6 Dividend ETFs That Can Outpace Inflation

By Javier Simon Published Feb 9, 10:15AM EST

Key Points

Many of these ETFs are invested in defensive sectors, known to withstand downturns.
The list contains passively and actively managed funds.
Many of these funds have competitive expense ratios and one as low as 0.06%.
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6 Dividend ETFs That Can Outpace Inflation — © JLGutierrez / E+ via Getty Images

Periods of high inflation can rock the markets. Volatility can run rampant. And when the Federal Reserve retaliates against high inflation with high interest rates, borrowing costs for companies increase. This can deliver a serious blow to their profitability. And the real purchasing power of returns can be diminished.

But there are a few ways to hedge your portfolio against inflation. Some investors turn to inflation-resistant divided exchange-trade funds (ETFs) that can provide reliable income streams and capital appreciation even in the face of high inflation. Many of these ETFs also seek companies with histories of consistently raising their dividends, sometimes outpacing inflation.

These ETFs tend to be heavily invested in defensive sectors like utilities and healthcare, which have generally fared well under various market conditions.

But when it comes to inflation, where are we now? The Consumer Price Index, a key inflation measurement, rose 2.7% in December from 12 months prior, according to the latest data from the Bureau of Labor Statistics (BLS).

So to help you defend your portfolio, we came up with a list of six dividend ETFs that grow income faster than inflation.

Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (SCHD) invests in companies screened for strong financial strength and consistency of paying out dividends for at least 10 consecutive years.

SCHD currently offers a yield of nearly 4%. And it has a five-year return of over 40%.

The fund is heavily concentrated in defensive sectors like consumer staples and healthcare. Its top holdings are in the energy sector. Moreover, SCHD also boasts a competitive expense ratio of 0.06%. And it holds about $71.64 billion in net assets.

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) aims to provide investors with a combination of high income and low volatility. So it seeks out high-yielding companies in the S&P 500, but filters out stocks with high volatility. SPHD pays a yield of slightly over 4%.

It has a five-year return of over 31%. Moreover, it holds net assets of about $3 billion. And it has an expense ratio of 0.30%.

Additionally, the fund is well-diversified across nine sectors. Its main holdings are in real estate and the defensive sectors of consumer staples and utilities.

iShares Core High Dividend ETF (HDV)

The iShares Core High Dividend ETF (HDV) invests in 75 high-yielding and financially strong companies. It pays a yield of about 3.22% and has a five-year return of more than 52%.

Plus, the fund provides access to a handful of financially resilient companies for the low expense ratio of 0.08%

The ETF’s portfolio is mainly geared toward the consumer staples, energy and healthcare sectors. It holds net assets of about $11.97 billion.

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

The State Street SPDR Portfolio S&P 500 High Dividend ETF (SPYD) is another popular dividend ETF among investors. And it has plenty to show for it.

The fund pays a yield of around 4.53% and has a five-year return of over 34%.

SPYD focuses on high dividend-yielding stocks in the S&P 500 Index. Its main holdings are in the real estate, financials and consumer staples sectors. And one of its main highlights is its low expense ratio of 0.07%.

JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) may protect your portfolio against inflation by generating income in two different ways. It invests in large-cap stocks with low volatility within the S&P 500 index.

And it also sells options via a covered call strategy that enables it to use premium to pay higher dividends.

JEPI has a high yield of about 8.25% and it has a five-year return of nearly 7%.

Its main holdings are companies in the financial, healthcare and information technology sectors. The latter may give you exposure to companies benefiting from the current artificial intelligence (AI) boom. Its expense ratio is 0.35%. And JEPI currently holds about $41.49 billion in net assets.

The SPDR S&P Dividend ETF (SDY)

The SPDR S&P Dividend ETF (SDY) invests in companies with track records of raising dividends for at least 20 consecutive years. These stocks are among what Wall Street refers to as the Dividend Aristocrats. This may give investors stability, capital appreciation and a reliable income stream that may beat inflation over time.

SDY offers a yield of about 2.61%. And the fund has a five-year return of about 41%.

SDY is mainly invested in the industrials, consumer staples and utilities sectors. Moreover, SDY has a competitive expense ratio of 0.35%. And it has about $19.88 billion in net assets.

About the Author Javier Simon →

Javier Simon is a contributor for 24/7 Wall St. His work has appeared on major financial publications like Fox Business, The Motley Fool, Money Magazine, and more. He’s experienced in covering a range of personal finance topics including retirement planning, investing, taxes, student loans, and mortgages. He’s also versed in writing in-depth reviews of brokerage and fintech products. Javier earned his bachelor’s degree in multimedia journalism from SUNY Plattsburgh. That’s where he first embarked on his journey into journalism as a staff writer for the award-winning newspaper Cardinal Points. His first professional gig in the world of personal finance was as a staff writer for the fintech company SmartAsset. There, he became a Certified Educator in Personal Finance (CEPF) and led a project producing high-ranking reviews of 529 college savings plans sponsored by different states.