QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)
QQQ   432.79 (+0.19%)
AAPL   188.32 (-0.58%)
MSFT   414.11 (+0.01%)
META   470.00 (+0.09%)
GOOGL   145.91 (+0.25%)
AMZN   169.84 (-0.40%)
TSLA   189.56 (+1.06%)
NVDA   696.41 (-0.65%)
NIO   5.82 (-0.68%)
AMD   169.35 (-0.93%)
BABA   70.74 (-3.94%)
T   16.82 (-2.94%)
F   12.83 (+0.23%)
MU   84.88 (-0.34%)
CGC   4.11 (-4.86%)
GE   139.07 (+0.41%)
DIS   110.54 (+11.50%)
AMC   4.09 (+3.81%)
PFE   27.56 (+0.00%)
PYPL   56.13 (-11.24%)
XOM   103.97 (+1.71%)

Dividend ETFs

If you're considering investing in an exchange-traded fund (ETF), it's important to know whether or not the fund pays dividends to investors. Most ETFs that invest in stocks that pay dividends will distribute those dividends to investors on a regular schedule. MarketBeat offers a list of the largest dividend-paying ETFs by assets under management to help you make an informed decision. Learn more about dividend ETFs.

Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
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Media SentimentUpgrade to All Access to use the All Sentiments Filter
CompanyCurrent PriceDividend YieldDistribution FrequencyFund AUMNet Expense RatioIndicator(s)
Vanguard Dividend Appreciation ETF stock logo
VIG
Vanguard Dividend Appreciation ETF
$175.20
0.0%
1.70%Quarterly$75.18B0.06%News Coverage
Schwab US Dividend Equity ETF stock logo
SCHD
Schwab US Dividend Equity ETF
$77.07
+0.2%
3.32%Quarterly$52.72B0.06%News Coverage
Vanguard High Dividend Yield ETF stock logo
VYM
Vanguard High Dividend Yield ETF
$112.99
+0.1%
2.88%Quarterly$51.26B0.06%News Coverage
JPMorgan Equity Premium Income ETF stock logo
JEPI
JPMorgan Equity Premium Income ETF
$56.14
0.0%
11.33%Monthly$31.81B0.35%Positive News
iShares Core Dividend Growth ETF stock logo
DGRO
iShares Core Dividend Growth ETF
$55.19
+0.1%
2.12%Quarterly$25.75B0.08%
JPMorgan Ultra-Short Income ETF stock logo
JPST
JPMorgan Ultra-Short Income ETF
$50.31
+0.0%
1.83%Monthly$22.23B0.18%
SPDR S&P Dividend ETF stock logo
SDY
SPDR S&P Dividend ETF
$123.32
-0.1%
2.59%Quarterly$20.12B0.35%
iShares Select Dividend ETF stock logo
DVY
iShares Select Dividend ETF
$114.03
+0.1%
3.92%Quarterly$17.87B0.38%
iShares Preferred and Income Securities ETF stock logo
PFF
iShares Preferred and Income Securities ETF
$31.81
+0.3%
6.44%Monthly$14.08B0.46%
WisdomTree U.S. Quality Dividend Growth Fund stock logo
DGRW
WisdomTree U.S. Quality Dividend Growth Fund
$72.81
+0.2%
1.68%Monthly$12.10B0.28%News Coverage
Positive News
High Trading Volume
First Trust Value Line Dividend Index Fund stock logo
FVD
First Trust Value Line Dividend Index Fund
$40.37
+0.2%
2.06%Quarterly$10.27B0.67%
JPMorgan Nasdaq Equity Premium Income ETF stock logo
JEPQ
JPMorgan Nasdaq Equity Premium Income ETF
$52.30
+0.2%
9.37%Monthly$9.93B0.35%Negative News
iShares Core High Dividend ETF stock logo
HDV
iShares Core High Dividend ETF
$103.72
0.0%
3.59%Quarterly$9.91B0.08%
First Trust NASDAQ Rising Dividend Achievers stock logo
RDVY
First Trust NASDAQ Rising Dividend Achievers
$51.27
+0.1%
2.11%Quarterly$9.30B0.50%Positive News
Vanguard International High Dividend Yield ETF stock logo
VYMI
Vanguard International High Dividend Yield ETF
$65.35
-0.5%
4.65%Quarterly$6.98B0.22%
SPDR Portfolio S&P 500 High Dividend ETF stock logo
SPYD
SPDR Portfolio S&P 500 High Dividend ETF
$38.18
0.0%
5.19%Quarterly$6.60B0.07%
Vanguard International Dividend Appreciation ETF stock logo
VIGI
Vanguard International Dividend Appreciation ETF
$79.21
-0.4%
