the S&P 500 High Dividend Index, which consists of stocks in the S&P 500 with above-average dividend yields. This ETF has a yield of around 3.1%.

3. Vanguard Dividend Appreciation ETF (VIG)

VIG holds stocks that have increased their dividends for at least 10 consecutive years. With a yield of about 1.5%, this ETF offers both growth and income potential, making it an excellent long-term investment choice.

4. iShares Select Real Estate ETF (IYR)

IYR focuses on the real estate sector, which has historically provided stable dividend yields. With a yield of approximately 3%, this ETF offers investors exposure to U.S. real estate companies across various property types.

5. ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

NOBL tracks the performance of the S&P 500 Dividend Aristocrats Index, which includes stocks that have increased their dividends for at least 25 consecutive years. This ETF offers a yield of roughly 1.8%.

6. Schwab U.S. Dividend Equity ETF (SCHD)

This ETF focuses on large-cap U.S. dividend stocks and offers a yield of approximately 2%. With a low expense ratio, SCHD is an attractive choice for investors looking to maximize their income while minimizing costs.

7. iShares International Select Dividend ETF (IDV)

IDV provides exposure to high-yielding dividend stocks in developed markets outside the U.S., making it an essential component of a well-diversified income portfolio. This ETF offers a yield of around 3.5%.

8. Vanguard Total Stock Market ETF (VTI)

Although not explicitly a high-yield ETF, VTI offers broad exposure to the entire U.S. stock market. With a yield of approximately 1.4%, it can serve as a foundation for an income-focused portfolio, while the potential for capital appreciation adds long-term growth potential.

9. iShares Global Clean Energy ETF (ICLN)

ICLN focuses on clean energy companies worldwide, providing exposure to a growing industry with significant long-term growth potential. Although its yield of approximately 1% is relatively low, it offers the opportunity to invest in companies driving the transition to renewable energy sources and reducing carbon emissions.

10. Invesco QQQ Trust II (QQQ)

While the NASDAQ-100 index ETF, QQQ, does not focus on high dividend yields, it offers exposure to some of the technology sector’s most innovative and profitable companies. Although its yield is minimal (around 0.1%), investors seeking long-term growth potential might find this ETF an attractive addition to their portfolios.

High-Yield ETFs: Top 10 to Watch in 2023

Exchange Traded Funds (ETFs) are investment funds that hold multiple stocks, bonds, or other assets in a single portfolio. They function much like individual stocks and can be bought and sold throughout the trading day on a stock exchange

[1]

. ETFs have gained immense popularity among investors due to their transparency, liquidity, and cost-effectiveness. One of the attractive features that distinguish ETFs from other investment vehicles is their potential to generate high yields. This article sheds light on the significance of incorporating high-yield ETFs into your investment portfolio and introduces the top 10 high-yield ETFs to keep an eye on in 2023.

What Are High-Yield ETFs?

High-yield ETFs, also known as high dividend or income ETFs, are investment vehicles designed to deliver above-average returns through their attractive dividend yields. These ETFs typically invest in stocks, bonds, or other assets that provide regular income payments. High-yield ETFs can be an effective tool for investors seeking to boost their portfolio’s growth and generate steady income streams

[2]

.

The Top 10 High-Yield ETFs to Watch in 2023

1. Vanguard High Dividend Yield ETF (VYM): This ETF focuses on U.S. stocks with high dividend yields, making it an attractive option for income-focused investors.
2. iShares Select Dividend ETF (DVY): This fund invests in U.S. dividend-paying stocks, targeting industries known for their consistent revenue streams and above-average yields.
3. SPDR Portfolio S&P 500 High Dividend ETF (SPYD): This ETF tracks the performance of a broad-market index consisting of high dividend-yielding U.S. stocks, providing investors with exposure to a diversified portfolio.
4. ProShares S&P 500 Dividend Aristocrats ETF (NOBL): This fund focuses on companies in the S&P 500 that have increased their dividends for at least 25 consecutive years.
5. Schwab U.S. Dividend Equity ETF (SCHD): This ETF invests in a diversified portfolio of high dividend-yielding U.S. stocks, offering both growth and income potential for investors.
6. iShares Preferred and Income Securities ETF (PFF): This fund tracks the performance of U.S. preferred stocks, which often provide higher yields compared to common stocks.
7. iShares International Select Dividend ETF (IDV): This fund invests in dividend-paying stocks from developed markets outside the United States, providing international diversification and attractive yields.
8. SPDR Portfolio S&P International Dividend ETF (IDVG): This ETF tracks the performance of a broad-market index consisting of high dividend-yielding international stocks, offering investors exposure to both developed and emerging markets.
9. iShares Select REIT ETF (REIT): This fund invests in Real Estate Investment Trusts (REITs), which are companies that own and operate income-producing real estate properties, providing regular income streams for investors.
10. Vanguard REIT ETF (VNQ): This ETF tracks the performance of a broad-market index consisting of U.S. real estate investment trusts, providing investors with exposure to various property sectors and attractive yields.

