Build a Diversified Portfolio and Generate Income With These Dividend ETFs
Income suddenly becomes exciting in a market downturn. Here's how to 'cash flow & chill' with income-producing funds.
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Income doesn’t have that crazy, blinking light and loud buzzer excitement of PRICE GROWTH!!!, but you need it.
Trust me on this.
Markets may get volatile in 2025, for a number of reasons, not the least of which is that we’ve seen two strong years in a row, and it may be time for institutions to take some profits.
When markets head south, retirees benefit from having assets that generate income, rather than having to sell those shares of Rocket Lab RKLB when the rocket is grounded.
While dividend ETFs can’t replace a well-rounded portfolio (yes, I know you still need growth), they can be a great addition for investors looking for reliable returns and reduced volatility.
Here are a few dividend ETFs focused mainly on companies with a track record of increasing shareholder payouts. This list is not exhaustive, but will give you an idea of how you might evaluate income-producing funds.
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
- Yield: 2.02%
- Expense Ratio: 0.35%
NOBL focuses on S&P 500 Dividend Aristocrats: companies with at least 25 years of consecutive dividend growth.
Its holdings are evenly weighted, minimizing concentration risk. This ETF fits into a diversified portfolio by providing exposure to financially stable, large-cap companies with consistent returns.
Use in a Portfolio: NOBL is ideal for the core of an equity allocation. It balances income generation with reliability, making it a cornerstone for investors who prioritize stability over rapid growth.
iShares Select Dividend ETF (DVY)
- Yield: 3.79%
- Expense Ratio: 0.38%
DVY targets high-yielding U.S. companies with a consistent dividend history. It includes a mix of large- and mid-cap stocks, with significant exposure to utilities and consumer staples. This makes it a great option for retirees or anyone looking for higher income.
Use in a Portfolio: DVY works well in an income-focused portfolio, especially for investors who want to diversify away from low-yield bonds without taking on excessive risk.
Invesco Dividend Achievers ETF (PFM)
- Yield: 1.55%
- Expense Ratio: 0.53%
PFM invests in companies that have increased their dividends for at least 10 consecutive years. With holdings such as Microsoft MSFT and Apple AAPL, it emphasizes growth-oriented dividend payers.
Use in a Portfolio: PFM is a complementary holding for growth-focused investors. It offers some dividend income while tapping into the long-term appreciation potential of tech and other high-growth sectors.
SPDR S&P Dividend ETF (SDY)
- Yield: 2.53%
- Expense Ratio: 0.35%
SDY tracks the S&P High Yield Dividend Aristocrats Index, which includes stocks with 20+ years of consistent dividend increases. Unlike many dividend ETFs, SDY has a mid-cap tilt, giving it more growth potential than traditional large-tilted dividend funds.
Use in a Portfolio: SDY is a strong addition to a portfolio that needs mid-cap exposure. It’s particularly useful for investors seeking a balance between income and growth.
Vanguard Dividend Appreciation ETF (VIG)
- Yield: 1.70%
- Expense Ratio: 0.06%
VIG focuses on large-cap companies with a history of annual dividend growth. Its holdings include Microsoft and BroadcomAVGO, which have driven strong performance. With a low expense ratio, it’s a cost-effective way to gain exposure to high-quality dividend growers.
Use in a Portfolio: VIG is a great option for cost-conscious investors. It fits well in a growth-oriented portfolio, offering dividend stability without sacrificing appreciation potential.
