Best High-Yield ETFs to Buy Now

These high-yield ETFs screen for stocks paying outsized yields. Here's how to evaluate which one is best for your portfolio.

five white arrows pointing up with percentage signs surrounding a red arrow pointing up with a percentage sign
(Image credit: Getty Images)

There's no single "right" way to be a dividend investor. Some folks want to focus on long-term growth by prioritizing companies with long track records of uninterrupted dividend increases.

Others zero in on quality, favoring firms with sustainable payout ratios and strong balance sheets that are less likely to cut their dividends.

A third approach is to target stocks with above-average yields compared to their sector or the broader market.

Exchange-traded funds (ETFs) offer many ways to implement this strategy, but not all high-yield ETFs are built the same. Understanding the key differences is essential before investing.

Understanding high-yield ETFs

High-yield ETFs are built to deliver more income than broad-market index funds. They achieve this by using rules-based frameworks that select stocks with above-average payouts.

For example, a simple version may start with an index such as the S&P 500, then filter for the highest-yielding stocks, say, the top 25% based on trailing 12-month dividend yields. From that group, the ETF constructs a portfolio. But even this approach comes with nuance.

Some funds weight holdings by dividend yield or by total cash dividends paid. Others try to avoid "yield traps," which are stocks with unsustainably high yields.

Many also cap the weight of individual stocks or sectors to keep the portfolio diversified and reduce concentration.

Beyond higher income, this strategy tends to come with other side effects. One is a tilt toward value stocks. That's because yield is calculated as dividends divided by share price, so when a stock's price falls, its yield rises.

As a result, high-yield screens often select companies that are trading at lower valuations.

However, high-yield ETFs also tend to lag the broad market during periods when growth stocks are leading.

That's because many top-performing companies, especially in technology sector, either don't pay dividends or offer very low yields, meaning they get excluded from high-yield strategies.

Finally, in taxable accounts, high-yield ETFs can face a drag. Every time a dividend is paid, it triggers a tax liability, making these funds better suited for tax-sheltered accounts like a Roth IRA.

How we chose the best high-yield ETFs

We focused on U.S.-listed high-yield ETFs that generate income from actual stock dividends and not derivatives such as covered calls. We also left out international dividend ETFs to keep the universe simple, cheap and tax efficient.

From there, we applied two core screens. First, we capped the expense ratio at 0.40%, to ensure investors keep more of the income generated.

Second, we required at least $1 billion in assets under management (AUM) as a proxy for investor trust, stability and issuer track record.

These filters helped narrow the field to ETFs that not only deliver high income but are also scalable, liquid and cost-effective additions to a long-term portfolio.

Dividend yields on equity funds represent the trailing 12-month yield, which is a standard measure for equity funds. Data is as of June 9.

Swipe to scroll horizontally
The best high-yield ETFs to buy

Exchange-traded fund (ticker symbol)

Dividend yield

Vanguard High Dividend Yield ETF (VYM)

2.9%

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

4.5%

iShares Core High Dividend ETF (HDV)

3.5%

Schwab U.S. Dividend Equity ETF (SCHD)

4.0%

WisdomTree U.S. High Dividend Fund (DHS)

3.5%

Tony started investing during the 2017 marijuana stock bubble. After incurring some hilarious losses on various poor stock picks, he now adheres to Bogleheads-style passive investing strategies using index ETFs. Tony graduated in 2023 from Columbia University with a Master's degree in risk management. He holds the Certified ETF Advisor (CETF®) designation from The ETF Institute. Tony's work has also appeared in U.S. News & World Report, USA Today, ETF Central, The Motley Fool, TheStreet, and Benzinga. He is the founder of ETF Portfolio Blueprint.