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Investors, especially retirees, seek a lifetime of passive income to get them through their Golden Years. But it takes more than just building a well diversified portfolio to meet this goal. So, many incorporate dividend paying stocks into their portfolios. But you can also look at dividend paying ETFs, which are becoming increasingly popular in the investing world. These funds invest in a handful, sometimes hundreds, of dividend paying stocks handpicked by professionals from asset managing juggernauts like Vanguard and Schwab.
But when it comes to evaluating these ETFs, it’s important to look beyond yield. The best dividend-paying ETFs have track records of consistently paying and increasing dividends. These funds also screen stocks for more than just high-yields. They look for components like strong financials, consistent performance, low volatility and more. Some use different income generating strategies like selling options in addition to investing in dividend stocks. And many of these funds are constantly competing for your money. So the list can seem endless. But we narrowed it down to seven dividend ETFs that can deliver a lifetime of passive income.
So let’s take a look.
Schwab U.S. Dividend Equity ETF (SCHD)
The Schwab U.S. Dividend Equity ETF (SCHD) has been making its way into many top ETF lists recently. And it has some fuel to back it up. The fund invests in high-quality companies known for sustainability of dividend distributions. It also screens for companies with strong fundamentals including revenue, cash flow and profits. The fund is well diversified across multiple sectors. But its main holdings lie in the energy, consumer staples and healthcare sectors. The latter two are known as defensive sectors, which means they historically have remained stable even in times of market downturns.
Moreover, SCHD generates a yield of nearly 4% or about 28 cents per share. The fund currently holds about $71 billion in net assets. Plus, it shines for its ultra low expense ratio of 0.06%, making it very competitive in the industry.
Vanguard High Dividend Yield ETF (VYM)
We’ve all heard don’t keep all your eggs in one basket. And the Vanguard High Dividend Yield ETF (VYM) can help you get around that. It offers broad diversification by investing in more than 500 stocks projected to have above-average dividend yields, potentially giving investors the upper hand. Its holdings are generally concentrated in basic materials, consumer discretionary and consumer staples. And as far as yield goes, VYM currently delivers one of about 2.45%. Moreover, the fund holds net assets of more than $84 billion. And it’s important to note that Vanguard stands out in the industry for its low cost funds. VYM is no exception with its expense ratio of 0.06%.
iShares Core Dividend Growth ETF (DGRO)
The iShares Core Dividend Growth ETF (DGRO) invests in companies with a track record of consistent dividend growth. This may give investors some peace of mind and the possibility of lifetime income with growth potential. And it offers a yield of about 2%. The fund is diversified across various sectors. And its main holdings are in financials, information technology and healthcare.
Furthermore, the fund has earned a four-star Morningstar rating as well as a Morningstar Gold medalist ranking. It currently holds net assets of nearly $36 billion. And it also shines for its competitive expense ratio of 0.08%.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) invests in 80 of the highest-yielding companies in the S&P 500. And these are all equally weighted to avoid overconcentration in any particular stock, which can be a plus for the risk-averse investor. The fund aims for reliable and high dividend income as well as capital appreciation. Its main holdings are concentrated in real estate, financials and consumer staples. Additionally, this ETF holds about $7 billion in net assets. And it has a competitive expense ratio of 0.07%. It also has delivered an impressive five-year return of over 30%.
Fidelity High Dividend ETF (FDVV)
Many of the ETFs on this list focus on large-cap companies. But the Fidelity High Dividend ETF (FDVV) invests in more than 100 stocks across mid-and-large cap companies. Its objective is to seek out companies that will continue to pay and grow their dividends. This can give investors an edge when it comes to securing a stream of lifetime income. Among its holdings are many of the so-called Magnificent Seven tech companies. Its holdings are heavily focused on information technology, financials and consumer staples. And it has a strong track record when it comes to performance. This Fidelity fund has a five-year return of nearly 74%. The fund generates a yield of about 3%. It has net assets of nearly $8 billion. Its expense ratio is also relatively low at 0.15%.
JPMorgan Equity Premium Income ETF (JEPI)
JEPI has become quite popular among dividend investors, especially retirees. It offers a yield of more than 8%. It does this by generating income in two ways. It invests in large-cap low volatility dividend stocks. And it sells options. By using proprietary research techniques, it also seeks out over- and-undervalued stocks with attractive risk/return profiles. Its main holdings are in the communication services, consumer discretionary and consumer staples sectors. Additionally, JEPI holds net assets of more than $41 billion. And it has an expense ratio of 0.35%, which is relatively low compared to other actively managed funds.
Amplify CWP International Enhanced Dividend Income ETF (IDVO)
For both international exposure and dual income generating strategies, you can turn to the Amplify CWP International Enhanced Dividend Income ETF (IDVO).
It generates income from high-quality mid-and-large cap companies expected to maintain their earnings and increase their dividends over time. These securities are also screened for strong financials like earnings and cash flow. Additionally, the fund uses a tactical covered call strategy on individual securities. The fund has delivered an impressive five-year return of nearly 61%. And it generates a yield of over 5%. Additionally, the fund holds net assets of more than $617 million. Furthermore, it has an expense ratio of 0.66%.