1.92%Quarterly$6.14B0.15%Positive News
Capital Group Dividend Value ETF stock logo
CGDV
Capital Group Dividend Value ETF
$30.38
+0.1%
1.05%N/A$6.06B0.33%
First Trust Preferred Securities and Income ETF stock logo
FPE
First Trust Preferred Securities and Income ETF
$17.02
-0.1%
5.64%Monthly$5.26B0.85%High Trading Volume
First Trust TCW Opportunistic Fixed Income ETF stock logo
FIXD
First Trust TCW Opportunistic Fixed Income ETF
$43.80
-0.3%
4.04%Monthly$5.04B0.56%
Dimensional Core Fixed Income ETF stock logo
DFCF
Dimensional Core Fixed Income ETF
$42.00
-0.3%
3.26%Monthly$4.44B0.19%
First Trust Morningstar Dividend Leaders Index stock logo
FDL
First Trust Morningstar Dividend Leaders Index
$36.03
-0.2%
3.64%Quarterly$3.96B0.45%
WisdomTree U.S. LargeCap Dividend Fund stock logo
DLN
WisdomTree U.S. LargeCap Dividend Fund
$68.12
+0.0%
2.29%Monthly$3.80B0.28%
WisdomTree U.S. MidCap Dividend Fund stock logo
DON
WisdomTree U.S. MidCap Dividend Fund
$44.70
+0.6%
2.48%Monthly$3.37B0.38%
Amplify YieldShares CWP Dividend & Option Income ETF stock logo
DIVO
Amplify YieldShares CWP Dividend & Option Income ETF
$37.53
0.0%
4.56%Annually$3.04B0.55%
First Trust SMID Cap Rising Dividend Archievers ETF stock logo
SDVY
First Trust SMID Cap Rising Dividend Archievers ETF
$32.10
+0.9%
1.93%Quarterly$3.02B0.60%
WisdomTree Emerging Markets SmallCap Dividend Fund stock logo
DGS
WisdomTree Emerging Markets SmallCap Dividend Fund
$48.98
-0.7%
4.80%Quarterly$3.01B0.58%Positive News
Janus Henderson Short Duration Income ETF stock logo
VNLA
Janus Henderson Short Duration Income ETF
$48.35
0.0%
4.26%Monthly$2.91B0.23%
Invesco S&P 500 High Dividend Low Volatility ETF stock logo
SPHD
Invesco S&P 500 High Dividend Low Volatility ETF
$41.43
-0.3%
4.13%Monthly$2.82B0.30%
WisdomTree Emerging Markets High Dividend Fund stock logo
DEM
WisdomTree Emerging Markets High Dividend Fund
$40.53
-0.6%
5.50%Quarterly$2.70B0.63%
First Trust NASDAQ Technology Dividend Index Fund stock logo
TDIV
First Trust NASDAQ Technology Dividend Index Fund
$66.51
+0.6%
1.67%Quarterly$2.30B0.50%
Dimensional Short-Duration Fixed Income ETF stock logo
DFSD
Dimensional Short-Duration Fixed Income ETF
$47.03
0.0%
2.08%Monthly$2.27B0.18%
WisdomTree International Hedged Quality Dividend Growth Fund stock logo
IHDG
WisdomTree International Hedged Quality Dividend Growth Fund
$43.05
+0.1%
11.41%Quarterly$2.11B0.58%
WisdomTree U.S. SmallCap Dividend Fund stock logo
DES
WisdomTree U.S. SmallCap Dividend Fund
GBX 30.73
+1.1%
2.67%Monthly£1.87B0.38%
Capital Group Core Plus Income ETF stock logo
CGCP
Capital Group Core Plus Income ETF
$22.46
-0.4%
2.94%Monthly$1.75B0.34%
FlexShares Quality Dividend Index Fund stock logo
QDF
FlexShares Quality Dividend Index Fund
$63.03
+0.1%
2.05%Quarterly$1.70B0.37%
X-trackers MSCI EAFE High Dividend Yield Equity ETF stock logo
HDEF
X-trackers MSCI EAFE High Dividend Yield Equity ETF
$23.64
-0.5%
4.99%N/A$1.42B0.20%
Fidelity High Dividend ETF stock logo
FDVV
Fidelity High Dividend ETF
$43.21
0.0%
2.96%Quarterly$1.28B0.29%
Invesco High Yield Equity Dividend Achievers ETF stock logo
PEY
Invesco High Yield Equity Dividend Achievers ETF
$19.87
4.93%Monthly$1.23B0.52%
First Trust Institutional Preferred Securities and Income ETF stock logo
FPEI
First Trust Institutional Preferred Securities and Income ETF
$18.01
+0.2%
5.22%Monthly$1.22B0.85%
WisdomTree Total U.S. Dividend Fund stock logo
DTD
WisdomTree Total U.S. Dividend Fund
$66.61
+0.2%
2.37%Monthly$1.16B0.28%
ALPS Sector Dividend Dogs ETF stock logo
SDOG
