If you're still working and retirement is many years down the road for you, then you arguably should hold a healthy batch of growth stocks in your portfolio. If you have already retired (or are nearing that point), your priorities will be different -- dramatically so. Income will likely be high on the list, and reliable safety won't be too far behind.
With that as the backdrop, here are three great dividend-oriented exchange-traded funds (ETFs) to consider if retirement is on your short-term radar. Each brings something different to the table, making the trio a smart collection of income-producing investments.
Invesco S&P 500 High Dividend Low Volatility ETF
As its name suggests, the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD 0.43%) aims to hold stocks that boast below-average volatility and pay above-average dividends. With a portfolio that mirrors the S&P 500 Low Volatility High Dividend Index, this ETF holds 50 of the S&P 500's least volatile, highest-yielding names. (Standard & Poor's makes some manual adjustments to the index's potential pick list to ensure it's also a well-diversified group of stocks.)
The purpose of such a fund is to allow its owners to sleep well at night. It curbs the potential for wide price swings, so shareholders have a reasonable expectation that their holdings won't move as erratically as the broader market often does.
The trade-off is lower net returns and slightly muted payouts. The market's more volatile names also tend to be growth names capable of achieving significant capital gains. And while the Invesco S&P 500 High Dividend Low Volatility ETF's current yield of around 4% is impressive, it's possible to find better yields if you're willing to hunt them down and own slightly riskier stocks.
That's OK, though. The whole point of a dividend ETF is to reduce risk and spread your sources of dividend income out among several sectors and many stocks. This particular exchange-traded fund achieves that goal quite nicely, without making you seasick in the meantime.
ProShares S&P 500 Dividend Aristocrats ETF
You won't be collecting a 4% yield from the ProShares S&P 500 Dividend Aristocrats ETF (NOBL 0.61%) anytime soon. Its current yield is roughly half that amount. But if you're looking for dividend payout growth that can help you cover your ever-rising costs though, this fund offers it.
To become a Dividend Aristocrat, a company must have a long history of uninterrupted annual increases in its dividend payments. Specifically, to earn the title, a company must increase its per-share payout for 25 consecutive years, and to hold it, it has to keep those boosts coming. The company must also be a constituent of the S&P 500, just to add a little added assurance that the company can maintain its payouts. As of the latest tally, only 65 stocks qualify for this distinction.
Yes, you can find higher yields out there. You can probably find higher-growth names than most Dividend Aristocrats as well, even among value stocks that don't qualify as dividend nobility. What you can't find outside of this select group of dividend stocks, however, are stocks of companies with the pedigree these names have, and strong interests in maintaining their status as a Dividend Aristocrat. Coca-Cola, Procter & Gamble, and General Dynamics are just a few of the blue chips that make up this select group of proven dividend payers.
Vanguard International Dividend Appreciation ETF
Finally, if you've already got a stake in the ProShares S&P 500 Dividend Aristocrats ETF, the Invesco S&P 500 High Dividend Low Volatility ETF, or other similarly safe dividend ETFs, you can afford to think a bit more aggressively with something like the Vanguard International Dividend Appreciation ETF (VIGI 0.03%).
As you can imagine, the upside of the fund is exposure to dividend-paying names that domestic investors might overlook. Meant to mirror the S&P Global Ex-U.S. Dividend Growers Index, this ETF only holds proven dividend payers -- and growers -- domiciled outside of the United States. The underlying index consists of foreign companies with track records of upping their annual dividend payments for at least seven consecutive years. That isn't nearly as picky as the requirement for becoming a Dividend Aristocrat, but it's a standard that makes sense when you're talking about non-U.S. stocks.
VIG Dividend data by YCharts
And it's certainly worth the slightly lower standard. On a total return basis, the fund has outpaced its benchmark for the past one-, three-, five-, and 10-year stretches. Dividend growth accounts for a sizable share of that outperformance.
