If you are a retiree looking to boost your retirement income but do not like to research individual stocks, don't be disheartened. You can still earn a decent amount of extra income by investing in dividend exchange-traded funds (ETFs). There are several dividend ETFs available in the market, which collect dividends from the stocks they own on behalf of investors and then distribute those dividends to investors periodically.
Let's take a closer look at two of the top dividend ETFs in the market right now.
Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (VYM 0.40%) fully replicates the performance of the FTSE High Dividend Yield Index, which includes more than 440 large-cap stocks with high dividend yields. The ETF's expense ratio is just 0.06%. The stocks included in the ETF are diversified across sectors, with the financials sector making up 20% of the ETF by market value. It is followed by the healthcare and consumer staples sectors, with a weight of roughly 14% and 13%, respectively.
The Vanguard High Dividend Yield ETF's dividend yield as of June 15 is roughly 3%, close to its historical average yield.
VYM Dividend Yield data by YCharts
Moreover, the ETF's 10-year annualized total return as of June 15 is 11.4%. Its five-year annualized return is 8.6%.
VYM Annualized 10 Year Total Returns (Daily) data by YCharts
Notably, as of May 31, the 10- and five-year annualized returns were 12.7% and 10.8%, respectively.
With total assets under management (AUM) of $46.4 billion, the Vanguard High Dividend Yield ETF's top three holdings are Johnson & Johnson, ExxonMobil, and JPMorgan Chase. The largest holding, Johnson & Johnson, accounts for just 3.2% of the portfolio, again indicating the diversified nature of the ETF.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (SCHD 0.36%) tracks the Dow Jones U.S. Dividend 100 Index, which focuses on fundamentally strong stocks with sustainable dividends. The ETF has total assets of $34.2 billion under management and an expense ratio of just 0.06%.
NYSEMKT: SCHD
Key Data Points
The ETF mainly invests in large companies across sectors. The financials sector accounts for roughly 21% of the ETF's portfolio, followed by IT sector with a nearly 21% weight. Merck is the top holding, accounting for 4.6% of the ETF's assets. It is followed by International Business Machines and Amgen, each accounting for 4.3% of the assets.
As of June 15, the Schwab U.S. Dividend Equity ETF offers a dividend yield of 3.1%, which is slightly higher than its 10-year average yield. Its annualized 10-year total return is 13.5% and the annualized five-year total return is nearly 13%.
Top ETFs for retirees
Overall, both the Vanguard High Dividend Yield ETF and the Schwab U.S. Dividend Equity ETF offer exposure to a diversified portfolio of large-cap, dividend paying stocks. The ETFs offer attractive dividend yield and their performance over the years has been impressive. It's important to note that, like other ETFs, investing in these two ETFs involves market-related risks. But that shouldn't be a concern if you plan to hold them for the long term.