ALPS Sector Dividend Dogs ETF
$50.44
-0.3%
3.95%Quarterly$1.12B0.40%
FlexShares Ultra-Short Income Fund stock logo
RAVI
FlexShares Ultra-Short Income Fund
$75.19
1.69%Monthly$1.11B0.25%
WisdomTree International SmallCap Dividend Fund stock logo
DLS
WisdomTree International SmallCap Dividend Fund
$62.23
-0.1%
4.61%Quarterly$1.07B0.58%News Coverage
WisdomTree U.S. High Dividend Fund stock logo
DHS
WisdomTree U.S. High Dividend Fund
$80.46
+0.1%
3.67%Monthly$1.05B0.38%
JPMorgan Income ETF stock logo
JPIE
JPMorgan Income ETF
$45.55
+0.2%
4.46%Monthly$1.02B0.41%
VictoryShares US EQ Income Enhanced Volatility Wtd ETF stock logo
CDC
VictoryShares US EQ Income Enhanced Volatility Wtd ETF
$55.30
-0.1%
4.41%Monthly$939.40M0.37%
Invesco International Dividend Achievers ETF stock logo
PID
Invesco International Dividend Achievers ETF
$17.87
-0.9%
3.41%Quarterly$932.83M0.53%
VanEck BDC Income ETF stock logo
BIZD
VanEck BDC Income ETF
$16.01
-0.1%
9.93%Quarterly$895.07M10.92%
YEAR
AB Ultra Short Income ETF
$50.41
+0.1%
1.19%Monthly$828.70M0.25%
Schwab International Dividend Equity ETF stock logo
SCHY
Schwab International Dividend Equity ETF
$24.15
+0.0%
3.40%N/A$776.17M0.14%
YieldMax TSLA Option Income Strategy ETF stock logo
TSLY
YieldMax TSLA Option Income Strategy ETF
$8.75
+0.9%
84.00%Monthly$752.99M0.99%
Invesco CEF Income Composite ETF stock logo
PCEF
Invesco CEF Income Composite ETF
$18.45
-0.1%
8.84%Monthly$739.62M3.08%
Invesco S&P Ultra Dividend Revenue ETF stock logo
RDIV
Invesco S&P Ultra Dividend Revenue ETF
$42.58
-0.1%
3.52%Quarterly$730.67M0.39%
Global X SuperDividend ETF stock logo
SDIV
Global X SuperDividend ETF
$20.84
-0.9%
7.10%Annually$720.55M0.59%
Franklin U.S. Low Volatility High Dividend Index ETF stock logo
LVHD
Franklin U.S. Low Volatility High Dividend Index ETF
$34.74
+0.1%
3.57%Quarterly$716.62M0.27%Dividend Cut
iShares Emerging Markets Dividend ETF stock logo
DVYE
iShares Emerging Markets Dividend ETF
$26.17
-0.9%
9.13%Quarterly$682.20M0.49%
AVIG
Avantis Core Fixed Income ETF
$41.12
-0.4%
2.53%Monthly$662.11M0.15%
DIVI
Franklin International Core Dividend Tilt Index ETF
$30.45
-0.2%
5.29%Quarterly$653.85M0.09%
Invesco Dividend Achievers ETF stock logo
PFM
Invesco Dividend Achievers ETF
$40.82
-0.1%
1.81%Quarterly$633.66M0.53%
WisdomTree Global ex U.S. Quality Dividend Growth Fund stock logo
DNL
WisdomTree Global ex U.S. Quality Dividend Growth Fund
$36.79
+0.2%
4.21%Quarterly$621.70M0.42%High Trading Volume
Fidelity Dividend ETF for Rising Rates stock logo
FDRR
Fidelity Dividend ETF for Rising Rates
$44.38
-0.2%
2.48%Quarterly$612.14M0.29%
Global SuperDividend US ETF stock logo
DIV
Global SuperDividend US ETF
$16.49
+0.2%
7.52%Annually$581.82M0.45%News Coverage
CGMU
Capital Group Municipal Income ETF
$26.98
0.0%
0.48%Monthly$579.87M0.27%
First Trust Municipal High Income ETF stock logo
FMHI
First Trust Municipal High Income ETF
$47.69
-0.1%
3.90%Monthly$553.20M0.70%
First Trust DJ Global Select Dividend Index Fund stock logo
FGD
First Trust DJ Global Select Dividend Index Fund
$21.79
-0.6%
5.78%Quarterly$548.40M0.56%News Coverage
Positive News
FlexShares International Quality Dividend Index Fund stock logo
IQDF
FlexShares International Quality Dividend Index Fund
$23.10
-0.5%
4.98%Quarterly$545.39M0.47%
WisdomTree International LargeCap Dividend Fund stock logo
DOL
WisdomTree International LargeCap Dividend Fund
$48.69
-0.3%
4.05%Quarterly$497.74M0.48%
CGMS
Capital Group U.S. Multi-Sector Income ETF
$26.92
-0.1%
0.93%Monthly$485.90M0.39%
SPDR S&P International Dividend ETF stock logo
