3 Dividend ETFs Designed for Conservative Retirees

view original post

You’ve worked hard and saved diligently your whole life. And you’ve finally clocked out for the last time and have taken the plunge into your Golden Years.

Now, you want to live the life you deserve. Maybe buy that nice car or yacht you’ve always wanted. Go on a luxury vacation. Or retire to a dream destination.

But that takes money. And a lot can eat away at your money. Inflation can erode the power of your dollars. Market downturns can creep in when you least expect it. But at this point, you may not want to take such big risks when it comes to investing.

That’s why some retirees turn to a specific set of dividend ETFs. These are diversified portfolios of various, sometimes hundreds, of stocks selected by professional asset managers often with decades of experience. And these in particular make regular payments in the form of dividends. You can reinvest these dividends to benefit from compound growth. Or you can receive them in cash payments to cover basic living expenses, often on a monthly or quarterly basis.

But conservative investors should keep their eye on a few basics. They’d want dividend ETFs that can offer a reliable and consistent stream of income. These ETFs should focus on financially healthy and stable companies with growth potential. They also may want to emphasize low volatility.

But when it comes to dividend ETFs, there are plenty to choose from. So let’s take a look at three top dividend ETFs designed for conservative retirees.

The Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (SCHD) can be a standout ETF for many reasons. First, it generates a strong yield of about 3.51%. Next, it screens for high-quality and stable companies with a track record of paying dividends. This could provide a reliable stream of income for conservative retirees. And it’s also well diversified across 101 stocks in various sectors. Its main strongholds are in energy, consumer staples and healthcare. The last two are within the defensive sector category. These are known to generally remain stable even during market downturns. This can offer conservative retirees some peace of mind.

And here’s a more in-depth breakdown of the fund’s portfolio.

  • 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%

Moreover, SCHD has also performed quite well. It has a five-year return of about 40.52%, a 1-year return of about 12.50% and a year-to-date return of around 13.97%. And another highlight of this ETF is its low fees. Its expense ratio is only 0.06%, among the lowest in the industry. This means that the annual fee on a $10,000 investment would be $6.

Additionally, the fund boasts net assets of about $78.4 billion.

Vanguard High Dividend Yield ETF (VYM)

The Vanguard High Dividend Yield ETF (VYM) stands as a core component of many dividend investing retirees’ portfolios. For conservative retirees that emphasize diversification, this fund screens for several financially stable companies projected to generate above-average dividend yields. In fact, VYM invests in more than 500 stocks across 10 sectors. Most of its assets or about 21% are concentrated in the financial sector. Here’s a closer look at its holdings breakdown.

  • Basic Materials: 2.20%
  • Consumer Discretionary: 10%
  • Consumer Staples: 8.80%
  • Energy: 9.10%
  • Financials: 20.90%
  • Health Care: 12.50%
  • Industrials: 13.80%
  • Technology: 12.90%
  • Telecommunications: 3.60%
  • Utilities: 6.20%

Additionally, VYM has also held strong in terms of performance. It has generated a five-year return of nearly 61%. Moreover, it has a 1-year return of about 14.82%, and a year-to-date return of about 8.05%.

And like many Vanguard funds, VYM has noticeably low fees. Its expense ratio is 0.06%. Plus, the fund holds net assets of about $88.51 billion.

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

Volatility can be a key concern for any retiree, especially the conservative one. But that’s where the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) can step in. SPHD seeks out high-dividend stocks in the S&P 500 index, but filters out those with high volatility in order to avoid value traps. This could provide capital appreciation, steady income and mitigate risk. And it currently generates a yield of about 4%. Plus, it’s heavily concentrated in defensive sectors like consumer staples, utilities and healthcare.

This is a closer look at its 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%

SPHD also stands out for its performance. It has a five-year return of about 31.13%, a 1-year return of 5.36%, and a year-to date return of about 7.85%.

The fund holds net assets of $3.64 billion. However, SPHD has a slightly higher expense ratio than funds on the rest of this list at 0.30%.