Understanding High-Yield ETFs

High-yield Exchange-Traded Funds (ETFs) are a type of investment vehicle that seeks to provide investors with above-average income returns, often in the form of dividends. Definition and explanation:

High-yield ETFs, also known as “junk bond” or “high-risk” ETFs, are designed to track the performance of a high-yield bond index. High-yield bonds are fixed income securities with lower credit quality than investment grade bonds, meaning they offer higher yields to compensate investors for the added risk. High-yield ETFs aim to replicate the performance of such an index by investing in a basket of high-yield bonds.

Differences between high-yield ETFs and other types of ETFs:

Index Funds:

Index funds, on the other hand, aim to track a broader market index, like the S&P 500. They do not focus on income generation but rather capital appreciation. In terms of risk profile and investment goals, they are fundamentally different from high-yield ETFs.

Sector Funds:

Sector funds are designed to invest in specific sectors of the economy, such as technology or healthcare. While they may offer higher yields than traditional index funds due to sector-specific opportunities, their returns are generally more volatile and depend on the performance of the targeted sector. High-yield ETFs focus on generating income, whereas sector funds prioritize capital appreciation.

Advantages and risks associated with high-yield ETFs:

Advantages:

• Higher income potential compared to traditional ETFs and index funds.
• Diversification benefits by investing in a basket of high-yield bonds instead of individual securities.
• Access to the high-yield bond market, which historically has offered attractive returns.

Risks:

• Higher credit risk due to the lower quality of the bonds held.
• Increased interest rate sensitivity as high-yield bond prices tend to be more affected by changes in interest rates.
• Higher volatility compared to other types of ETFs and index funds due to the inherent risk in high-yield bonds.

I Factors to Consider When Choosing High-Yield ETFs

When it comes to investing in high-yield ETFs, there are several crucial factors that investors should consider to make informed decisions.

Yield

• Current and historical yields: One of the primary considerations is the current yield and the historical yield of the ETF. The current yield refers to the dividend income that an investor earns from holding the ETF, typically expressed as a percentage of the current market price.
• Dividend payout ratios: Another important factor is the dividend payout ratio, which represents the percentage of earnings that are distributed as dividends. A higher payout ratio means more income for investors, but it may also indicate that the ETF is not reinvesting enough in growth opportunities.
• Yield comparisons to other income investments: It’s also essential to compare the yield of a high-yield ETF with other income investments, such as bonds or dividend stocks. This comparison can help investors determine whether the potential risks and rewards of an ETF are worth it.

Diversification

Another critical factor when choosing high-yield ETFs is diversification.

• Sector allocations: Investors should consider the sector allocation of an ETF, which refers to the percentage of assets invested in each industry sector. A well-diversified ETF will spread investments across various sectors to reduce risk.
• Geographical exposure: Geographic exposure is another crucial consideration. An ETF that offers diversification across various regions and countries may help investors reduce risk by minimizing exposure to any single market.
• Company size: Investors should also consider the size of the companies in an ETF. Small-cap ETFs, for instance, may offer higher yields but come with greater volatility and risk.

Volatility

Volatility is a significant risk factor when investing in high-yield ETFs.

• Historical price movements: Investors should examine the historical price movements of an ETF to assess its volatility. A high-volatility ETF may offer higher yields, but it also comes with increased risk.
• Risk assessments: It’s essential to perform a thorough risk assessment of an ETF before investing. Factors like market conditions, economic indicators, and industry trends can all impact an ETF’s volatility.

Expense ratios

Finally, expense ratios are an essential factor to consider when choosing high-yield ETFs.

• Fees charged by the ETF issuers: Expense ratios represent the fees that ETF issuers charge for managing the fund. These fees can eat into an investor’s yields over time, so it’s crucial to compare the expense ratios of different high-yield ETFs before making a decision.

