5 Dividend Growth ETFs to Buy

Are you familiar with the concept of total return? When you check the performance of the S&P 500, what you typically see is the price return, that is, the change in the index value over time. But that doesn't include dividends, which can make a big difference to your wealth.

Total return measures how much you've earned from an investment after accounting for both price appreciation and reinvested dividends. Over long periods, reinvesting those dividends can significantly boost your returns.

Take two investors who each bought and held the SPDR S&P 500 ETF Trust (SPY) from January 2023 to April 2025. One reinvested every dividend they received. The other did not.

By the end of that period, the investor who reinvested dividends earned a 10.12% annualized return before taxes and fees. The one who didn't earned just 8.14%.

That may not sound like a huge gap, but over more than three decades, it adds up. The investor who reinvested turned $10,000 into $223,690.98. The other ended up with only $124,424.47.

This is the power of compounding. And it's even more effective when the companies you invest in consistently increase their dividend payouts year after year.

Each dividend lets you buy more shares, which then pay more dividends, which buy even more shares, and if the payouts keep growing and you hold long enough, the whole process starts to snowball.

Beyond the snowball effect of compounding, growing dividend payouts also signal strong fundamentals. On average, companies that can consistently hike dividends through multiple economic cycles tend to be profitable, well-managed and financially disciplined.

That's exactly what dividend growth ETFs aim to capture.

These funds screen for companies with strong histories of raising dividends, and today, investors have plenty of cost-effective choices to build a portfolio around this strategy.

Dividend growth ETFs vs dividend ETFs

There's more than one way to skin a cat, or, in this case, package a dividend investing strategy into an ETF.

Dividend growth ETFs are just one approach, and they sit alongside several other popular styles that target income in different ways.

The most common are high-yield dividend strategies. These ETFs screen for stocks that pay above-average dividend yields relative to their peers. They're often tailored for income-focused investors, especially retirees.

At the same time, they tend to function like quasi-value strategies, since high-yielding stocks are frequently out-of-favor names with lower valuations.

You'll also come across dividend-quality strategies, which focus less on how much a company pays and more on how sustainable those payments are.

These funds often analyze metrics like the payout ratio or free cash flow yield to judge how likely a company is to keep paying dividends through thick and thin.

Dividend growth ETFs sit in a different lane.

Some take a rearward-looking approach, only including companies that have raised their dividends for a set number of consecutive years. Others are forward-looking, aiming to identify companies that are well-positioned to opportunistically increase their payouts in the future based on fundamentals.

The key takeaway is not to take the ETF name at face value.

Some funds clearly state their approach, while others bury the strategy deep in their index methodology. Also, these strategies aren't mutually exclusive. One ETF might emphasize dividend growth but still screen for value or quality factors – or all three. The emphasis just varies depending on the fund.

How we chose the best dividend growth ETFs to buy

We began by limiting our search to dividend growth ETFs that target U.S. equities.

While the strategy can certainly be applied to international stocks, U.S.-focused funds are generally more tax efficient for American investors and narrowing the pool helps keep the focus on the most practical options.

From there, we ensured that each ETF selected has a clear dividend growth screen built into its index methodology – or, at the very least, that dividend growth is a central theme or notable contributor to how the portfolio is constructed.

This had the effect of screening out some ETFs that might sound like they fit but don't. One example is the popular WisdomTree U.S. Quality Dividend Growth Fund (DGRW). Based on the name alone, you might assume it prioritizes dividend growth, but a closer look at the index reveals otherwise.

DGRW's strategy focuses on dividend-paying companies with quality and growth traits, based on three-year averages for return on equity, return on assets, and long-term earnings growth expectations. Nowhere is past or expected dividend growth a selection factor. It’s a perfect example of why looking under the hood is so important.

Once that screen was applied, we relied on our usual three-part methodology focused on what we consider the pillars of a well-constructed ETF:

Expense Ratio: We capped our search at 0.35%, or $35 annually per $10,000 invested. Dividend growth strategies are typically low-turnover and rules-based, so there's no need to pay up for complexity or active management.

Liquidity: Each ETF selected has a 30-day median bid-ask spread of 0.10% or less. This keeps trading costs low and makes it easier for investors to buy and sell without losing value on execution.

Scale and Stability: Funds with low assets under management run the risk of closure. We focused on ETFs with at least $1 billion in AUM, which helps ensure fund longevity, tighter spreads, and overall market confidence.

By applying this process, we identified a group of five dividend growth ETFs that are not only true to the strategy but also cost-effective, easy to trade, and built to last.