Dividends have served me very well so far in my life — and I’m not even retired yet. Like many people, I underestimated them for a long time. They just came along with many of the stocks I bought. I’ve had multiyear periods when I was plowing as much money as I could into my long-term portfolio, and periods when I just didn’t have much or any extra cash to invest. During those latter periods, though, my investment accounts slowly filled with cash, which I was able to use to buy more stock — even though I was living close to my means.
Dividends can serve you well, too, and a particularly good way to invest in dividend-paying stocks is via exchange-traded funds (ETFs), which are funds that trade like stocks. You can do so with just $1,000, $500, or less, to start. But for best results, aim to sock away significant sums regularly, for many years. It can be slow when you start, but you can end up with eye-popping results.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
Here are 10 dividend-focused ETFs to consider. Each can quietly deliver lots of passive income to you — in amounts that will tend to increase from year to year.
Check out these promising long-term investments:
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) |
9.00% |
N/A |
N/A |
|
iShares Preferred & Income Securities ETF (NASDAQ: PFF) |
6.00% |
3.33% |
3.87% |
|
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) |
3.64% |
6.95% |
12.71% |
|
Fidelity High Dividend ETF (NYSEMKT: FDVV) |
2.71% |
14.68% |
N/A |
|
Vanguard High Dividend Yield ETF (NYSEMKT: VYM) |
2.67% |
11.06% |
10.11% |
|
SPDR S&P Dividend ETF (NYSEMKT: SDY) |
2.26% |
8.78% |
9.71% |
|
iShares Core Dividend Growth ETF (NYSEMKT: DGRO) |
2.24% |
12.12% |
12.04% |
|
Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) |
1.68% |
12.98% |
11.94% |
|
First Trust Rising Dividend Achievers ETF (NASDAQ: RDVY) |
1.49% |
14.86% |
13.25% |
|
Vanguard S&P 500 ETF (NYSEMKT: VOO) |
1.22% |
15.91% |
13.39% |
Source: Morningstar.com, as of Nov. 8, 2024.
Here’s a closer look at them:
This is not your typical ETF loaded up with dividend-paying stocks. Instead, it holds about 80% of its assets in U.S. stocks and devotes much of the rest to writing call options. It’s only a few years old, but it’s attracting attention due to its high yield, with its income paid out monthly. Read up on it if you’re intrigued.
This is another somewhat unusual dividend ETF because it doesn’t contain regular common stock. Instead, it’s focused on preferred stocks. These tend to pay relatively high dividends, but don’t grow in value very briskly, as you can see in the table above.
This ETF tracks the Dow Jones U.S. Dividend 100 Index, holding 100 stocks with a track record of paying dividends for at least 10 years and which also seem to be in good financial health.
This ETF holds over 100 medium-sized and large companies that are poised to keep paying and increasing their dividends.
This ETF tracks the FTSE High Dividend Yield Index of high-yielding companies and recently included around 550 of them.
This ETF requires its component companies to have increased their payouts annually for at least 20 consecutive years. It recently held 133 stocks.
This ETF tracks an index of U.S. stocks with a history of consistently growing dividends. Its yield isn’t that high, but it’s more interested in companies with relatively rapidly growing dividends than in slower-growing dividends with fatter yields.
This ETF tracks the S&P U.S. Growers Index, which is focused on companies that have increased their dividend for at least 10 consecutive years. It also excludes stocks with very steep yields, as a high yield can be due to a depressed stock price and a struggling company. It recently held 338 different stocks.
This ETF is focused on the Nasdaq US Rising Dividend Achievers index of about 50 companies of various sizes that have been paying growing dividends and seem healthy enough to continue doing so.
I included this basic (and terrific) S&P 500 index fund as an example of how many broad-based ETFs also pay significant dividend income. Many of the 500 companies in it are dividend payers. The overall average yield isn’t that great compared to more dividend-focused ETFs, but the total payouts should increase over time, and the S&P 500 has a solid long-term performance record, averaging annual returns close to 10% over long periods.
As you look into any of the funds above that interest you, think about whether you favor growing dividends or fat dividend yields. Look at the expense ratios (annual fees) of funds you check out. Some have super low fees, under 0.10%, while some are higher.
Note that you might find one or more of these funds available in your workplace 401(k) plan, and that can be an effective way to invest in them. If not, you should be able to invest in most or all via any good brokerage account.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,819!*
-
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,611!*
-
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $444,355!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of November 11, 2024
Selena Maranjian has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.
10 Dividend ETFs to Buy With $1,000 and Hold Forever — for Lots of Passive Income was originally published by The Motley Fool