Although these funds share a common goal -- boosting investors' income -- all dividend ETFs are not the same. In fact, they can have profoundly different methods for determining which stocks make the cut. Here's a closer look at how five ETFs slice and dice the universe of dividend-paying stocks, and a few things you need to consider if you're interested in adding them to your portfolio.
1. Vanguard Dividend Appreciation (VIG)
This Vanguard ETF seeks out stocks that have a long history of increasing their dividends over time. The index that the ETF tracks starts out by screening for stocks that have raised their dividends every single year for at least a decade, and then applies some additional tests to ensure the stocks it owns are liquid and easily tradable. Currently, the ETF owns almost 150 stocks that have passed those tests.
At just 2.1 percent, the Vanguard ETF's yield is fairly low compared to other dividend ETFs, as current yield is a secondary consideration for the Vanguard ETF. But over time, growing dividend payouts should give investors regular raises in their income levels in future years.
2. iShares Dow Jones Select Dividend ETF (DVY)
This iShares dividend ETF has the same goal as the Vanguard ETF of picking strong dividend stocks with histories of rising payouts. But the iShares ETF goes at it a slightly different way -- first looking at the highest-yielding stocks in the market and then going down the list, picking only those stocks that have current dividends that are higher than their five-year averages and that pay out 60 percent or less of their earnings as dividends.
The result is a greater number of high-yielding stocks in the iShares ETF's portfolio, with the ETF carrying a current yield of 3.7 percent.
3. WisdomTree Emerging Markets High-Yielding Equity ETF (DEM)
This WisdomTree ETF takes dividend investors outside the U.S.: Its holdings are in promising emerging-market stocks that pay substantial amounts of dividend income. With stocks from China, Brazil, Russia and more than a dozen other countries, the ETF chooses companies whose dividends rank in the top 30 percent of WisdomTree's broader index of dividend stocks and then buys them in appropriate amounts based on the total amount of dividends they pay.
4. SPDR S&P International Dividend ETF (DWX)
This SPDR ETF also has an international focus, but it tracks a broader set of companies coming from both developed and emerging markets. Australia represents the highest-weighted country in the ETF, but you'll also find stocks from across Europe and Asia as well as South Africa, Brazil and Canada. Financial, telecom and utility stocks make up more than half the portfolio, which currently produces an impressive yield of nearly 7 percent.
Given the economic troubles in Spain, Italy and other European nations, those high yields reflect somewhat heightened risk levels, but many income investors will appreciate the extra dividends.
5. iShares Mortgage REIT ETF (REM)
For investors seeking maximum dividend yield, this iShares ETF delivers: Its current yield above 11 percent. The ETF achieves that by owning real estate investment trusts that invest in mortgage securities and use highly leveraged strategies to produce double-digit percentage payouts.
Favorable interest rates have produced strong returns for fund shareholders in recent years, but many fear that a coming rise in rates could send mortgage-REIT dividends falling and jeopardize investments that rely on low rates to produce the income to pay those dividends.
Be Smart About Dividends
Each of these dividend ETFs has a much different risk and return profile. Choose wisely to ensure that you won't take on more risk than you're comfortable with while maximizing your ability to generate income from your investments.
Motley Fool contributor Dan Caplinger owns shares of Vanguard Dividend Appreciation and iShares DJ Select Dividend ETF. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.