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Everybody knows about the biggest dividend ETFs out there. They get all the attention. They draw all of the net inflows from investors. They’ve been covered extensively.

But the dividend ETF universe goes beyond that.

There are more than 170 dividend ETFs available according to the ETF Action database.

Most of them are unknown and unloved. The dividend ETF universe as a whole accounts for about $500 billion in assets. The four largest ETFs account for half of that number. 133 of them have less than $1 billion in assets. 70 of them have less than $100 million. It’s a very top-heavy marketplace and that means a lot of dividend ETFs are getting ignored.

Let’s change that.

I’m going to break the dividend ETF universe down into five categories:

• The Ones That Everybody Knows About

• The 4- & 5-Star Funds

• The Up & Comers

• The Under The Radar ETFs

• The “Meh” ETFs

We’ll get into the general criteria I used for each category once we get there. I’m going to identify four dividend ETFs that fit into each category and why I think they qualify. The focus will be on the smaller and less well-known ETFs. As I mentioned earlier, the big guys already get the attention. Let’s shine some light on the others!

Let’s go…

The Ones That Everybody Knows About

This category is pretty simple. These are the four largest dividend ETFs in the U.S. marketplace (and the ones that account for half of all dividend ETF assets). You know all about these funds already.

• Vanguard Dividend Appreciation ETF (VIG)

• Schwab U.S. Dividend Equity ETF (SCHD)

• Vanguard High Dividend Yield ETF (VYM)

• iShares Core Dividend Growth ETF (DGRO)

The 1-year net inflow numbers are similarly lopsided. These four ETFs are all among the top 11 with SCHD leading the way by a large margin. At this point, we simply live in a world where these big name funds from big name issuers are going to keep drawing in money whether performance is strong or not.

SCHD, for example, has been among the worst performers since the start of 2023, yet it continues to draw in the most money. VIG and DGRO are fine strategies if you want to target long-term dividend growers. I’d argue that there are better options than VYM for high yield. The Fidelity High Dividend ETF (FDVV) has done particularly well lately.

The 4- and 5-Star Funds

This group includes dividend ETFs of all sizes that currently carry 4- or 5-star ratings from Morningstar. That makes them above average performers for longer periods. The comparison benchmark used can differ and that can affect how they’re viewed on a relative basis (some, for example, are measured in the Large Value category where others might fall into the Large Blend bucket). Either way, these are solid funds with proven track records.

• WisdomTree U.S. Quality Dividend Growth ETF (DGRW)

• First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)

• Invesco Buyback Achievers ETF (PKW)

• Invesco Dividend Achievers ETF (PFM)

DGRW is also pretty well-known in the dividend ETF universe, but it’s got the absolute and risk-adjusted performance to back it up (a recent overweight to tech didn’t hurt).

Theo others all rate 5-stars and, as the names might suggest, all use similar strategies. The term “dividend achievers” refers to companies that are just in the early stages of developing a dividend growth streak. They may not qualify for a fund, such as VIG (which requires a minimum 10-year dividend growth streak), but they’re headed in that direction. These strategies are a nice way to target emerging dividend growers, but still maintain some growth potential since these companies typically aren’t too mature.

PKW is an interesting one because it targets companies that are buying back large blocks of their own shares. This strategy has historically produced good returns and it’s doing so here as well.

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The Up & Comers

For this category, I only considered funds with less than $1 billion that had some type of positive catalyst working in their favor. That might be strong recent performance, a smart portfolio construction strategy or something else.

• Bahl & Gaynor Dividend ETF (BGDV)

• TBG Dividend Focus ETF (TBG)

• AB U.S. High Dividend ETF (HIDV)

• Federated Hermes U.S. Strategic Dividend ETF (FDV)

Odds are probably good you’ve never even heard of most (or all) of these funds. I think they’ve all appeared at one time or another on the top monthly performers list (some of them multiple times).

BGDV looks for companies with a combination of dividend growth & quality, while looking to generate below average risk. TBG also looks at quality and dividend growth metrics, focusing on free cash flows and using a bottom-up approach that remains sector-agnostic. HIDV is more of your traditional high yield fund, but it looks to incorporate long-term growth potential into the equation as well. FDV targets dividend growth & high yield.

For the most part, these ETFs are smaller and unnoticed, but outside of potentially higher trading costs associated with being smaller, I don’t see why any of these funds shouldn’t at least be considered.

The Under The Radar

These are even smaller funds with asset bases of under $250 million. They’ve all demonstrated some ability in the past to produce above average returns and I think will all continue to do well regardless of how big they are (or aren’t) able to get.

• VictoryShares Dividend Accelerator ETF (VSDA)

• Opal Dividend Income ETF (DIVZ)

• Freedom Day Dividend ETF (MBOX)

• Siren DIVCON Leaders Dividend ETF (LEAD)

I think I’ve mentioned all of these funds multiple times in the past. I’m particularly fond of LEAD and MBOX. The former uses a quantitative selection strategy that focuses only on those companies with the highest probability of growing their dividends and avoiding those that don’t. The latter is a concentrated portfolio that looks for dividend growth & quality.

DIVZ has been around for a little while, uses the growth/quality theme as well, but recently decided to pay monthly dividends. VSDA looks for sustainable dividend growth and stable balance sheet health.

Again, these ETFs use smart strategies and have produced solid results, but just haven’t gotten much attention from the street.

The “Meh” Funds

Here’s the list of funds that I’m not terribly fond of. There’s something about them that just doesn’t work for me.

• Global X SuperDividend ETF (SDIV)

• Invesco S&P Small Cap High Dividend Low Volatility ETF (XSHD)

• SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

• ALPS Sector Dividend Dogs ETF (SDOG)

The reason I’d avoid SDIV is risk and concentration. Sure, the 10-11% yield is nice, but look what you’re buying. Because it simply targets the highest yielding securities in the world, it has a heavy overconcentration to BDCs, MLPs, REITs and mortgage REITs. That makes it substantially more volatile than other dividend ETFs and very cyclically-sensitive. SDIV experienced a 55% drawdown during COVID and another 40% drawdown in 2021-22.

XSHD has had almost every part of its strategy - small-caps, high yield, low volatility - be out of favor with the market for extended periods of time. Performance has been miserable and it has a 1-star rating from Morningstar.

You might be surprised to see SPYD on the list considering its #1 in my dividend ETF rankings (which are purely numbers-based, which is why a fund can score high there, yet I don’t like it personally). Any fund that specifically targets only high yields without any guardrails is asking for trouble. Without a dividend growth or quality screen to act as a cross-check, it becomes vulnerable to deeper drawdowns under the wrong conditions.

The dividend dogs strategy is kind of a relic of decades past and doesn’t seem to be used much any more. It’s kind of similar to SPYD in that it just looks at the highest yielding stocks within a sector or index. Ultimately, it creates kind of a boring portfolio that hasn’t performed particularly well.

Final Thoughts

There’s good and bad throughout the dividend ETF universe, both of which have been highlighted here.

There’s generally nothing wrong with focusing only on the biggest and most well-known funds, but it’s similar to going to a new car dealer and only considering a half dozen cars on the lot. You’re potentially missing out on a lot, including those that might be better fits.

Smaller funds might feel riskier or “bad” because they don’t have the level of assets of some of its peers. The ETFs listed above, however, are well worth considering and have the characteristics to back that up.