Dividend ETFs are a simple and safe way to grow your income over time.
As the Dow Jones Industrial Average scales new heights and the S&P 500 continues its impressive bull run, savvy investors might be looking to secure their profits. However, it's crucial to remember that long-term investment is the key to accumulating substantial wealth.
For those aiming to temper their risk in this buoyant market while staying invested, dividend-paying exchange-traded funds (ETFs) offer a compelling option. Since 1960, dividends have contributed significantly to the total returns of the U.S. stock market, and this trend is expected to continue well into the future.
Amidst the plethora of dividend-paying ETFs available, three stand out for their performance and reliability: the JPMorgan Equity Premium Income ETF(JEPI -0.02%), the Schwab U.S. Dividend Equity ETF(SCHD 0.95%), and the Vanguard International High Dividend Yield Index Fund ETF Shares(VYMI 0.84%). Let's dive into what makes these ETFs a top pick for dividend seekers.
JPMorgan Equity Premium Income ETF
The JEPI ETF is a favorite among investors who prefer a steady income stream. Here's why:
Dividend distribution frequency: Investors enjoy monthly dividends, providing a regular income.
Yield: The JEPI sports a 7.63% annualized yield at current levels, making it an attractive option for income-focused portfolios.
Tracking index: This ETF tracks the S&P 500, offering a broad exposure to the market.
Expense ratio: With a relatively low expense ratio of only 0.35%, it ensures more of your money stays in your pocket.
Three-year average annual return: The JEPI has shown consistent growth since inception, delivering a 7.2% average annual return over the prior three years. That's an outstanding return on investment for a high-yield dividend ETF.
Schwab U.S. Dividend Equity ETF
For those looking for a blend of value and dividends, the Schwab U.S. Dividend Equity ETF is a compelling choice. Here are its main attractions:
Dividend distribution frequency: The SCHD dishes out dividends quarterly, aligning with many investors' preferences for larger but less frequent distributions.
Yield: The ETF provides a substantial yield of 3.47%. That's more than double the average yield among S&P 500 listed stocks.
Tracking index: The SCHD tracks the Dow Jones U.S. Dividend 100 Index, which focuses on companies with above-average dividend yields.
Expense ratio: The SCHD is known for its ultra-low expense ratio of just 0.06%, which aids in maximizing investor returns.
Performance: The ETF has a track record of truly exceptional performance. Over the prior five years, the SCHD has delivered average returns of 11.1% per year.
Vanguard International High Dividend Yield Index Fund ETF Shares
For those looking to diversify internationally with a focus on dividends, the VYMI is an excellent option for the following reasons:
Dividend distribution frequency: Like SCHD, VYMI distributes dividends quarterly.
Yield: The ETF offers an attractive yield of nearly 5%, making it an ideal income-generation vehicle.
Tracking index: This Vanguard ETF tracks the FTSE All-World ex-US High Dividend Yield Index, providing exposure to a wide array of international high-dividend-yielding stocks.
Expense ratio: The VYMI comes with a moderate expense ratio of 0.22%, balancing cost with international exposure.
Performance: Despite its high yield, this international dividend ETF has exhibited robust performance, delivering an annual average return of 6.2% over the past five years.
Final thoughts
These three ETFs offer unique advantages for investors seeking dividend income. Whether you're drawn to the monthly payouts of JEPI, the strong performance of SCHD, or the international diversity of VYMI, each ETF presents an opportunity to enhance your investment strategy.
George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
There aren't any exchange-traded funds (ETFs) that focus exclusively on Dividend Kings. However, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL 1.88%) owns shares of all Dividend Aristocrats®.
Vanguard High Dividend Yield ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VYM is an outstanding option for investors seeking exposure to the Style Box - Large Cap Value segment of the market.
Many people pair VOO with the Vanguard Total Bond Market ETF (BND) in a broader portfolio. The fixed income ETF has $95 billion in assets and is the largest bond ETF trading in the U.S. BND has two-thirds of its assets in U.S. government bonds, with most of the remainder in investment-grade corporate bonds.
VOO - Volatility Comparison. Vanguard High Dividend Yield ETF (VYM) has a higher volatility of 3.04% compared to Vanguard S&P 500 ETF (VOO) at 2.73%. This indicates that VYM's price experiences larger fluctuations and is considered to be riskier than VOO based on this measure.
Some of the highest dividend paying stocks in India are Vedanta Ltd., Hindustan Zinc Ltd, Coal India Ltd, T.V.Today Network Ltd, Bhansali Engineering Polymers Ltd, Balmer Lawrie Investment Ltd, Coal India Ltd.
JEPI - Volatility Comparison. JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) has a higher volatility of 2.42% compared to JPMorgan Equity Premium Income ETF (JEPI) at 1.63%. This indicates that JEPQ's price experiences larger fluctuations and is considered to be riskier than JEPI based on this measure.
1. VanEck Semiconductor ETF. The VanEck Semiconductor ETF (SMH) tracks a market-cap-weighted index of 25 of the largest U.S.-listed semiconductors companies. Midcap companies and foreign companies listed in the U.S. can also be included in the index.
It's no wonder why investors closely monitor Warren Buffett's portfolio. He is arguably the greatest investor of all time, and he has doled out some of the best investment advice over the years.
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