Choosing stocks or ETFs is sometimes like selecting a birthday cake—it's mostly a matter of personal taste. Some people prefer chocolate, others favor vanilla, and some might pick a fruit tart or ice cream cake. The same logic applies when selecting dividend ETFs. You can choose a fund that performs well in the index but offers lower dividend returns, or find one with decent returns that underperforms slightly in the overall market.

Personally, I often opt for a balanced approach, and I choose the iShares Core High Dividend ETF. This fund has relatively low fees, good annual performance, and healthy dividend yields.

Regarding the iShares Core High Dividend ETF, it is managed by BlackRock's iShares and tracks 75 U.S. stocks in the Morningstar Dividend Focus Index, aiming to balance yield, performance, and cost. The fund manager rebalances the ETF quarterly, focusing on stocks with sustainable dividends and solid financial health. Its expense ratio is only 0.08%, which means an annual cost of $8 per $10,000 invested. The 3.3% dividend yield is significantly higher than the S&P 500's 1.2%. Additionally, year-to-date returns have reached 9.1%, matching the overall market, and outperforming many other dividend ETFs.

Investing in the iShares Core High Dividend ETF provides you with a list of blue-chip dividend stocks. Nearly 20% of the fund is in mainstream sectors, but it also includes stocks in technology (16%), real estate (12.4%), and communication (11.3%). Major holdings include ExxonMobil, Johnson & Johnson, AbbVie, Chevron, and The Home Depot.

Diversification and blue-chip stocks are important considerations when choosing dividend ETFs. While you might find ETFs with higher dividend yields, such as the Alerian MLP ETF, which tracks the energy sector and offers an 8% yield, the problem is over-reliance on a single industry. Moreover, despite the higher yield, the Alerian MLP ETF has significantly lagged in market performance this year.

Comparing the HDV ETF with other popular dividend ETFs like the Schwab U.S. Dividend Equity ETF and the Capital Group Dividend Value ETF reveals that each has its strengths. The Capital Group fund leads in returns because it heavily invests in technology stocks, which tend to have lower dividend yields—Microsoft, for example, offers only 0.6%, and Nvidia just 0.2%.

On the other hand, the Schwab U.S. Dividend Equity ETF slightly outperforms in yield but has underperformed since the beginning of the year compared to the iShares Core High Dividend ETF. That’s why I prefer the iShares. I like the balance of blue-chip stocks, yield, and performance. Such ETFs are a good way to diversify your portfolio and can also generate returns.

If you choose to invest in this or other dividend ETFs, it’s best to reinvest the quarterly dividends into the fund to allow compound growth over the long term. A diversified, comprehensive dividend stock portfolio is an effective way to achieve retirement goals. However, the content of this article does not constitute investment advice. Want to share your thoughts? Feel free to leave a comment! 😊