DWX
SPDR S&P International Dividend ETF
$34.28
-0.8%
4.40%Quarterly$477.98M0.45%High Trading Volume
First Trust BuyWrite Income ETF stock logo
FTHI
First Trust BuyWrite Income ETF
$21.96
+0.4%
8.33%Monthly$443.68M0.85%
Amplify High Income ETF stock logo
YYY
Amplify High Income ETF
$11.79
-0.3%
12.22%Monthly$428.02M2.26%
Nationwide Nasdaq-100 Risk-Managed Income ETF stock logo
NUSI
Nationwide Nasdaq-100 Risk-Managed Income ETF
$23.32
+0.0%
6.99%Monthly$415.00M0.68%
Columbia Diversified Fixed Income Allocation ETF stock logo
DIAL
Columbia Diversified Fixed Income Allocation ETF
$17.70
-0.3%
3.39%Monthly$405.64M0.28%High Trading Volume
Columbia Multi-Sector Municipal Income ETF stock logo
MUST
Columbia Multi-Sector Municipal Income ETF
$20.58
+0.4%
1.70%Monthly$400.28M0.23%High Trading Volume
SMIG
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF
$24.96
-0.2%
1.80%Monthly$396.02M0.60%
CGSD
Capital Group Short Duration Income ETF
$25.49
0.63%Monthly$366.37M0.25%
T. Rowe Price Dividend Growth ETF stock logo
TDVG
T. Rowe Price Dividend Growth ETF
$36.09
-0.2%
1.00%Quarterly$362.78M0.50%
EDIV
SPDR S&P Emerging Markets Dividend ETF
$32.47
-0.4%
3.66%Quarterly$360.26M0.49%News Coverage
Invesco KBW High Dividend Yield Financial ETF stock logo
KBWD
Invesco KBW High Dividend Yield Financial ETF
$14.68
-0.1%
12.33%Monthly$354.17M2.02%
QDEF
FlexShares Quality Dividend Defensive Index Fund
$60.95
0.0%
2.05%Quarterly$353.63M0.37%
DTH
WisdomTree International High Dividend Fund
$37.56
-0.1%
5.46%Quarterly$345.00M0.58%Positive News
HIGH
Simplify Enhanced Income ETF
$24.54
+0.1%
1.26%Monthly$335.76M0.51%
DFJ
WisdomTree Japan SmallCap Dividend Fund
$73.75
-1.5%
2.25%Quarterly$329.79M0.58%
JPMorgan Realty Income ETF stock logo
JPRE
JPMorgan Realty Income ETF
$43.39
+0.8%
10.05%Quarterly$316.37M0.50%
WisdomTree U.S. SmallCap Quality Dividend Growth Fund stock logo
DGRS
WisdomTree U.S. SmallCap Quality Dividend Growth Fund
$46.42
+1.4%
2.43%Monthly$314.88M0.38%
CSHI
NEOS Enhanced Income Cash Alternative ETF
$49.96
+0.0%
1.98%Monthly$300.08M0.38%
Invesco Dow Jones Industrial Average Dividend ETF stock logo
DJD
Invesco Dow Jones Industrial Average Dividend ETF
$46.38
0.0%
2.98%Quarterly$291.77M0.07%
AVSF
Avantis Short-Term Fixed Income ETF
$46.24
1.77%Monthly$286.62M0.15%
QQQY
Defiance Nasdaq 100 Enhanced Options Income ETF
$17.29
+0.3%
26.03%Monthly$276.97M0.99%Positive News
Victoryshares Dividend Accelerator ETF stock logo
VSDA
Victoryshares Dividend Accelerator ETF
$47.77
+0.1%
1.95%Monthly$262.40M0.35%High Trading Volume
Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF stock logo
QDPL
Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF
$34.61
+0.0%
6.01%Quarterly$256.90M0.79%
IDOG
ALPS International Sector Dividend Dogs ETF
$28.77
-0.6%
3.93%Quarterly$255.83M0.50%
DFSB
Dimensional Global Sustainability Fixed Income ETF
$51.27
-0.3%
0.49%Monthly$249.45M0.24%
EIPX
FT Energy Income Partners Strategy ETF
$20.87
+0.5%
0.34%Quarterly$248.08M0.95%
GDIV
Harbor Dividend Growth Leaders ETF
$13.83
+0.6%
5.06%Annually$247.08M0.50%
VanEck Mortgage REIT Income ETF stock logo
MORT
VanEck Mortgage REIT Income ETF
$10.80
+0.3%
14.17%Quarterly$243.80M0.41%
SABA
Saba Capital Income & Opportunities Fund II
$3.85
-0.3%
9.35%N/A$243.75M0.00%Positive News
PFLD
AAM Low Duration Preferred and Income Securities ETF
$20.95
5.68%Monthly$239.76M0.45%
Timothy Plan High Dividend Stock ETF stock logo
TPHD
Timothy Plan High Dividend Stock ETF
$32.77
+0.1%
2.26%Annually$234.26M0.52%