Top 10 High-Yield ETFs for Your Portfolio in 2023

As we move into the new financial year, investors are on the lookout for high-yield ETFs that can bolster their portfolio’s income potential. Here are the top 10 ETFs that investors should consider for their portfolios in 2023.

iShares Select Dividend ETF (DVY)

With a dividend yield of approximately 3%, this ETF focuses on delivering a steady income stream from high-dividend-paying U.S. companies.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

This ETF tracks a high dividend index of the S&P 500 and has a yield of around 3.2%. It’s an excellent choice for those looking to balance income and capital appreciation.

iShares International Select Dividend ETF (IDV)

For international income, this ETF offers a dividend yield of around 3.2% and is invested in high-dividend stocks from developed markets outside the U.S.

Schwab U.S. Dividend Equity ETF (SCHD)

With a yield of approximately 2.8%, this ETF tracks the Dow Jones U.S. Dividend 100 Index and provides a solid income stream with potential for long-term capital appreciation.

5. iShares Core S&P Total U.S. Stock Market ETF (ITOT)

Although its primary focus isn’t on high dividends, this broad market index fund offers a yield of around 1.6% and ensures investors capture the overall growth of the U.S. stock market.

6. Vanguard Dividend Appreciation ETF (VIG)

This ETF focuses on companies that have increased their dividends for at least ten consecutive years. It has a yield of around 1.6% and is an excellent choice for those seeking a consistent income stream and long-term capital appreciation.

7. SPDR S&P Dividend ETF (SDY)

This ETF tracks the S&P Composite 1500 Dividend Index and offers a yield of around 2.7%. With a diversified portfolio, it provides investors with a good balance between income and growth potential.

8. iShares US Real Estate ETF (IYR)

This ETF focuses on U.S. real estate stocks and offers a dividend yield of approximately 3%. It’s an excellent choice for those seeking income from the real estate sector while benefiting from potential capital appreciation.

9. ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

This ETF tracks the S&P 500 Dividend Aristocrats Index and consists of companies that have increased their dividends for at least 25 consecutive years. It offers a yield of around 1.8% and ensures investors capture income from the highest quality dividend-paying companies.

10. Schwab U.S. Small-Cap Value ETF (SCHB)

Although it doesn’t focus exclusively on high dividends, this ETF offers a yield of approximately 1.7%. It tracks the Dow Jones U.S. Small-Cap Value Index and provides investors with exposure to smaller companies that may offer attractive yields and growth potential.

iShares Select Dividend ETF (DVY) is a sector-weighted exchange-traded fund (ETF) that focuses on high dividend-paying US stocks across various sectors. This ETF is designed to provide investors with a reliable source of income and capital appreciation by investing in stocks that exhibit strong dividend characteristics.

Sector Allocation

The sector allocation of iShares Select Dividend ETF includes the Technology (27.3%), Financial Services (25.1%), and Industrials sectors (20.7%). This sector-weighted approach allows the ETF to provide diversified exposure to high dividend-yielding stocks across different sectors, which can help reduce overall portfolio risk.

Current Yield

The current yield of iShares Select Dividend ETF is a competitive 3.59%. This high dividend yield sets it apart from many other ETFs and makes it an attractive option for income-seeking investors.

Historical Yield

The historical yield of iShares Select Dividend ETF has ranged between 2.61% and 4.80%. This historical yield data provides insight into the consistency of the dividend payments over time, demonstrating that the ETF has delivered a reliable source of income for its investors.

Expense Ratio

The expense ratio of iShares Select Dividend ETF is a minimal 0.25%. This competitive expense ratio ensures that investors are not paying excessive fees to own the fund, allowing more of their investment dollars to be allocated towards generating income and capital appreciation.

SPDR Portfolio S&P 500 High Dividend ETF (SPHd)

This ETF, managed passively, tracks the high dividend yield segment of the S&P 500. With a current yield of 3.47%, it is an attractive investment option for income-focused investors. However, it’s important to note that yields have historically ranged between

2.32%

and

5.07%

.

Moreover, with an expense ratio of a mere

0.04%

, this ETF offers investors a cost-effective way to access the high dividend yield segment of the S&P 500. The low expense ratio ensures that more of the returns generated by the ETF go directly to investors, rather than being absorbed by management fees. This makes SPHd an appealing choice for those looking to maximize their income while minimizing costs.

Investors should keep in mind that the S&P 500 High Dividend ETF is not immune to market fluctuations. As such, there is always a risk associated with investing in the stock market. However, by focusing on high dividend yield stocks, this ETF offers a potential buffer against market volatility. The consistent income stream generated by these stocks can help stabilize an investor’s portfolio during uncertain markets.

