If you’re looking for income in retirement or would just like cash regularly arriving in your retirement investment accounts, it’s hard to go wrong with dividends. They get paid in strong markets and weak markets alike (except in relatively rare instances, when a company is struggling and needs to decrease, suspend, or eliminate its payout). And the dividends of healthy and growing companies are increased fairly frequently, too — often once per year. Those increases help your payouts keep up with inflation — and even exceed it.
A particularly easy and effective way to invest in dividend-paying stocks is to do so via exchange-traded funds (ETFs) that focus on dividends. (ETFs are funds that trade like stocks, permitting you to buy as few or as many shares as you’d like.) Here are five solid candidates to consider for your portfolio.
1. Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) is an often-recommended dividend-focused ETF. It’s an index fund with very low annual fees (just 0.06%), and it tracks the Nasdaq US Dividend Achievers Select Index — which includes securities that have increased their payouts annually for at least 10 years. The index recently featured 212 components, and the Vanguard ETF simply copies them. Its top holdings recently were Microsoft, Walmart, Johnson & Johnson, Procter & Gamble, and UnitedHealth Group, and its dividend yield was recently 1.66%.
2. Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) tracks the Dow Jones U.S. Dividend 100 Index, which is focused on “high-dividend-yielding stocks in the U.S. with a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.” It also looks for companies that are increasing their payouts. The ETF charges just 0.06% annually and has about a quarter of its assets in financial stocks, about 20% in industrials, and about 16% in consumer defensive companies. Its top holdings recently were ExxonMobil, Altria, Texas Instruments, 3M, and United Parcel Service, and the ETF recently yielded 3.4%.
3. Vanguard High Dividend Yield ETF
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