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After decades of hard work and diligent saving, you want to sleep well in your Golden Years. But a few drawbacks can keep you up at night.
What if inflation diminishes your earnings’ power now that you’re not earning a regular paycheck? What if an unexpected market downturn puts your investments in a tail spin?
But there could be a remedy. Some retirees utilize dividend exchange-traded funds (ETFs). These are diversified portfolios managed by investment professionals often with decades of experience. And they also make regular payments via dividends. But not all dividend ETFs are created equal.
As a retiree, you’d want a reliable stream of income as well as capital appreciation. Some dividend ETFs aim to achieve this by investing in high-quality and high-dividend stocks with low volatility. They also try to keep fees low so you keep more of your returns. These are characteristics retirees may want to keep their eyes on when shopping for dividend ETFs.
So to make it easier, we devised a list of ETFs that may be able to help you sleep soundly as you earn income. Then, you can wake up and enjoy another day in retirement.
So let’s take a look.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
Risk averse retirees looking for a balance between income and capital appreciation could look into the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD). This fund sets its sights on financially stable companies that pay high dividends. But it filters out stocks that experience high volatility to mitigate risk and bypass value traps. These could be key to a retiree’s portfolio.
And the fund still manages to generate a strong yield of about 4%. So a $400,000 investment with a yield of 4% could pay $1,333 a month.
Plus, SPHD has a track record of decent performance. It has had a five-year return of about 32.10%, a one-year return of around 5.72% and year-to-date return of about 8.68%.
Moreover, SPHD has a competitive expense ratio of 0.30%.
And another bonus for the risk averse, SPHD is heavily concentrated in defensive sectors, which generally maintain strong cash flow even during market turmoil.
However, it offers virtually no exposure to the tech sector which has generally benefited from the artificial intelligence (AI) boom. Thus, it may lag during tech-led rallies and bull markets. But it may still suit risk averse investors looking for reliable income and stability. So it could fill a defensive spot in a diversified portfolio.
Here’s a better look at its total holdings.
- Real estate: 21.86%
- Consumer staples: 16.50%
- Utilities: 14.05%
- Health care: 12.99%
- Financials: 12.66%
- Energy: 9.87%
- Communication services: 7.13%
- Industrials: 2.84%
- Materials: 2.10%
Schwab US Dividend Equity ETF (SCHD)
Retirees seeking a low-cost and high-yielding ETF with low volatility can turn to the Schwab US Dividend Equity ETF (SCHD). This fund screens for high-dividened paying companies with strong fundamentals relative to their peers. This means these companies stand out for characteristics like strong cash flow and return on equity. This could help them continuously pay dividends over time, which is good news for retirees who can spend 20 to 30+ years in retirement.
Plus, the fund pays a generous yield of about 3.51%. A $400,000 investment could pay around $1,170 a month with a yield of 3.51%.
Additionally, SCHD is also heavily invested in defensive sectors. Here’s a closer look at its portfolio breakdown.
- Energy: 19.88%
- Consumer Staples: 18.50%
- Health Care: 16.20%
- Industrials: 12.10%
- Financials: 9.68%
- Consumer Discretionary: 8.47%
- Information Technology: 8.20%
- Communication Services: 4.27%
- Materials: 2.66%
- Utilities: 0.04%
And SCHD also stands out for performance. It has a five-year return of about 39.89%, a one-year return of about 12.17%, and a year-to-date return of around 14.40%.
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) focuses on the so-called Dividend Aristocrats. And it selects fundamentally strong companies that have consistently increased their dividends for at least 25 years. This can give investors some peace of mind and the potential for a reliable stream of income in retirement.
Historically, NOBL has experienced lower volatility than the S&P 500. And it has also generally benefited from most of the gains in rising markets.
Moreover, NOBL generates a yield of about 2%. So a $400,000 investment with a 2% yield could provide you with a $667 monthly check.
The fund also stands strong in performance with a five-year return of 39.71%. It also has a 1-year return of 11.21%, and a year-to-date return of 8.34%.
NOBL is heavily focused on industrials and consumer staples. Here’s a deeper look at its holdings.
- Industrials: 22.48%
- Consumer Staples: 22.09%
- Financials: 13.08%
- Materials: 12.35%
- Health Care: 10.56%
- Utilities: 5.46%
- Real Estate: 4.19%
- Consumer Discretionary: 4.16%
- Energy: 2.91%
- Information Technology: 2.73%