2 High-Yielding ETFs That Can Generate Dividend Income for Your Portfolio for Decades
Investing in dividend stocks is a great way to generate a steady stream of recurring income for your portfolio. However, relying on just one or two dividend stocks can expose you to the risk of a dividend cut or suspension. To mitigate this risk and enhance your income stability, consider investing in exchange-traded funds (ETFs) that focus on dividends.
ETFs that include a diverse array of dividend stocks provide valuable diversification, helping to ensure consistent payouts over the long term. Two excellent ETFs to consider are the Schwab U.S. Dividend Equity ETF ($SCHD) and the SPDR Portfolio S&P 500 High Dividend ETF ($SPYD), both yielding around 4% and ideal for building a robust dividend portfolio for decades.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF is known for its low-cost structure and high dividend payments. With an expense ratio of just 0.06%, this fund is competitive compared to others in the sector. It holds approximately 100 stocks, which allows for a more concentrated focus on quality investments rather than spreading thin across hundreds of dividend-paying stocks.
This ETF aims to invest in stocks with sustainable dividends and strong fundamentals, featuring top holdings such as Coca-Cola, Home Depot, and Verizon Communications. These are all valuable dividend investments on their own, making the ETF a solid choice for consistent income generation.
With about 62% of its holdings in companies with market caps exceeding $70 billion and 29% in the $15-70 billion range, the $SCHD ETF positions investors well for stable income. Despite a slight decline of 2% since the year's start, its beta of less than 0.8 suggests it remains a stable investment option.
SPDR Portfolio S&P 500 High Dividend ETF
Another excellent choice is the SPDR Portfolio S&P 500 High Dividend ETF ($SPYD), which offers an attractive 4.5% yield and has an expense ratio of 0.07%. This fund tracks the S&P 500 High Dividend Index, providing investors with access to 80 of the highest-yielding stocks in the S&P 500. As of June 9, it held 77 stocks, ensuring a solid foundation for dividend income.
Top holdings include major companies like AbbVie, CVS Health, and AT&T. Notably, no single stock exceeds 2% of the ETF's total weight, appealing to risk-averse investors who want to avoid heavy exposure to individual stocks. The ETF emphasizes stability, focusing on sectors like real estate and utilities, which comprise around 42% of its holdings.
While the ETF's conservative strategy has resulted in slightly lower long-run returns compared to the Schwab U.S. Dividend Equity fund and the S&P 500 index, it remains a reliable vehicle for generating dividend income.
Investing in these ETFs not only diversifies your portfolio but also positions you to reap the benefits of dividend income for years to come. For more insights and updates, visit Inside Ticker.