Investing in dividend-paying stocks is one of the many ways to collect passive income. The only work involved for you involves selecting which stocks to buy and managing your portfolio.

Buying an exchange-traded fund (ETF) that focuses on dividends is an even more passive approach, and these two dividend ETFs in particular are excellent ways for you to add passive income generation to your portfolio.

Get the top 100 dividend stocks in one fund

The Schwab U.S. Dividend Equity ETF (SCHD 0.15%) makes it easy to invest in dividend stocks. The fund tracks the Dow Jones U.S. Dividend 100 index, which includes only high-yielding stocks with a record of consistently paying dividends. These companies also tend to have stronger financial metrics than their peers. In short, the fund holds positions in about 100 of the top dividend-paying companies in the country.

Its top five holdings currently are:

  • Lockheed Martin, which has a 2.2% dividend yield at the current share price and has increased its payment for 21 consecutive years.
  • AbbVie, which has a 3.2% dividend yield at the current share price and has increased its payout annually for over a quarter century.
  • Home Depot, which has a 2.4% dividend yield at the current share price and has raised its dividend for 15 straight years.
  • Blackrock, which has a 2.3% dividend yield at the current share price and has delivered 15 consecutive years of dividend growth.
  • Coca-Cola, which has a 2.7% dividend yield at the current share price and has delivered 62 consecutive years of dividend increases.

The fund's 10 largest holdings comprise about 40% of its value. It holds higher allocations of its largest holdings, which are among the highest-quality dividend-paying stocks.

The Schwab U.S. Dividend Equity ETF has offered a dividend yield of 3.4% over the last 12 months. That's more than double the S&P 500's average dividend yield of less than 1.5%. Investors get access to that attractive income stream at an ultra-low expense ratio of 0.06%. These features make it an ideal ETF for generating passive income.

Focused on the top high-yield dividend stocks

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD 0.50%) contains the 80 highest-yielding stocks in the S&P 500. Its focus on yield enables it to generate more dividend income for every dollar invested in the fund. It currently has a yield above 4%.

The fund holds a relatively equal weighting of each of its 80 holdings (its 10 largest positions only account for about 15% of its value). The fund rebalances each quarter to ensure it holds the 80 top-yielding stocks in the S&P 500. Its five largest holdings currently are:

  • Kellanova (2.9% yield)
  • Kenvue (3.6% yield)
  • Public Storage (3.3% yield)
  • Ventas (2.8% yield)
  • Regency Centers (3.6% yield)

Given its focus on yield over dividend quality, this ETF is a little riskier than the Schwab U.S. Dividend Equity ETF. Companies in the SPDR Portfolio S&P 500 High Dividend ETF have higher risks of needing to reduce or eliminate their payouts if they run into financial issues. That could impact future dividend payments from the fund if several holdings were to cut their dividends. A series of cuts among its components would also likely weigh on the fund's value.

However, investors can earn a higher yield in exchange for a slightly higher risk profile. Further, the fund's broad diversification spreads out its risks. And it, too, charges investors an ultra-low expense ratio -- just 0.07% -- which enables investors to keep more of their dividend income and share price gains.

Great ways to generate some passive income

ETFs are very passive investments. Because of that, high-dividend ETFs can be an ideal way to generate passive income. The Schwab U.S. Dividend Equity ETF provides access to 100 of the highest quality dividend stocks, while the SPDR Portfolio S&P 500 High Dividend ETF gives investors exposure to the 80 highest-yielding stocks in the S&P 500. Either fund is a great option for those seeking to sit back and watch the passive income flow into their brokerage account.