ETFs (exchange traded funds) aren't normally on the top of most dividend investor's watchlists.
Perhaps because of their relatively new presence on the investing scene, ETFs seem to be viewed with a little more suspicion by income-focused investors than say your classic ASX dividend powerhouses like Commonwealth Bank of Australia (ASX: CBA) or Sydney Airport Holdings Pty Ltd (ASX: SYD).
However, I think dividend-focused ETFs can be a valuable tool in any dividend portfolio. Instant diversification with baskets of dozens of dividend paying companies as well as some international exposure are just some of the benefits ETFs offer.
So here are 3 dividend-focused ETFs that might interest anyone with a bias toward share market income.
SPDR S&P Global Dividend Fund (ASX: WDIV)
This ETF follows dividend paying companies mostly outside Australia that have a track record of stable or increasing dividends over the past ten years. You are getting a mixed bag of companies here, from banks and real estate to consumer stapes and utilities. Our own AGL Energy Ltd (ASX: AGL) is in the mix, but some of WDIV's top holdings include AT&T, IG Group Holdings and Philip Morris International. This ETF is currently offering a 4.78% trailing dividend yield.
Vanguard Australian Property ETF (ASX: VAP)
A little closer to home, this ETF from Vanguard aims to track the largest Australian REITs (real estate investment trusts) on the ASX. Property has always been a lucrative source of investment income, and this ETF provides it through a listed stock investment. VAP holds companies like Goodman Group (ASX: GMG), Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP). These REITs all own property assets like shopping centres, business parks and retirement villages and pass on their rental income as dividends. VAP is currently offering a trailing dividend yield of 4.36%.
iShares Consumer Staples ETF (ASX: IXI)
This ETF doesn't have a primary focus on dividends, but instead aims to track an index comprised of global consumer staples companies (most of which pay decent dividends anyway). These businesses make everyday essentials like food and household items – offering a base of defensive stocks that should be fairly recession-resistant. Some of IXI's top holdings include Proctor & Gamble, Nestle, Coca-Cola and Walmart. IXI is currently offering a 2.04% trailing yield.
Foolish takeaway
I think these 3 ETFs have a lot to offer any investor that has dividend income at the top of their investing priorities. Each ETF offers exposure to dozens of underlying companies (some from around the world), which helps reduce portfolio risk whilst maintaining a decent dividend output.
