3 High-Yielding ETFs That Retirees Will Love

Do you want a relatively safe way to collect dividends during your retirement years? A good way to accomplish that is by investing in exchange-traded funds (ETFs) that provide you with exposure to a vast array of stocks while also paying high dividends.

Investing in individual dividend stocks can be risky because if there’s a cut or suspension, it can wreak havoc on your portfolio, through not just the lost dividend income but also the inevitable fall in the share price, as often the payout is a key reason for investing in a dividend stock. With an ETF, however, you’re not as dependent on a single stock; thus, it can drastically reduce your overall risk.

Three ETFs that can be ideal options for retirees and income-seeking investors right now are Schwab U.S. Dividend Equity ETF (SCHD +0.40%), iShares Core Dividend Growth ETF (DGRO +0.71%), and ProShares S&P 500 Dividend Aristocrats® ETF (NOBL +1.07%) (the term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC). Let’s take a closer look at each of them.

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF yields 3.7%, which is more than 3 times the 1.2% yield of the average S&P 500 stock. Plus, this fund has a fairly low expense ratio of just 0.06%. It has also averaged a low beta of less than 0.7 over the past five years, making it an appealing option for risk-averse investors who just want to collect a dividend and not worry about volatility. This year, the ETF is up just over 1%.

A key aspect of the fund that makes it less risky than others is its low exposure to tech; tech stocks make up just 8% of its entire portfolio. Energy and consumer staples each make up around 19% of the fund and add a great deal of stability to the ETF, as those types of stocks primarily focus on dividends.

The Schwab fund has 102 stocks in its portfolio as of Dec. 9, and it averages a modest price-to-earnings multiple of less than 17. It’s an excellent option if you just want to focus on collecting a high dividend.

iShares Core Dividend Growth ETF

The iShares Core Dividend Growth ETF is another solid income-generating fund to consider for your portfolio. Its yield is a bit more modest at around 2%, but it’s still higher than what you’d get with the average stock on the S&P 500. Its expense ratio of 0.08% is low, and it also has a low beta of 0.75. The fund has been doing well this year, rising by 13% since January.

What stands out about this fund is its focus on dividend growth stocks and companies that have strong track records for growing their payouts over the years. This can be key for long-term investors as it means your dividend income is likely to rise over time. It’s also a fairly diversified fund, with around 400 stocks in its portfolio.

While there are your classic big-name dividend stocks, such as Johnson & Johnson and ExxonMobil here, there are also tech companies among its top 10 holdings, including Apple and Microsoft. Although they don’t offer terribly high yields, these tech stocks have been growing their dividend payments over the years. All in all, the iShares fund gives you an excellent mix of stocks to ensure that your overall risk is low, while the yield is still above average.

ProShares S&P 500 Dividend Aristocrats ETF

Rounding out this list of high-yielding ETFs is the ProShares S&P 500 Dividend Aristocrats ETF. It pays just over 2% in dividends, and it has averaged a beta of 0.77, making it another fairly stable option for retirees to consider. This year, it has risen by around 4% in value. The one downside is that at 0.35%, its expense ratio is the highest on this list. However, it’s still not terribly high compared to other funds.

Its focus is on investing in companies that it says have stability and strength, targeting stocks that are less volatile than the overall S&P 500. The stocks in its portfolio have also been increasing their dividends for at least 25 consecutive years.

There are 69 stocks in the fund’s portfolio, although none of them make up even 2% of the ETF’s total holdings. The ETF has excellent diversification with just 3% of its stocks being in the tech sector. For risk-averse investors, this can be an ideal one to consider given its limited exposure to any single stock.