3 Hidden-Gem Dividend ETFs That Are Beating the Market

The end goal of most dividend exchange-traded fund (ETF) investors is to generate a steady stream of income through regular dividend payouts. Moreover, these ETFs are great for compounding your wealth over decades and eventually outperforming the broader market by a wide margin. Small, occasional investments into dividend stocks can snowball into life-changing amounts over time. Dividend stocks also have cash-rich businesses, so they’re great for hedging risk.

That said, you don’t think about hot stocks that are outperforming the market when you hear about an income stock or a dividend stock ETF. The conventional wisdom is that these stocks are supposed to be boring and underperform the market.

However, this perception couldn’t be further from the truth when it comes to certain under-the-radar dividend ETFs. There are still ETFs that have paid solid dividend yields and outperformed the benchmark S&P 500 index at the same time. Here are three to look into:

American Energy Independence ETF (USAI)

The American Energy Independence ETF (NYSEARCA:USAI) has a self-explanatory name. It is a passively managed ETF that tracks the American Energy Independence Index. It gives you exposure to U.S. and Canadian companies involved in midstream energy infrastructure.

The ETF aims to invest at least 80% of its assets in these companies. Midstream companies are known for generating very stable cash flows, as they have long-term fee-based contracts based on volume. So even if oil and gas prices were to decline tomorrow, USAI wouldn’t be as affected.

USAI currently holds 28 stocks that are weighted by modified market capitalization and are rebalanced quarterly. The portfolio is composed of 80% U.S. and Canadian midstream companies and 20% U.S. midstream MLPs and general partners.

The top 10 holdings account for over 60% of the fund and are as follows:

The annual expense ratio is 0.75%, or $75 per $10,000 invested. The dividend yield is 4.8%. Total returns (including dividends) are 141.86% in the past five years. In comparison, the SPY managed 90.61%.

USAI should do very well going forward due to strong U.S. energy exports to Europe post-2022 and an administration friendly to oil and gas.

First Trust NASDAQ Technology Dividend Index Fund (TDIV)

First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV) is a good pick, as tech companies have become the backbone of the U.S. economy. Even though there has been a re-industrialization push, these tech giants are growing faster and faster. Recent earnings from Microsoft (NASDAQ:MSFT | MSFT Price Prediction) and Meta Platforms (NASDAQ:META) hit it out of the park.

This ETF tracks the NASDAQ Technology Dividend Index and focuses on up to 100 technology and telecommunications companies that pay regular or common dividends, using a modified dividend-weighted approach.

The fund aims to provide investment results corresponding to the index’s price and yield before fees. Its holdings at the moment are in AI-related stocks. As you’d expect, these fast-growing tech companies don’t pay much in dividends, so the yield is only 1.42%. This is still much higher than most tech-focused ETFs.

Its top holdings are as follows:

TDIV has an expense ratio of 0.50%. It has delivered a 103.19% return over the past five years.

Sprott Uranium Miners ETF (URNM)

Speaking of AI, uranium miners have been a strong beneficiary. Increased electricity demand from data centers and small modular reactors (SMRs) is expected to increase uranium demand even more.

Sprott Uranium Miners ETF (NYSEARCA:URNM) gives you good exposure to uranium, and it also has a 2.86% dividend yield. The ETF aims to invest at least 80% of its assets in companies involved in uranium mining. It tracks the North Shore Global Uranium Mining Index (URNMX).

The portfolio of stocks is more concentrated, since uranium companies aren’t that numerous.

Regardless, I see solid long-term upside due to the increasing demand for uranium. Global demand is increasingly outstripping supply, and countries are aggressively building out reactors for energy independence. The U.S. isn’t the only one investing in SMRs and big nuclear power plants. China has been very aggressive, too. Even Europe is showing renewed interest in nuclear power.

This has caused URNM ETF to deliver 194.59% in gains over the past five years. The expense ratio is 0.75%.