Consistent dividend payments often signal financial fortitude, and stocks that possess that quality typically display below-average volatility. But the downside to owning individual dividend stocks is the requisite work. Investors must keep tabs on a company and its financial results to ensure the payout is sustainable and the stock itself is on solid ground. After all, a high dividend yield means little if the underlying stock consistently loses value.

But investors can save themselves time and trouble with an index fund strategy, either in lieu of or in addition to a portfolio of individual stocks. With that in mind, the Vanguard High Dividend Yield ETF (VYM -0.52%) and Schwab U.S. Dividend Equity ETF (SCHD -0.38%) currently have dividend yields that exceed the S&P 500 average, and both index funds produced reasonable returns over the past decade.

Read on to learn more.

1. Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF tracks 452 large U.S. companies that are generally classified as value stocks. The index fund is limited to equities that have paid above-average dividends for the past 12 months.

The Vanguard High Dividend Yield ETF is most heavily weighted toward the financials, consumer staples, healthcare, and industrials sectors. The top five holdings are listed below:

  1. ExxonMobil: 3.4%
  2. JPMorgan Chase: 3.2%
  3. Johnson & Johnson: 2.8%
  4. Procter & Gamble: 2.8%
  5. Broadcom: 2.7%

Dividend: The dividend yield currently sits at 3.4%, more than double the 1.6% yield of the S&P 500, and the last quarterly payout was $0.78 per share in September.

Performance: On a total return basis, the index fund returned 129% over the past decade, or 8.6% annually. Without dividends reinvested, it returned 70% over the last decade, or 5.4% annually. In either case, the Vanguard High Dividend Yield ETF dramatically underperformed the S&P 500, which returned 200% with reinvested dividends and 151% without reinvested dividends over the past decade.

However, the upside for shareholders was below-average volatility compared to the broader stock market. The Vanguard High Dividend Yield ETF has a 10-year beta of 0.85, meaning it moved 85 basis points for every 100-basis-point movement in the S&P 500.

Price: The expense ratio is just 0.06%, meaning the annual fee on a $10,000 portfolio would be just $6.

Here's the bottom line: The Vanguard High Dividend Yield ETF diversifies capital across hundreds of companies that have historically paid high dividends, and it's a good option for income investors willing to accept more modest returns in exchange for reliable passive income and reduced volatility.

2. The Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF measures the performance of 104 large U.S. companies. The index fund is limited to equities that (1) currently pay a high dividend, (2) have consistently paid a dividend for at least a decade, and (3) outrank other domestic equities in terms of financial strength, as measured by return on equity and free cash flow to debt.

The Schwab U.S. Dividend Equity ETF is concentrated in the industrials, healthcare, financials, and consumer staples sectors. The top five holdings are:

  1. Broadcom: 4.6%
  2. Amgen: 4.5%
  3. Verizon Communications: 4.3%
  4. Coca-Cola: 4.0%
  5. PepsiCo: 4.0%

Dividend: Its 3.9% yield offers a generous premium to the S&P 500 average. The most recent quarterly payment in September was for $0.65 per share.

Performance: The index fund returned 164% over the past decade, or 10.2% annually, with dividends reinvested. That figure falls to 94%, or 7.0% annually, when dividends were not reinvested. Though the Schwab U.S. Dividend Equity ETF had stronger returns than the Vanguard High Dividend Yield ETF, the S&P 500 still came out on top.

Its beta of 0.89 also offers investors reduced volatility compared to the broad market.

Price: Its 0.06% expense ratio is well below the 0.47% average for mutual funds and ETFs.

Here's the bottom line: This Schwab U.S. Dividend Equity ETF holds some of the most financially resilient dividend-paying companies in the world. It's another good option for income investors who prioritize steady payouts and a lower risk profile in their portfolio.