When investing in dividend ETFs, it's crucial to comprehend this significant difference.

Investors are doubling down on dividend-based exchange-traded funds.

Since inflation concerns intensified in 2021, dividend ETFs have experienced substantial inflows, with many achieving gains of over 20% last year.

• The (DGRO) rose 24% in 2021
• (NOBL) climbed 23%
• (VIG) gained 22%
• The (SDY) was up 22%

It is crucial for investors to comprehend the distinction between the two primary types of dividend ETFs as the funds flow at an accelerated pace, according to Simeon Hyman, global investment strategist at ProShares, who stated this on CNBC's "ETF Edge" on Monday.

The difference lies between high yielders and dividend growers, according to Hyman.

The NOBL ETF by ProShares tracks companies that have consistently increased their dividends for at least 25 years.

Hyman stated that having staying power in a name and the ability to grow dividends through a cycle are crucial qualities, especially in an inflationary environment.

The consumer staples and industrials sectors make up more than 40% of NOBL's top holdings, with steel giant and food processing company being among them.

Hyman stated that consistency might be more crucial than an uncommon large hike that you haven't witnessed before from some of the more cyclical names.

ProShares values some technology giants as consistent dividend payers in the hot space.

Hyman emphasized the significance of technology dividends in the marketplace and highlighted the distinction between dividend growth and buybacks. While a buyback may suggest a company's past success, an increase in dividends is a more forward-looking indicator, indicating a company's commitment to its shareholders.

Todd Rosenbluth, the head of ETF and mutual fund research at CFRA, stated in an interview that recent history has shown a preference for dividend growth over yield.

Rosenbluth stated that in the past three years, Vanguard's Dividend Appreciation ETF (VIG) has outperformed Vanguard's S&P 500 ETF (VYM) by over 300 basis points, due to its focus on growth-oriented sectors such as technology, rather than the above-average yields found in VYM.

He expected VIG to keep winning out thanks to its sector weightings.

NOBL, SDY, and VIG have different investment strategies due to their cutoff periods. NOBL is heavily weighted towards staples, industrials, and financials because of its 25-year cutoff. SDY, on the other hand, requires its underlying companies to have raised their dividends for at least 20 consecutive years, resulting in a more balanced portfolio with a higher weighting towards utilities stocks. VIG, which looks even shorter term, includes recent dividend growers such as .

Before taking the next step, it's crucial to determine whether you're seeking growth or just yield, as Rosenbluth pointed out.