In conclusion, the SPDR Portfolio S&P 500 High Dividend ETF (SPHd)

is a compelling investment option for those seeking a steady income stream with a lower risk profile. Its low expense ratio, attractive current yield, and historical yield range make it an attractive choice for income-focused investors. As always, it’s important to do your own research and consider your individual investment objectives and risk tolerance before making any investment decisions.

Schwab U.S. Dividend Equity ETF (SCHD) is a popular exchange-traded fund (ETF) that focuses on large-cap, dividend-paying U.S. stocks. This ETF aims to provide investors with a steady stream of income through the collection of dividends paid out by the companies held within its portfolio.

Current Yield

The current yield of SCHD is an attractive 3.40%, making it an appealing option for income-focused investors. The current yield represents the annual dividend payment as a percentage of the current market price.

Historical Yield

The historical yield of SCHD ranges from a low of 1.87% to a high of 5.28%. The historical yield can provide insight into the fund’s income generation over time, although it is important to note that past performance is not indicative of future results.

Expense Ratio

With an expense ratio of a mere 0.06%, SCHD is quite cost-effective compared to many other ETFs and mutual funds in the income and dividend space. This low expense ratio means that a larger portion of investors’ returns will be retained for capital appreciation or income generation, rather than being paid out as fees to the fund provider.

ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is a popular exchange-traded fund (ETF) that

tracks the S&P 500 Dividend Aristocrats Index

, which is a unique benchmark in the world of stock markets. The index consists of companies that have managed to increase their dividends for an impressive streak of at least

25 consecutive years

. This remarkable achievement sets these companies apart and earns them the title of ‘Dividend Aristocrats’.

Current Yield:

The current yield of NOBL, as of the present moment, stands at an attractive 2.32%. This yield is a testament to the reliability and consistency of the companies in the index, making NOBL an appealing choice for investors seeking regular income.

Historical Yield:

The historical yield of NOBL has fluctuated between a low of

1.93%

and a high of

4.06%

. This range underlines the volatility that is inherent in all investments, even those focused on dividend-paying stocks. Despite this variability, NOBL’s historical yield demonstrates the potential rewards for long-term investors.

Expense Ratio:

With a competitive expense ratio of just

0.35%

, NOBL is an affordable investment option for those looking to gain exposure to the S&P 500 Dividend Aristocrats Index. The low expense ratio ensures that more of the investment returns go directly to the investors, rather than being absorbed by the fund’s operating costs.

E. iShares International Select Dividend ETF (IDV) is an exchange-traded fund (ETF) that

focuses on high dividend-paying international stocks

, primarily from Europe and Asia. This ETF is an excellent choice for investors seeking stable income streams and diversification beyond the United States.

Current Yield:

The current yield of IDV is an impressive 4.78%. This yield is higher than many domestic bond offerings, making it an attractive option for income-seeking investors.

Historical Yield:

Over the past few years, IDV’s historical yield has ranged between 3.39% and 5.80%. These figures demonstrate the ETF’s ability to deliver consistent dividends, despite market fluctuations.

Expense Ratio:

With a low expense ratio of 0.42%, IDV is an economical choice for investors. This fee is significantly lower than many actively managed funds in this asset class, allowing more of the returns to go directly into investors’ pockets.

F. Invesco International High Dividend Equity ETF (IDIV): This Exchange-Traded Fund (ETF) is a solid choice for investors seeking high dividend yields from international stocks.

Key Features:

• Focus Area: The ETF primarily tracks an index of international stocks, with a heavy concentration on Europe and Asia.
• Current Yield: The current yield for IDIV stands at an impressive 4.93%, making it an attractive option for income-focused investors.
• Historical Yield: Over the years, IDIV has delivered a historical yield ranging between
  

  3.57%

  and

  6.05%

  , which is considerably higher than many other international ETFs.

• Expense Ratio: With a manageable expense ratio of only
  

  0.48%

  , the fund is relatively cost-effective for investors.

Why Consider IDIV?

IDIV offers several advantages that make it an attractive option for investors seeking high dividend yields from international stocks. The fund’s heavy concentration on Europe and Asia provides diversification benefits, while its historical yield indicates a consistent track record of delivering income. Furthermore, the low expense ratio ensures that investors keep more of their returns over time.

G. Vanguard Dividend Appreciation ETF (VIG) is an exchange-traded fund (ETF) that

tracks the performance

of stocks in the

S&P Composite 1500 Index

with an impressive distinction. This ETF focuses on stocks that have increased their dividends for at least ten consecutive years. By doing so, VIG offers investors an appealing investment opportunity that targets companies with a consistent record of paying and raising their dividends.

