These 4 dividend ETFs with low expense ratios are a cheap way to play the income investing trend

Published Wed, Feb 23 20222:05 PM ESTUpdated Wed, Feb 23 20224:08 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

With equity markets falling into a correction and inflation at the highest level seen in decades, many investors are looking toward dividend-paying stocks to preserve capital. For those looking to find income names while still keeping a diversified portfolio, dividend-focused exchange-traded funds may be the way to go. ETFs are seen as a cheaper alternative to mutual funds for those wanting to invest in a broad swath of stocks. That said, ETFs still carry expense fees, so investors need to look before investing. Here are a few of the major dividend-focused ETFs with relatively low expense ratios. Two of the biggest funds in the space come from Vanguard, an asset manager known for low-fee investing. The Vanguard Dividend Appreciation ETF (VIG), with an expense ratio of just 0.06%, has fallen this year but has still held up better than the S & P 500. It also sports a dividend yield of 1.9%, according to FactSet, and is focused on stocks that are likely to grow dividends over time, which is particularly important during an inflationary period. The fund's top holdings include many of the biggest stocks in the S & P 500, such as Microsoft , UnitedHealth Group and JPMorgan Chase . The other Vanguard name on the list is the Vanguard International Dividend Appreciation ETF (VIGI), which is also holding up better than the S & P 500 so far in 2022 and carries a dividend yield of 1.5%. The internationally focused fund does carry a higher expense ratio of 0.2%, but it does add some extra diversity for an investors who may be heavily exposed to the U.S. The top holdings in the fund include food and beverage company Nestle and pharmaceutical giant Roche . If the yields from those funds seem too small, the JPMorgan U.S. Dividend ETF (JDIV) and the Invesco Dow Jones Industrial Average Dividend ETF (DJD) both have dividend payouts above 3%, according to FactSet. Both funds have an energy stock at the the top of their holdings list — Chevron for the Invesco Fund, and Exxon Mobil for the JPMorgan fund — but the JPMorgan fund selects from a broader list of stocks overall than the Invesco fund's Dow-centric model. Each fund is down about 3% year to date as of Wednesday afternoon, outperforming the S & P 500 and the Vanguard dividend funds.

Traders on the floor of the NYSE, Feb. 18, 2022.

Source: NYSE

With equity markets falling into a correction and inflation at the highest level seen in decades, many investors are looking toward dividend-paying stocks to preserve capital.