Top 7 Dividend ETFs for Retirement Income

When looking for the best dividend ETFs for retirement, stability often outweighs thrill. Investing in growth stocks can be exciting, but for retirees, the allure lies in investments offering predictable performance and regular profits over the long term.

Dividend ETFs that require minimal monitoring yet provide steady returns have become increasingly popular. Such ETFs cater to those preferring a hands-off investment approach, playing right into the hands of retirees. High yield dividend ETFs for retirement have also seen a surge in interest. This is particularly true during periods of low interest rates when traditional income-generating investments, such as U.S. Treasuries, struggle to deliver reasonable yields. Therefore, investors are looking for top retirement income ETFs that balance safety and returns. Hence, the best ETFs for retirement income can play a critical role in building a balanced and resilient portfolio for retirement.

Vanguard International High Dividend Yield ETF (VYMI)

The Vanguard International High Dividend Yield ETF VYMI has established itself as a formidable player in the dividend ETF landscape. It is a steady beacon for income-oriented investors, with more than $5.5 billion in net assets. It also has an expense ratio of just 0.22%.

The ETF tracks the FTSE All-World ex US High Dividend Yield Index, a collection of high dividend-yielding investments that comfortably outpace the market. Consequently, the VYMI ETF offers a robust dividend yield of 4.5%, which is roughly 100% higher than the sector median. Moreover, the index boasts roughly 1,400 holdings in its lofty portfolio, with developed markets forming a whopping 79% of its portfolio.

iShares Select Dividend ETF (DVY)

The iShares Select Dividend ETF DVY is reliable for investors looking for consistently growing dividends. It tracks the Dow Jones U.S. Select Dividend Index, which offers an assortment of 100 U.S.-listed stocks with a robust dividend profile.

To earn a spot on this ETF, stocks must demonstrate impressive dividend health indicators. Among these is a current dividend per share that outshines their five-year average, a mighty impressive dividend coverage ratio of 167% or greater, and atrack record of consistent dividend payment over a five-year period. Furthermore, the iShares ETF manages more than $20 billion in net assets, with over 60% of the fund’s net assets, in small- and mid-cap companies.

Real Estate Select Sector SPDR Fund (XLRE)

The Real Estate Select Sector SPDR Fund XLRE has positioned itself as a solid choice in the realm of real estate investment. It manages over $5 billion in assets with a modest expense ratio of just 0.10%, which is lower than 79% of the sector.

The fund takes a focused approach, which effectively tracks the real estate sector of the S&P 500 Index. It includes a wide array of companies, mainly those with massive investments in commercial and residential properties. Moreover, it leans towards Real Estate Investment Trusts (REITs) but uniquely steers clear of mortgage REITs. This approach allows the fund to manage risks and earn stable incomes effectively. REITs, a key component of the ETF, provide stability due to their consistent cash flow base.

Vanguard Dividend Appreciation ETF (VIG)

The Vanguard Dividend Appreciation ETF VIG has effectively carved its niche in the dynamic world of large-cap blended funds. The ETF mirrors the performance of the S&P 500 Dividend Growers index, garnering a remarkable monthly volume exceeding the one million mark.

Over the past decade, VIG has seen its price triple, making a compelling case for those seeking steady growth paired with a strong dividend yield. It invests in some of the largest capitalization businesses, including UnitedHealth UNH, Johnson & Johnson JNJ, and Microsoft MSFT, presenting an intriguing blend of sectors.

The fund exhibits a lean expense ratio of just 0.06%, positioning itself as a low-risk, high-reward proposition compared to its peers. All in all, VIG stock might be the right option for investors looking to inject a potent blend of growth and dividends into their portfolio.

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

Invesco S&P 500 High Dividend Low Volatility ETF SPHD is a compelling choice for yield-seekers who prefer low stock volatility. The ETF is committed to the S&P 500 Low Volatility High Dividend Index, offering an efficient way to tap into high-yield, low-volatility stocks within the burgeoning S&P 500.

What’s noteworthy is the ETF’s strategic balance between robust dividend payouts and reduced volatility, addressing both income generation and risk management. Hence for those seeking a smooth ride amidst market fluctuations, SPHD offers a compelling, yield-rich proposition.

Looking at the SPHD ETF, we see it has an average three-month daily share volume of 768,000, more than 1,500% higher than the sector median. Moreover, it offers an excellent dividend yield of more than 4.4%, dwarfing the sector median by more than 90%. Additionally, its expense ratio is at just 0.3%, lower than 36% of the sector median. On top of that, it trades at a relatively attractive valuation after shedding more than 11% in value in the past year.

Invesco Variable Rate Preferred ETF (VRP)

Invesco Variable Rate Preferred ETF VRP boasts a substantial net assets base of more than $1.6 billion in net assets with stakes in 322 companies. The ETF, though a bit older than VYMI, mirrors the ICE Variable Rate Preferred & Hybrid Securities Index.

The index encapsulates the variable and floating rate preferred stocks and hybrid debts, offering a wide array of investment-grade and below-investment-grade options. Moreover, the dividend or coupon rate is adjustable, providing a buffer against market fluctuations. Furthermore, it offers a clear maturity guideline, strategic liquidity stipulations, and monthly rebalancing, effectively managing short-term market uncertainties while ensuring consistent income generation. Consequently, the VRP ETF has an annualized volatility of 11.6%, which is 41% lower than the sector median. Moreover, with a dividend yield of more than 5.8%, it is arguably the best low-risk bet on the list.

Schwab US Dividend Equity ETF (SCHD)

The Schwab US Dividend Equity ETF SCHD is down around 10% year-to-date, but over the years has been an excellent wealth compounder, growing returns by over 100%.

This ETF tracks the performance with the Dow Jones U.S. Dividend 100 Index, comprising U.S.-listed stocks known for high-yielding sustainable dividends. Since the start of 2011, SCHD has accumulated over $4 billion in net assets, with a minimal expense ratio of 0.06%, with a bid / ask % spread of 0.02%.

More importantly, the ETF boasts an A-graded dividend profile, with a 3-year dividend growth rate of 13.3% and 10 consecutive years of dividend growth and consistency. Also, its annual volatility is at 17.5%, roughly 11.3% lower than the sector median.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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