These Dividend ETFs Are Retirees’ Best Friend | Smart Change: Personal Finance
If you’re a retiree looking to boost your retirement income but don’t want to hunt down individual stocks, don’t be discouraged. You can still earn a decent amount of additional income by investing in exchange-traded funds (ETFs). There are many ETFs in the market, which collect profits from the shares they own on behalf of the investors and then distribute those profits to the investors periodically.
Let’s take a closer look at two of the best ETFs on the market right now.
Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) Fully repeats the performance FTSE High Dividend Yield Index, which includes more than 440 large stocks with high dividend yields. The ETF expense ratio is only 0.06%. The stocks included in the ETF vary across sectors, with the financial sector making up 20% of the ETF by market capitalization. It is followed by the healthcare and consumer goods sectors, with a weight of approximately 14% and 13%, respectively.
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The Vanguard High Dividend Yield ETF’s dividend yield as of June 15 is nearly 3%, which is close to the historical average return.
Furthermore, the ETF’s 10-year annual total return as of June 15 is 11.4%. Its five-year annual return is 8.6%.
Notably, as of May 31, the 10-year and five-year annual returns were 12.7% and 10.8%, respectively.
With total assets under management (AUM) of $46.4 billion, the three largest holdings of the Vanguard High Dividend Yield ETF are Johnson & JohnsonAnd the ExxonMobilAnd the c. B. Morgan Chase. The largest holding company, Johnson & Johnson, accounts for just 3.2% of the portfolio, again indicating the diversified nature of the ETF.
Schwab Fund of Equity Shares Traded in the United States
The Schwab Fund of Equity Shares Traded in the United States (NYSEMKT: SCHD) tracks Dow Jones US Dividend 100, which focuses on mainly strong stocks with sustainable profits. The ETF has total assets of $34.2 billion under management and an expense ratio of just 0.06%.
The ETF primarily invests in large companies across sectors. The financial sector accounts for about 21% of the ETF’s portfolio, followed by the IT sector with around 21%. merck It is the largest holding, accounting for 4.6% of the ETF’s assets. followed by International Business Machines And the Amgeneach representing 4.3% of the assets.
As of June 15, the Schwab US Dividend Equity ETF is offering a dividend yield of 3.1%, which is slightly above the 10-year average return. Its 10-year total annual return is 13.5% and its five-year total annual return is approximately 13%.
Top ETFs for Retirees
Overall, both the Vanguard High Dividend ETF and the Schwab US Dividend Equity ETF offer exposure to a diversified portfolio of large-cap dividend stocks. ETFs offer attractive dividend yields and their performance over the years has been impressive. It is important to note that, like other ETFs, investing in these two funds involves market-related risks. But this should not be a concern if you plan to keep them for the long term.
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JPMorgan Chase is an advertising partner of The Ascent, the Motley Fool Company. Rekha Khandelwal has no position in any of the mentioned shares. Motley Fool has positions in the ETF and recommends Vanguard High Dividend Yield. The Motley Fool recommends Amgen and Johnson & Johnson. Motley Fool has a disclosure policy.