Key Points

  • Most ETFs hold assets that pay dividends, a portion of which are often passed along to investors. However, not every ETF offers a dividend. 
  • Investors may receive qualified or unqualified dividends through ETFs depending on the fund's holdings and management.
  • The type of dividend you receive affects the tax rate you pay. 

Exchange-traded funds (ETFs) are common choices for investors looking to mitigate their market risk through diversification. ETFs provide investors with less risk than buying and selling individual stocks, considered a basket of assets. But do ETFs pay dividends to investors in the funds?

Most ETFs that invest in stocks that pay dividends distribute those dividends to investors on a schedule, similar to any of the best dividend stocks on MarketBeat. If the ETF invests in bonds that accumulate interest, the ETF will also usually offer a portion of the interest back to investors through dividends. However, not every ETF is required to offer investors dividend distributions, and some companies may elect to reinvest stock dividends earned back into growth operations or research and development. 

Before you invest in dividend ETFs, know how to research the sustainability of these payments and be sure that the fund you're investing in is a dividend-paying ETF. Read on to learn more about these assets and how you can learn more about the best dividend stocks and ETFs. 

What Are ETFs?

An ETF is an investment vehicle made up of multiple stocks, bonds or other assets traded on the public markets. Unlike mutual funds, you can buy and sell ETFs throughout the day, similar to a single share of stock. This makes them a convenient and affordable option for retail investors. 

As ETFs include individual stocks, most have at least a few assets that issue dividends at least once a month. Where the ETF dividends go and how they split up depends on the company managing the fund. While most ETFs distribute at least a portion of their returns to fund holders in the form of dividend payments, some may choose to reinvest the dividends into the fund's assets or other management projects. 

