These 6 Dividend ETFs Are a Retiree’s Best Friend

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 at or above inflation. And by getting that regular dividend income, you may be able to avoid selling stocks.

An effective way to invest in dividend payers is through 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 decent dividend yields.

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 stock. 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 an expense ratio (annual fee) 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), companies 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%.

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3. Schwab US Dividend Stock ETF

This ETF is an index fund that tracks the Dow Jones US Dividend 100 Index comprised 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 dividends or large dividends, but also on those with a track record of increasing their payments. 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 your retirement — and as you should retirement plan – keep dividend payers in mind. It’s not a bad idea to look for other sources of income for your future years besides Social Security, such as perhaps annuities, side jobs, or even a reverse mortgage.

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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 Mad Motley has a disclosure policy.

These 6 Dividend ETFs Are Retirees’ Best Friends was originally published by The Motley Fool