5 Dividend ETFs That Could Pay You for Life

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Whether you’re just beginning to invest or sailing into retirement, you can benefit from a lifetime stream of passive income. But how do you achieve that?

To do so, many investors turn to dividend exchange-traded funds (ETFs). Rather than individually picking stocks, you can choose an ETF that invests in hundreds or even thousands of stocks. These funds are managed by seasoned investing professionals. And some specifically invest in stocks that pay dividends. These are regular payments that companies make to shareholders out of their profits. So you can think of them as bonuses in addition to any appreciation in the stock price.

But there are plenty of dividend-paying ETFs out there. So where do you start?
To help, we compiled a list of some of the top dividend-paying ETFs out there today.

So let’s take a closer look.

Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (SCHD) is a very popular fund among dividend investors. SCHD invests in 80 high-quality companies in the Dow Jones U.S. Dividend 100 Index. The fund managers screen these companies for strong financials and consistent dividend payments. This can give your portfolio a certain degree of stability. Additionally, most of the companies it invests in are in energy, consumer staples and healthcare sectors. These are generally considered defensive industries. This means these companies are believed to remain stable even in times of economic turmoil.

Its top holdings include Cisco (NASDAQ:CSCO), PepsiCo (NASDAQ:PEP) and Home Depot.

Moreover, SCHD delivers a strong yield of about 3.90%. And it also stands out for its low expense ratio of 0.06%. Expense ratios are annual fees that can eat away at your savings. But the SCHD’s expense ratio is among the lowest in the industry.

Vanguard High Dividend Yield ETF (VYM)

Vanguard is known for funds with exceptionally low fees. And the Vanguard High Dividend Yield ETF (VYM) is no exception. Its expense ratio matches SCHD at 0.06%. But it offers more than that. VYM leads with diversity. It invests in more than 500 quality companies that pay high dividends. It has an impressive yield of around 2.49%.

The fund’s top holdings are in the financials, basic materials, consumer discretionary, consumer staples and technology sectors. Its top holdings include Broadcom (NASDAQ:AVGO), JPMorgan Chase (NYSE:JPM) and Microsoft (NASDAQ:MSFT).

Moreover, VYM has net assets of $81.3 billion. The fund was launched in 2006 and boasts a year-to-date return of nearly 13%.

Overall, the VYM could offer stability and high yields at a very low cost. It could complement the SCHD with an added layer of diversity.

Vanguard International High Dividend Yield ETF (VYMI)

So far, we’ve discussed ETFs that invest in domestic stocks. But you can further diversify your portfolio with a fund that invests in international stocks.

Here’s where the Vanguard International High Dividend Yield ETF (VYMI) can come into play. The VYMI invests in stocks of non-U.S. international companies that are forecasted to pay above average dividends. The fund’s main holdings are in the United Arab Emirates, Austria and Australian markets.

It has a slightly higher expense ratio than our first two funds. However, it remains competitive at 0.17%.

VYMI’s goal is to invest in high-dividend paying companies in emerging markets. It tracks the performance of the FTSE All-World ex US High Dividend Yield Index. It can add another layer of international diversification when combined with VYM, SCHD or both.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) invests in the top 80 high dividend-yielding companies within the S&P 500 Index. Its goal is to provide high dividend yields as well as strong capital appreciation by investing in quality companies.

Its top holdings are CVS, Best Buy (NYSE:BBY) and ABBVIE (NYSE:ABBV). It boasts an impressive five-year return of 15.18%. And it also carried a low expense ratio of 0.07%.

JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) is a bit different from the other funds on our list. It generates income not only by investing in large-cap stocks. But it also sells options. This strategy has helped allow it to generate a high yield of 8.62%.

And unlike the passively managed funds on our list, JEPI is actively managed. Passive management means the fund aims to mimic the returns of a particular index like the Nasdaq 100. Active management means the fund aims to beat the returns of a given index.

JEPI’s fund managers aim to invest in over and undervalued stocks in the S&P 500 with attractive risk/return characteristics.

Its top holdings include Magnificent Seven members like Nvidia (NASDAQ:NVDA), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT).

However, actively managed funds typically come with higher fees than their passively managed counterparts. The JEPI has an expense ratio of 0.35%.

The bottom line

The funds we covered all stand out for features like diversification, competitive fees and high yields. ETFs like SCHD, VYM and SPYD stand out for stability and high yields. VYMI shines and adds international exposure. And actively managed JEPI holds the highest yield. Anyone of these can help provide lifetime income. But you can also create a diversified portfolio geared to your investment goals by combining some or all of these funds.

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