If you're looking to invest in an ETF and want to be sure that it distributes a dividend to shareholders, be sure to check the fund's dividend yield before you place a buy order. You can browse some of the best dividend ETFs or start your search by exploring today's top high-yield dividend stocks on MarketBeat.

do etfs pay dividends

Types of Dividends

Exchange-traded funds (ETFs) can pay out multiple types of dividends depending on the underlying securities in the ETF's portfolio. The two most common types of distributions are qualified and nonqualified dividends. The difference and the type of ETF dividend you receive will depend on the underlying assets held by the fund and other financial factors.

Qualified and nonqualified dividends are taxed at different rates, so understand the differences before choosing which annual or monthly dividend stocks and ETFs to invest in. 

Qualified Dividends

Qualified dividends are a type of dividend subject to a lower tax rate than ordinary dividends. If your dividends are qualified, you will pay the capital gains tax rate on your dividend income rather than the standard income tax rate. For most people, this will result in a much more advantageous tax situation when compared to collecting unqualified dividends. 

To be considered qualified, dividends must meet certain requirements set by the Internal Revenue Service (IRS), which include:

  • A U.S. corporation or a qualified foreign corporation must issue the dividends.
  • The stock on which the dividends are paid must be held for a certain period, known as the holding period requirement.
  • The dividends cannot be listed as "unqualified dividends" or "ordinary dividends" on the company's financial statements.

If they meet these requirements, the dividends are considered qualified and are taxed at the long-term capital gains tax rate. The exact tax rate depends on the individual's tax bracket, but as of 2023, qualified dividends are taxed at rates ranging from 0% to 20%.

Unqualified Dividends

Unqualified dividends (also known as ordinary dividends) do not meet the requirements set by the IRS to be considered qualified dividends. An ETF dividend might be classified as unqualified because it was issued by a company based outside of the U.S., the asset has not met the holding period, or it was not approved for capital gains qualification by the IRS for financial reasons. Some select types of companies (like REITs) must pay out unqualified dividends even if they meet the standards for qualified distributions. 

Unqualified dividends are subject to the ordinary income tax rate, generally higher than the tax rate for qualified dividends. Depending on your income, you may pay between 10% and 37% of your unqualified dividend income when you file your federal income tax return. 

How Dividends Are Allocated

Companies allocate dividends to their shareholders by their dividend policy, usually determined by the company's board of directors. Several factors influence the dividend policy, including the company's financial position, growth prospects, and capital needs. Some companies pay a flat-rate dividend per share held by the investor, while others distribute a variable dividend based on the company's profits. 

Deciding to issue a dividend is an involved process involving multiple important dates that investors should know. The following are the most important steps in the dividend allocation process. 

  • Declaration date: The board of directors declares a dividend and sets the dividend amount and payment date.
  • Record date: The record date is when the company determines which shareholders can receive the dividend. To do this, they create a list of all shareholders who held the stock or fund on the declaration date and issue dividends based on shares held. 
  • Ex-dividend date: The ex-dividend date is two business days before the record date. Investors who purchase shares on or after the ex-dividend date will not receive the dividend.
  • Payment date: The payment date is when the dividend is paid to eligible shareholders. It is usually several weeks after the record date.

It's important to note that the decision to pay dividends is ultimately up to the company's board of directors, and very few companies are required to pay dividends. Research an ETF's dividend distribution history before you buy to be sure that the investment you're choosing pays out a regular dividend. 

What Are Capital Gains?

Capital gains are profits that an individual or a business earns from selling a capital asset, such as stocks or real estate. Capital gains occur when the asset's sale price is greater than the original purchase price. For example, if you bought your home for $250,000 and sold it for $300,000 when you moved, you have seen a capital gain of $50,000. 

Like other investments, ETFs can generate capital gains when sold for a higher price than you purchased them. These capital gains are subject to taxation by the government and may be taxed at the capital gains rate or your standard income tax rate. As noted above, the distributions you receive from ETFs may qualify for the lower capital gains tax rate depending on the fund's management. 

What Does it Mean to Reinvest ETF Dividends?

When an ETF pays a dividend, investors have the option to reinvest the dividend back into the ETF by purchasing additional shares, rather than receiving the dividend as cash. This is known as dividend reinvestment, which can compound your investment returns and dividend income over time. 

