Exchange Traded Funds (ETFs) have easily become one of the most popular investment vehicles of the 21st century. They are known for helping investors to diversify their holdings and giving them the ability to leverage their money through securities and consistent returns.
As a dividend investor you may be wondering if ETFs pay dividends. The simple answer is yes – some ETFs do indeed pay dividends.
ETF dividends are similar to regular stock dividends. They pay out a certain amount of money per share of stock on a regular payment schedule. Most ETFs pay quarterly and several also pay monthly. While semi-annual and annual payments are available, they are rare.
Common Dividend ETFs
S&P 500 ETFs
ETFs that track the S&P 500 index are consistently among the most popular choices. These stocks typical boast around an 8 percent average increase in stock price, plus a modest 1-2.5 percent dividend yield that is usually paid out quarterly.
Another popular ETF type is a Real Estate Investment Trust (REIT). A REIT ETF invests the bulk of its in REITs and related securities. Typically, REIT ETFs deliver a large dividend payout.
Interestingly, REITs tend to offer a lower average increase in stock price, but an above average dividend yield of 4 to 8 percent that is usually paid out monthly.
Bond ETFs are another ETF that appeal to many investors. Bond ETFs hold a significant amount of either corporate or government bonds and deliver a modest dividend payout. Like REIT ETFs, there is typically a low average increase in stock price. They typically offer an average of 1.5 to 2.5 percent dividend yield that is usually paid out monthly.
Overall, many ETFs pay decent dividends to their investors. Although some sectors like real estate and bonds pay more consistent dividends, growth ETFs like the S&P 500 tracking fund also pay modest dividends.