3 Dividend-Paying ETFs to Double Down On Even if the S&P 500 Sells Off in October
If you’re worried about the stock market possibly selling off in October, you might be hesitant to add any money to it. (Many big stock market crashes have happened in October, after all.) But not every October is a downer, and sitting on the sidelines can cost you in gains lost. Market timing doesn’t work.
But even if you’re not willing to go all-in on the hottest stocks this month, one move you might make is investing in dividend-paying stocks, because healthy ones will tend to keep paying you regularly, no matter what the overall market is doing. So even if the market pulls back, you could still be earning money. A great way to invest in dividend payers is via ETFs (exchange-traded funds) that are focused on them.
Image source: Getty Images.
There are many reasons to love dividend payers. Consider these total return numbers.
Dividend-Paying Status
Average Annual Total Return, 1973-2024
Dividend growers and initiators
10.24%
Dividend payers
9.20%
No change in dividend policy
6.75%
Dividend non-payers
4.31%
Dividend shrinkers and eliminators
(0.89%)
Equal-weighted S&P 500 index
7.65%
Data source: Ned Davis Research and Hartford Funds.
Also:
No dividend is guaranteed, but healthy and growing dividend-paying stocks will generally increase their payouts over time. So if you’re collecting, say, $1 per share per year today, you might be collecting $3 per share at some point in the future. This can help you keep up with inflation.
These companies will likely have stock prices that grow over time, too, despite occasional stock market pullbacks. So shareholders can benefit from stock price growth, dividend income, and dividend growth.
Dividends add up. If, for example, you have $400,000 in dividend-paying stocks with an overall average dividend yield of 3%, you can expect around $12,000 in annual income, a sum that should grow over time.
Dividend payers can provide income without your having to sell off part of your portfolio.
While retirees can use dividend income for living expenses, pre-retirees can reinvest those dividends in additional shares of stock, which may then start delivering dividend payments of their own.
There are plenty of dividend-focused ETFs to consider. Below are three I highly recommend. I’m adding a stand-out S&P 500 index fund, too, for comparison.
ETF
Yield
5-Year Average Annual Return
10-Year Average Annual Return
iShares Preferred and Income Securities ETF(NASDAQ: PFF)
6.46%
2.57%
3.64%
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD)
3.79%
10.51%
11.55%
Vanguard Dividend Appreciation ETF (NYSEMKT: VIG)
1.64%
12.20%
13.16%
Vanguard S&P 500 ETF(NYSEMKT: VOO)
1.15%
15.42%
14.75%
Source: Morningstar.com, as of Oct. 15, 2025.
I’ve ranked them by dividend yield, and you can see that there’s some trade-off between yield and return, as the ETFs with bigger yields tend to be somewhat slower growers than the ones with somewhat lower yields. You might want to spread your dollars across several of these and/or other ETFs.
Here’s a bit about each of the three above.
While most dividend-focused ETFs generate their dividend income by holding shares of regular, common stocks, this ETF is focused instead on preferred stock. Preferred stock tends to not appreciate in value very much from year to year, but their generally fixed and guaranteed dividend payouts tend to be generous.
The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, which holds about 100 stocks with track records of paying dividends for at least 10 years, and which are also tied to high-quality companies. It offers a great mix of a very respectable dividend yield and a solid performance record. Top holdings recently were AbbVie, Lockheed Martin, and Amgen.
The Vanguard Dividend Appreciation ETF tracks the S&P U.S. Growers Index, which is focused on companies that have increased their dividend for at least 10 consecutive years. It also excludes stocks with very steep yields, as a high yield can be due to a depressed stock price and a struggling company. It recently held 337 different stocks, with top holdings including Broadcom, Microsoft, and JPMorgan Chase.
Give any or all of these ETFs some consideration for your long-term portfolio — no matter what you think might happen in October. They’re great buys for the long term.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Selena Maranjian has positions in AbbVie, Amgen, Broadcom, Microsoft, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends AbbVie, Amgen, JPMorgan Chase, Microsoft, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and Lockheed Martin and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
