ETFs
These 6 Dividend ETFs Are Retirees’ Best Friends
One such ETF recently returned a whopping 6.5%. Several of them have recorded average double-digit annual growth over the past five and ten years.
If you are retired or close to retirement, it is wise to aim to hold plenty of dividend paying stocks in your wallet. (It’s really smart at any age.) Dividend payers will deposit money into your account regularly – a welcome occurrence when you’re living on a fixed or limited income.
Better yet, healthy and growing dividend payers tend to increase their payouts over time, often keeping up with or exceeding inflation. And by getting that regular dividend income, you may be able to avoid selling stocks.
Image source: Getty Images.
An effective way to invest in dividend paying companies is to exchange-traded funds (ETFs). ETFs are mutual fund-like securities that trade like stocks. You can easily buy or sell a few or more stocks through your brokerage account, just like you would stocks. Here are six solid ETFs to consider that offer a decent deal dividend yields.
|
iShares Preferred and Income ETFs (PFF 0.21%) |
6.49% |
2.62% |
3.45% |
|
Vanguard Real Estate ETF (VNQ 0.40%) |
4.34%** |
3.02% |
5.42% |
|
Schwab US Dividend Stock ETF (SCHD -0.29%) |
3.87% |
12.69% |
11.36% |
|
Vanguard High Dividend Yield ETF (VYM -0.23%) |
2.86% |
10.47% |
9.95% |
|
iShares Core Dividend Growth ETF (DGRO -0.40%) |
2.30% |
12% |
11.60%* |
|
Vanguard S&P 500 ETF (VOO 0.01%) |
1.36% |
14.83% |
12.97% |
Source: Morningstar.com, as of May 17, 2024.
*As of inception, June 10, 2014.**Vanguard does not provide SEC returns. This is a 12 month return.
1. iShares Preferred and Income ETFs
The recent large dividend of around 6.5% for this ETF is possible because it is not filled with regular stocks. Instead, it’s full of preferred shares. Preferred stocks generally do not appreciate in value very quickly, and they tend to pay fixed dividends. So don’t expect large annual increases in their payments. But their returns are generally higher than those of their common stock counterparts. This ETF charges a spending rate (annual contribution) of 0.46%.
2. Vanguard Real Estate ETF
If you are optimistic about the growth potential of the real estate sector, consider this ETF. It’s full of real estate investment trusts (REITs) — businesses that own many properties and earn income by renting them out. Owning real estate can be tricky and expensive, so consider REITs as a simpler alternative. Since REITs are required by law to pay out at least 90% of their income to shareholders, they tend to have strong dividend yields. The expense ratio of this ETF is 0.12% and the recent dividend yield is around 4.3%.
3. Schwab US Dividend Stock ETF
This ETF is an index fund, which tracks the Dow Jones US Dividend 100 Index of high-dividend-yielding US stocks that have consistently paid dividends. The fund’s biggest holdings recently were Texas Instruments, AmgenAnd PepsiCo. This ETF’s expense ratio is 0.06% and its dividend yield is around 3.9%.
4. Vanguard High Dividend Yield ETF
This ETF is another index fund, in this case tracking the FTSE High Dividend Yield Index. This index focuses on domestic stocks offering high dividend yields (excluding REITs). His major recent titles included Broadcom, JPMorgan ChaseAnd ExxonMobil (NYSEXOM). This ETF’s expense ratio is 0.06% and its dividend yield is around 2.9%.
5. iShares Core Dividend Growth ETF
This ETF tracks an index focused not only on companies paying large dividends or dividends, but also on those that have a history of increasing their payouts. This is a significant distinction, because dividend growth can really boost a portfolio. This can make a stock with a 2% yield a more attractive long-term investment than a stock with a 3% yield if that payout grows quickly. The ETF’s top holdings were recently AppleExxonMobil and Chevron. This ETF’s expense ratio is 0.08% and its dividend yield is around 2.3%.
6. Vanguard S&P 500 ETF
It is a standard S&P 500 index fund — there are a lot of them around — and you may be wondering what he’s doing here. Well, since it contains 500 of America’s biggest and best companies, many of them also pay dividends.
So, the index fund offers a dividend, which increases over time. His major titles recently included Microsoft, AppleAnd Nvidia. (Each of these companies pays dividends, although their current yields are rather low, less than 1%.) Keep some or most of your money in a low-fee fund. S&P500 The index fund is a solid strategy for long-term growth – with some dividend income. This ETF’s dividend yield is a more modest 1.36%, but its expense ratio is a tiny 0.03%.
As you plan for retirement — and you should plan your retirement — keep dividend payers in mind. It’s not a bad idea to look for other sources of income for your future years, in addition to Social Security — like maybe annuitiesside gigs, or even a reverse mortgage.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Selena Maranjian holds positions at Amgen, Apple, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Apple, Chevron, JPMorgan Chase, Microsoft, Nvidia, Texas Instruments, Vanguard Real Estate ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Amgen and Broadcom 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.