Best ETFs for dividends returns

Hello T212 users! Apologies if the answer has already been discussed but I’ve check a few chats and still a bit confused! I want to include a high dividends ETF to my portfolio but unsure on the best one, I’ve landed on the vanguard FTSE all world high div yield but how does this compare to the remaining vanguard ETFs 100/250/500? Plan would be to invest a bit every month for that “rainy day” scenario In my ISA. My current portfolio is predominantly uk but happy to explore and open to suggestions or reassurance. Thanks

justetf.com is a good place search for and compare high yield ETFs. However, I am curious to learn why people like high yield ETFs. What is the case for them? I cannot find one that performs better than a normal tracker which does not focus on high yield. Compare top two rows here to bottom two rows (from justetf.com). Rows are VUSA, SWDA, HDIQ, VHYL.

Also bear in mind that, at least in the UK, dividend tax rates are (for higher rate taxpayers) greater than capital gains tax rates.

I find sense in the comments of Terry Smith, who (as reported in FT Advisor) " … argues that investors are usually worse off investing for dividends and leaving the capital undisturbed than they would be investing for total returns and regularly taking profits instead of income.

He also takes issue with the idea of investing in dividend-yielding companies to reinvest the income to compound growth and instead argues that companies should use profits to maximise their growth."

Well I can’t speak for everyone but as a recent newbie to this world, I felt it was a safe bet for long term investment, I have invested in other companies with more of a short term focus but maybe there is more stability with ETFs?

That’s is false statement in real world.
A company that reinvest 4% of its free cash flow on their business, has zero guarantee that business will grow 4% because of that.

I think what Terry Smith is trying to say is that if a business is good, then its shareholders will benefit most when the profits are reinvested into growing that same business further. Ideally, reinvest of 4% should grow the business 8%.

For companies of a certain size that just isn’t going to happen though. I’m all for redistribution of profit via dividends if they are unable to use it effectively.

@Andyk132 had asked which ETFs are good for dividend yield. The discussion has gone a tangent direction. I suggested using justetf.com to look for ETFs of this type.

But when I do I see no high yield dividend ETFs that perform better than a straight market VUSA or SWDA, and that got me to thinking, why?

Hi Andy,

My 2 personal favourites are VHYL & HDLG. My only issue with HDLG is that it has a small AUM (assets under management) and slightly higher expense ratio however, this may change moving forward. I do own both VHYL & HDLG. Depending on how I feel about HDLG later down the line I will either keep it or move the money invested in it to VHYL.

For the why… I like HDLG as it has a good 5 year growth return and high dividend yield resulting in a nice total return. VHYL isn’t to far behind, it has a higher 5 year average growth return but a slightly lower dividend yield. If is still good though.

VHYL has over 1600 stock in the ETF but HDLG has around 50 I believe so VHYL is more diverse due to the amount of holdings. I also like the market cap weighting it uses for asset allocation.

The American equivalent of HDLG is SPHD and seems very popular amongst some US investors I follow. For me dividend investing ticks the right boxes and I am interested in a combination of both good growth and good income.

The discussion of income Vs growth investing can go on forever but ultimately it comes down to your personal preference. I would recommend checking out Andrei Jikh if you’re interested in learning more about some different strategies when it comes to stock investing.

This video in particular is quite good https://youtu.be/B7qBqKNaiK0

But as always do your own due diligence and try out a few things to see what works for you and fits your profile.

Best of luck! :+1:t4:

I love numbers :nerd_face:

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That’s an easy one :slightly_smiling_face:

Besides small caps, Momentum index and some Emerging Market ETFs… any ETF that does not include many of the top 20 stocks from S&P 500 / Nasdaq, will mostly never beat the market.
Companies with higher dividends are usually slow growers, you have to really do some calculation to see when it worth to have smaller dividends with higher growth and vice-versa.

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As show in numbers above, these ETFs underperform even when their high dividends are reinvested. So there is no calculation that makes them appear attractive.

Moreover, high dividend ETFs which invest in US stocks suffer even more than usual from the double taxation effect of the US 15% withholding tax.

I suppose the attraction must be at least partly psychological, in that an investor can obtain the pleasure of a regular income without having to drip sell any of his shares.

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At last. A youtuber not spouting the misguided notion that dividends are some form of mythical income that arrive out of thin air. The dialogue recently has very much been “new investors should generate passive income via dividends” and never explains to complete newbies that the £100 you had yesterday is just split £99 and £1 and the taxation of the new component parts can be different. It also disregards the fact that “most” (although not all) newbie investors are probably quite young and really can afford to go for growth over income. That’s not to say you shouldn’t buy dividend generating stocks - you should. But you shouldn’t be fixated on it.

Data from the users of the FinKi API shows that 90%+ of all API calls are regarding dividends. Cool. Nice to know when they are coming, nice to build a portfolio tool to give you the best picture of your assets. But the emails I get starting with “Whats the biggest yielding ETF I can buy” are indicators of peoples lack of understanding about where dividends come from and what the size of the yield implies to the safety of their capital.

Dividends are cool. Take them - they are yours. But don’t fixate on them. They are only part of the picture.

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Well… :smiling_imp:

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I love watching Joey, but he isn’t actually qualified. Ben is and he is using peer reviewed academic research.

I like Ben content.
That being said, the theory that he mentioned is from 60s I guess and it just do not reflect the real world market.
They both talked about historical data, any person can do that, sorry, I don’t see why Joseph “is not qualify” to read historical data and take his conclusions.
Believe me, a quick research will give you more results showing why this theory just do not work, than the opposite.

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Well said. I was one of them until about six months ago. I held a high-yield portfolio: albeit alongside a much bigger passive ETF core: but I liquidated it just before the pandemic, thankfully.

I think it’s a psychological thing: dividends are easy to understand and the returns feel reassuringly real. Having realised the error of my ways, it is now shocking to see just how many people seem to be pursuing income at the cost of growth while in the accumulation phase.

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All I meant was one manages other peoples money for a living, as well as his own. The other just manages their own. Also, this is just one paper in one video. I believe Joseph is using Investopedia for his citations. As for Josephs other videos, he doesn’t really use any source material other than news articles.

Edit: I just want to add that I love Josephs content and I’m not saying that anyone who doesn’t quote academic literiture is wrong and not worth listening to. I mean I watch a whole bunch of T212 youtubers videos. Far too many of them now to mention lol, but I check in on what they are doing for support and just curious as to other opinions.

I just think that in this instance, a professional is telling me that dividneds should not be my focus. As appose to just a random dude with an interest (which is me also lol).

Edit 2: Clearly I don’t listen to Ben either lol becuase I’m like 45% TSLA now lol!

Check about “the Milgram Experiment” and the effect of an “expert” telling us what to do :wink:

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too many ways to invest in the market. no single way is best or correct compared to the others, however, I would rather watch Joe over someone who claims that something is irrelevant just because of ‘academic research’.

I don’t have examples on hand, but time and again academic research has been later disproved for reasons x, y and z once people become better informed.

listening to Ben tell me how to invest would be like listening to Graham Stephen telling me how to get onto the property ladder. it would be highly inappropriate. Joe is admittedly not trying to compete in ideologies of the market, he just picked what works for him and shows us how it goes over time, he isn’t using a position of authority to influence our decisions, which is all that “being qualified” amounts to.

I think that ETFs are good in various ways, but focused on dividends doesn’t really strike me as the correct way to go about using them.

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