The 3 Best Dividend ETFs to Buy for July

Josh Enomoto

Mon, Jul 3, 2023, 7:07 PM 4 min read

While the latest read on inflation suggests that policymakers are moving the needle in the right direction, investors may still want to consider the best dividend ETFs for reliability and relative safety. In particular, with the U.S. Supreme Court killing President Joe Biden’s student loan debt relief plan, a large portion of the populace faces a reality check.

Another reason to consider an ETF investment in July centers on consumer debt. With credit card balances soaring to record heights, investors need to be careful about banking too heavily on the disinflation argument. Again, the pace of rising prices may be decelerating. However, the consumer economy might not be as strong as advertised.

Also, it makes sense for conservative investors to buy dividend ETFs based on their wide footprint. With an exchange-traded fund, you’re not just acquiring exposure to one enterprise but several. To be fair, this diversification may mitigate maximum upside potential. However, the top ETFs in July should keep you in the game. Right now, that’s the most important takeaway.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Schwab US Dividend Equity ETF (SCHD)

A photo of a young boy wearing sunglasses, jeans, a blazer, a white shirt and suspenders holding money in various denominations in one hand and sitting in a plush chair.

Source: Dmitry Lobanov/Shutterstock.com

One of the most popular ideas for best dividend ETFs, the Schwab US Dividend Equity ETF (NYSEARCA:SCHD) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100 index, according to its prospectus. Since the beginning of this year, SCHD slipped about 4%. Over the past 365 days, SCHD gained a little over half-a-percent.

Still, what’s intriguing here is that in the trailing month, SCHD moved up just under 4%, making it an intriguing prospect for ETF investment in July. Much of the enthusiasm centers on its diverse holdings of industry stalwarts. Its top holding is Broadcom (NASDAQ:AVGO) at 4.25% of net assets. Coming in close behind are Verizon Communications (NYSE:VZ) at 4.15% and Merck (NYSE:MRK) at 4.12%.

Looking at sector holding distribution, the SCHD is most heavily geared toward the industrials space at a weighting of 18.12%. Coming in second is healthcare at 15.62%, followed by financial services at 14.58%. Finally, SCHD prints an expense ratio of 0.06%, well below the category average of 0.39%. Thus, it’s one of the most balanced ideas for investing in dividend ETFs.

SPDR S&P Dividend ETF (SDY)

The word "dividend" highlighted in a dictionary.

Source: Shutterstock

Another intriguing idea for best dividend ETFs, the SPDR S&P Dividend ETF (NYSEARCA:SDY) per its prospectus seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P High Yield Dividend Aristocrats index. Since the Jan. opener, SDY slipped a bit more than 2%. However, in the trailing one-year period, the fund gained almost 2% of market value.

Just like the Schwab fund mentioned above, the SDY witnessed near-term momentum, moving up just under 4% in the past 30 (calendar) days. Because of Schwab’s focus on the most dependable passive income providers, stakeholders can rest easy regarding their exposure. Carrying the load for the fund is applied sciences giant 3M (NYSE:MMM), followed closely by tech juggernaut IBM (NYSE:IBM).

By sector allocation, the SCHD prioritizes industrials with a weighting of 20.11%. That’s followed by consumer defensive (15.04%) and financial services (14.37%). Therefore, if you want to buy dividend ETFs, SDY makes a case due to its stoutness. However, resilience has a cost, with SDY incurring an expense ratio of 0.35%. That’s relatively pricey compared to the category average of 0.42%.

Vanguard High Dividend Yield ETF (VYM)

Glass jar of coins marked "dividends" to represent dividend stocks. stocks with dividends

Source: Shutterstock

For those that want a little more spiciness with their best dividend ETFs, the Vanguard High Dividend Yield ETF (NYSEARCA:VYM) may be worth investigation. Per its prospectus, the VYM seeks to track the performance of the FTSE High Dividend Yield Index that measures the investment return of common stocks of companies that are characterized by high dividend yield. Sure enough, in the trailing year, VYM gained over 3% of market value.

In addition, the VYM is on the move similar to the other top ETFs in July. Just in the week ending June 30, the fund moved up over 2%. Reaching pole position in terms of top individual holdings is Exxon Mobil (NYSE:XOM). While the hydrocarbon industry might seem irrelevant because of the broader push for renewable energy infrastructure, fossil fuels carry the advantage of energy density. Plus, they tend to pay generous yield.

However, in terms of allocation, the financial services space dominates sector weightings at 19.26%. That’s followed in a rather distant second by the consumer defensive industry at 14.85%. In closing, the VYM prints an expense ratio of only 0.06%, well below the category average of 0.39%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.