Many brokerages allow you to enable dividend reinvestments for assets you choose automatically. If you reinvest your ETF dividends automatically, your broker will purchase additional fund shares at the current market rate when the dividend is received. 

Note that even if you directly reinvest the dividend after receiving it, the IRS still considers it taxable income in the year it's paid. If you reinvest dividends, you should keep track of their "cost basis" (the original price paid for the shares), as it will affect the amount of capital gains tax owed when you sell the shares.

How to Find ETFs that Pay the Most Dividends

The easiest way to sort ETFs by dividend payout is to use a stock screener. Many financial websites and brokerage platforms offer screening tools allowing investors to filter and sort ETFs based on size and trading volume. Use the screening tool to screen ETFs by "dividend yield," which represents the percentage value of the ETF that investors receive annually in the form of dividends. 

Several ETFs can invest in high-dividend stocks. These companies specifically invest their funds in companies that pay out the highest dividends, and actively manage the fund to grow dividends over time. Some examples include the iShares Select Dividend ETF (NYSE: DVY) and the Amplify High-Yield ETF (NYSE: YYY). 

Pros and Cons of Investing in ETFs for Dividends

Before you search for a list of dividend ETFs to start investing in, it's important to weigh the pros and cons of these sometimes-volatile funds. 

Pros

First, the potential benefits of investing in ETFs:

  • Income generation: ETFs that pay large dividends can provide a steady stream of income for investors, which can be helpful for those looking to supplement their retirement income or meet other financial goals.
  • Diversification: ETFs offer investors the ability to invest in a diversified portfolio of stocks with a single investment, which can help to spread risk across multiple companies and sectors and lowers your risk level when compared to investing in individual high-dividend stocks. 
  • DRIP options: Most ETFs offer direct dividend reinvestment programs, putting your dividend income management on autopilot. This can be useful for busy investors who want to avoid managing their dividends as cash. 

Cons

What about the downsides? Take a look:

  • Potentially lower returns: ETFs focusing on dividend-paying stocks may provide a different level of capital appreciation than other ETFs focusing on growth stocks. This may reduce your overall return as an investor. 
  • May pay nonqualified dividends: If you invest in an actively managed ETF that buys and sells stocks throughout the year, your dividends may not qualify for capital gains tax rates. This usually means paying more in taxes on dividends you earn. 
  • Expense ratios: ETFs include expense ratios that pay for the fund's management. Dividend ETFs may have higher expense ratios than funds that track a major index because management must regularly reevaluate assets included based on dividend payout. 

Can You Get Dividends from ETFs?

So — do you get dividends from ETFs? In most cases, the answer is "yes." ETFs may invest in hundreds of underlying stocks, which may pay out a dividend that's passed along to investors. However, like individual stocks, ETFs do not have to pay dividends, and any funds you invest in are free to cut future dividends at any time. Reviewing a fund's dividend payout history can help you choose viable assets for creating a long-term income stream. 

FAQs

Still have questions about dividend ETFs? Look at several we've compiled.

Which ETF pays the highest dividend?

Dividend yield rates constantly fluctuate, meaning that the fund paying the largest dividend may change from year to year. As of March 2023, some of the highest-paying ETFs include the Vanguard High Dividend Yield ETF (NYSE: VYM) and the iShares Select Dividend ETF (NYSE: DVY)

Do ETFs pay good dividends?

The dividend yield of an ETF depends on the underlying securities held in the fund. Some ETFs might invest heavily in growth stocks that do not yet have the infrastructure to pay dividends, while others may invest heavily in dividend stocks to attract investors. Check out each ETF's dividend payment history to learn more about the type of distributions you can expect. 

How often does an ETF pay dividends?

Some ETFs pay dividends every quarter, while others may pay dividends monthly or annually. You can typically find a dividend schedule for an ETF on the fund's website or through a collective stock and ETF database like MarketBeat

Sarah Horvath

About Sarah Horvath

  • horvath.sarah17@gmail.com

Contributing Author

Retail, Healthcare, and Real Estate stocks

Experience

Sarah Horvath has been a contributing writer for MarketBeat since 2022.

Areas of Expertise

Retirement investing, long-term retail investing, personal finance

Education

Bachelor of Arts, Arcadia University

Past Experience

Vanguard, Nationwide, Benzinga and MarketWatch

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