6 Dividend Growth ETFs to Buy

Dividend growth ETFs tap into a strategy that beats the market over time and helps investors beat inflation.

Pink piggy banks resting on stacks of money that get larger to the right, indicating growth, with a blue background.
(Image credit: Getty Images)

The past few years have shone a bright light on one of the many virtues of dividend growth stocks — and by extension, dividend growth ETFs.

Inflation eats away at the power of the U.S. dollar, and in recent years, it has been feasting. In 2021, America suffered a 7% annual inflation rate, followed by another 6.5% in 2022. While inflation has somewhat cooled, per the most recent CPI reports, in practical terms, an item bought for $10 in January 2021 would already cost $12.01 today.

Now, imagine you live off dividends — if you don't now, you might one day in retirement — and your dividends remained flat between 2021 and now. That means even though the amount of dollars you received stayed the same, how much those dollars could purchase would have shrunk considerably. But if you held dividend growth stocks, you might be much closer to whole.

Dividend growth stocks and dividend growth ETFs possess other important characteristics, of course.

For one, dividends overall are an important component of overall return — from 1930 to 2022, a little more than 40% of the S&P 500's annualized total return was generated by the payment and reinvestment of dividends, according to Nuveen research.

Dividend growth is a winning strategy. According to Ned Davis Research and Hartford Funds data, dividend growers and initiators in the S&P 500 generated an overall average annual return of 10.2% between 1973 and 2022, outpacing dividend payers (9.2%), dividend stocks with no change in dividend policy (6.6%), dividend non-payers (-0.6%), dividend cutters and eliminators (4.0%) and the equal-weighted S&P 500 Index (7.7%).

Better still? Dividend growth stocks outperformed with less volatility than any of those other categories.

Now, you could hand-pick a few dividend stocks and hope you end up selecting the outperformers of the bunch. But you might also consider casting a wider net, owning dozens if not hundreds of dividend growers via the best ETFs. Read on as we examine six dividend growth ETFs that cover several ways to play expanding payouts.

Data is as of July 9. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.  

Kyle Woodley

Kyle Woodley is the Editor-in-Chief of WealthUp, a site dedicated to improving the personal finances and financial literacy of people of all ages. He also writes the weekly The Weekend Tea newsletter, which covers both news and analysis about spending, saving, investing, the economy and more.

Kyle was previously the Senior Investing Editor for Kiplinger.com, and the Managing Editor for InvestorPlace.com before that. His work has appeared in several outlets, including Yahoo! Finance, MSN Money, Barchart, The Globe & Mail and the Nasdaq. He also has appeared as a guest on Fox Business Network and Money Radio, among other shows and podcasts, and he has been quoted in several outlets, including MarketWatch, Vice and Univision. He is a proud graduate of The Ohio State University, where he earned a BA in journalism. 

You can check out his thoughts on the markets (and more) at @KyleWoodley.