A portfolio of quality dividend exchange-traded funds (ETFs) may help investors retire well and sleep well at night (SWAN). The benefit of these funds is that, unlike single stocks, they are highly diversified, with the strengths of some companies offsetting the risks of the others.
So, let’s explore some of the best blue-chip dividend ETFs, excluding the highly popular SCHD, which is normally included in most of these listings.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
The JPMorgan Nasdaq Equity Premium Income ETF is one of the best dividend ETFs to buy today. It is a covered call ETF with over $23 billion in assets under management.
JEPQ uses the covered call strategy to generate returns to shareholders. It does that by investing in companies in the Nasdaq 100 index and then writing a call option trade on the index.
By doing that, the company generates returns, which it distributes to its shareholders each month. The benefit of investing in the JEPQ ETF is that it offers a 9% yield, and its total return is almost equivalent to the Nasdaq 100 index.
Fidelity High Dividend ETF (FDVV)
The Fidelity High Dividend ETF is another good quality dividend ETF to buy for a rich retirement. It is a fund with a net expense ratio of 0.16% that tracks well-known companies that are expected to grow their dividends over time. It has a dividend yield of 2.85% and over $4.8 billion in assets.
Most companies in the FDVV ETF are in the technology industry, followed by industrials, consumer staples, energy, and utilities. The most notable of these firms are Apple, Microsoft, NVIDIA, Broadcom, Targa Resources, and Philip Morris.
The FDVV’s total return in the last five years was 83% compared to the Vanguard S&P 500 ETF (VOO) which returned about 95%. FDVV tends to beat other dividend ETFs. In a note, Morningstar analysts said this about the fund:
“A unique weighting system confers many of market-cap weighting’s benefits and keeps concentration in check. The fund weights stocks in proportion to their market capitalization, then layers on a layer of equal weight that boosts smaller stocks.”
iShares Core Dividend Growth ETF (DGRO)
The iShares Core Dividend Growth ETF (DGRO) is another good dividend ETF to buy for a SWAN retirement. It is a giant fund with over $37 billion in assets and a cheap expense ratio.
DGRO has a fairly low dividend yield of about 2%. However, it excels in its focus on dividend growth as its compounded annual growth rate (CAGR) in the last decade was almost 19%, higher than the sector median of 6.14%.
DGRO ETF achieves this by focusing on companies that have a good track record of dividend growth. Some of the most notable names in the fund are JPMorgan Chase, Johnson & Johnson, Broadcom, AbbVie, Apple, and ExxonMobil. The DGRO’s total return in the last five years was about 67.2%.
SPDR S&P Dividend ETF (SDY)
The SPDR S&P Dividend ETF is another blue-chip dividend ETF to buy for a rich retirement. It is a fund with an expense ratio of 0.35%. This is a unique fund in that it focuses on companies categorized as dividend aristocrats, which have paid and increased their payouts for over 25 years.
This includes companies like Verizon, Realty Income, Chevron, Abbvie, Kenvue, Kimberly Clark, and Johnson & Johnson. These are all large companies that have a dominant market share in their industries.
The main cons for this fund is that it does not have a good exposure in the technology sector that has room for growth. At 0.35%, the fund is more expensive than its peers.
Other top dividend ETFs to consider
The other top dividend ETFs to consider for a rich retirement are WisdomTree U.S. Total Dividend Fund (DTD), Vanguard Dividend Appreciation Index Fund ETF Shares (VIG), Vanguard High Dividend Yield Index Fund ETF Shares (VYM), and iShares Core High Dividend ETF (HDV).
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