I feel reading correct level is important. When they don't know many words in the book, they easily get frustrated. I try to choose books which 5 year old DS can easily read most of the words and increase the level slowly. There are some beginner books focusing on one/two sight words at a time. Learning sight words definitely helps to increase proficiency.
For my DS, we still read picture books every night, not sure if he would follow a chapter book yet.