At a time when much attention is on growth and tech stocks — especially artificial intelligence (AI)-related ones — dividend stocks are flying under the radar yet are delivering solid performance. It’s always a good idea to have dividend stocks in your portfolio, but especially during times of market uncertainty.
There’s no shortage of dividend stocks to choose from, but I often recommend investing in dividend exchange-traded funds (ETFs). They may not have the ultra-high yields you see in certain individual stocks, but they provide diversification and lower risk.
If you’re looking for a couple of dividend ETFs to add to your portfolio for the long haul, consider the following two options. They’re both dividend-focused, but in different ways.
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1. Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (SCHD +0.20%) has been a dividend ETF staple because of its focus on high-quality companies.
To be eligible for SCHD, a company must have consistent cash flow, profitability, and 10 years of consecutive dividend increases. A company that checks those three boxes is typically financially healthy, so the ETF avoids situations where a company is included solely because of a high yield (which could be unsustainable).
Schwab U.S. Dividend Equity ETF
Today’s Change
(0.20%) $0.06
Current Price
$30.86
Key Data Points
Day’s Range
$30.83 – $31.00
52wk Range
$23.87 – $31.95
Volume
2.1M
SCHD contains 101 stocks, with the top three represented sectors being energy (19.88%), consumer staples (18.50%), and healthcare (16.20%). These sectors don’t typically get as much attention as sectors like tech, but they tend to produce steady cash flow.
On par with SCHD’s focus on high quality is its holding of four Dividend Kings (companies with at least 50 years of consecutive dividend increases): Altria (4.08% of the ETF), Coca-Cola (3.93%), PepsiCo (3.88%), and Target (1.99%).
At the time of this writing, SCHD’s dividend yield is 3.4%, which is right on par with its average for the past five years.
SCHD Dividend Yield data by YCharts
2. Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation (VIG +0.78%) has a relatively small yield compared to SCHD and other dividend ETFs (1.6% as of market close on March 11), but, as the name suggests, its focus is on companies that are actively increasing their dividend payouts. To be eligible for VIG, a company must also have increased its dividend for at least 10 consecutive years.
Vanguard Dividend Appreciation ETF
Today’s Change
(0.78%) $1.70
Current Price
$219.24
Key Data Points
Day’s Range
$218.60 – $219.94
52wk Range
$169.32 – $230.53
Volume
1.4M
One thing that stands out about VIG is that it holds more tech stocks than most dividend ETFs on the market. The tech sector is over a quarter of VIG, and that’s because many of these companies have only relatively recently begun paying dividends, but fit VIG’s mold of including companies committed to increasing their dividends.
Investors should be OK with VIG’s low dividend yield, anticipating that over the long haul its payout will be much higher than it is today. Over the past decade, the payout has increased by more than 115%.
VIG Dividend data by YCharts
How much it increases over the next decade will ultimately depend on the companies’ specific increases in that time, but they’ve already shown a commitment to keeping the annual increases going.