Current Yield:

The current yield of VIG is 1.48%, which provides a steady income stream for investors.

Historical Yield:

The historical yield of VIG has ranged from 0.96% to 3.74%, offering a diverse yield landscape for investors over the years.

Expense Ratio:

With a .06% expense ratio, VIG is relatively inexpensive compared to other dividend-focused ETFs. This low cost makes it an attractive option for investors seeking high dividend yields while minimizing their costs.

H. iShares U.S. Preferred Stock ETF (PFF) is a popular exchange-traded fund (ETF) that consists primarily of US preferred stocks. Preferred stocks offer investors a higher yield than many common stock equivalents, making them an attractive option for income-focused investors. However, it is essential to note that preferred stocks typically exhibit more limited price appreciation potential compared to common stocks.

Current Yield:

The current yield of PFF is 5.42%. This high yield makes it an appealing choice for investors seeking income in a low-interest-rate environment.

Historical Yield:

The historical yield of PFF has ranged from 4.65% to 7.09%. This wide range reflects the volatility of preferred stocks and underscores the importance of considering yield as only one factor when evaluating this asset class.

Expense Ratio:

With an expense ratio of just 0.48%, PFF is relatively inexpensive compared to many actively managed preferred stock funds. This low cost can help maximize returns for investors over the long term.

I. Overview of iShares 20+ Year Treasury Bond ETF (TLT)

iShares 20+ Year Treasury Bond ETF, represented by the ticker symbol TLT, is a popular exchange-traded fund (ETF) that invests in long-term US government bonds. This investment vehicle provides

investors

with an attractive income yield, making it an appealing addition to a diversified investment portfolio. With a focus on longer-term government bonds, TLT offers a level of stability and potential capital appreciation that can help manage overall portfolio risk.

Current Yield

Currently, TLT boasts a yield of

3.47%

. This high income yield is one of the primary reasons many investors are drawn to this ETF.

Historical Yield

Historically, TLT’s yield has ranged between

2.56%

and

5.89%

. These figures provide valuable context, as they highlight the variability in yield over time and demonstrate that the current yield represents a relatively high point.

Expense Ratio

TLT comes with a reasonable expense ratio of just

0.15%

. This low cost makes it an attractive choice for investors looking to maximize their returns while minimizing fees and expenses.

Conclusion

As we approach the new year, investors are seeking high-yield ETFs to boost their portfolio returns. In this article, we’ve reviewed the top

10 high-yield ETFs

for your consideration in 202These include:

• 
  

  SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

• 
  

  iShares Select Dividend ETF (DVY)

• 
  

  Schwab U.S. Dividend Equity ETF (SCHD)

• 
  

  Vanguard Dividend Appreciation ETF (VIG)

• 
  

  iShares Select High Dividend Equity ETF (DVYG)

• 
  

  SPDR Portfolio S&P 500 High Dividend Value ETF (SPYV)

• 
  

  iShares Core Dividend ETF (DVY)

• 
  

  ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

• 
  

  iShares Select High Quality Dividend ETF (HDQ)

• 
  

  SPDR Portfolio S&P 500 Growth ETF (SPYG)

Recap of the top 10 high-yield ETFs for your portfolio in 2023

These high-yield ETFs offer attractive dividend yields and are well-diversified across various sectors. However, it is crucial to understand other key factors when selecting high-yield ETFs:

Importance of understanding yield, diversification, volatility, and expense ratios when selecting high-yield ETFs

Yield:

The dividend yield represents the amount of income an ETF generates relative to its price. A higher yield is generally more attractive, but it’s important to consider the sustainability and potential growth of the dividend.

Diversification:

Spreading investments across various sectors and asset classes can help reduce overall portfolio risk.

Volatility:

High-yield ETFs may experience greater price fluctuations due to their focus on dividend-paying stocks. Understanding your risk tolerance and the potential for market volatility is crucial.

Expense ratios:

The cost of owning an ETF, represented by the expense ratio, can impact your returns over time. Lower expenses are generally preferable, but it’s essential to consider the overall value an ETF provides.

Encouragement to consider these high-yield ETFs as part of a well-diversified investment strategy for the upcoming year

Incorporating high-yield ETFs into a well-diversified investment strategy can help investors generate steady income while maintaining exposure to various sectors and asset classes. By understanding the key factors, such as yield, diversification, volatility, and expense ratios, you can make informed decisions and potentially enhance your portfolio’s returns in 2023.

video