If the idea of making money while you sleep appeals to you, congratulations! You might enjoy dividends. But you don't have to sift through countless dividend stocks to build a dependable portfolio that will shower you with income. Instead, consider using exchange-traded funds (ETFs) to create a diversified dividend portfolio without breaking a sweat.
Here are five fantastic ETFs that offer high dividend yields to really crank up that passive income. Then, consider five more standout dividend-paying ETFs to add as complements. Together, these ETFs can form an excellent portfolio that will pay you while you sleep well at night.
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These five ETFs offer high yields from investments across stocks, Treasury bonds, and real estate
1. Schwab U.S. Dividend Equity ETF
To start, the Schwab U.S. Dividend Equity ETF (SCHD +0.14%) is a fantastic all-around high-yield ETF that focuses on blue chip dividend stocks in the Dow Jones U.S. Dividend 10 Index. The ETF currently has a 3.8% yield and charges a very modest expense ratio of 0.06%.
This ETF is only 8.3% weighted to technology stocks, making it a nice way to avoid the potential volatility that has crept into the broader stock market amid the artificial intelligence (AI) boom. Instead, the ETF emphasizes other market sectors, headlined by energy, consumer staples, and healthcare.
NYSEMKT: SCHD
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2. iShares 20+ Year Treasury Bond ETF
Investing in Treasury bonds can generate passive income while diversifying outside of the stock market. The iShares 20+ Year Treasury Bond ETF (TLT +0.80%) holds U.S. Treasury bonds with more than 20 years to maturity.
The ETF's trailing-12-month yield is just under 4.3%, and carries a 0.15% expense ratio. Treasury bonds are a traditional alternative to stocks, widely viewed as a haven from riskier assets. That said, interest rate fluctuations impact bond prices, so even this ETF isn't immune to the volatility that stocks are known for.
3. Pacer Global Cash Cows Dividend ETF
The Pacer Global Cash Cows Dividend ETF (GCOW +0.23%) follows an investment strategy focused on stocks with lots of free cash flow and high dividend yields. This focus on cash cow stocks inspired the ETF's name. The fund currently yields just over 4% and has an expense ratio of 0.6%.
NYSEMKT: GCOW
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This ETF tends to focus on mature industries, where companies often lack explosive growth but still deliver juicy profits that fund generous dividends. That means a heavy lean into healthcare, energy, and consumer staples. It also includes both U.S. and international stocks, adding another element of diversification.
4. SDPR Portfolio S&P 500 High Dividend ETF
The S&P 500 is a famous index of 500 prominent U.S. companies. The SPDR Portfolio S&P 500 High Dividend ETF (SPYD +0.17%) drills down into the S&P 500 index and invests in the 80 stocks with the highest dividend yields. As a result, the ETF offers a robust 4.6% yield while charging an expense ratio of only 0.07%.
This ETF provides investors with high exposure to real estate and utilities, two sectors that are often overlooked. While they account for less than 5% of the S&P 500 index, they account for roughly 35% of this fund. That makes it a great way to round out your portfolio.
5. Vanguard Real Estate ETF
Real estate is a timeless asset. But as you saw above, it has minimal representation in the S&P 500. The Vanguard Real Estate ETF (VNQ 0.07%) invests in more than 150 individual real estate investment trusts (REITs), companies that acquire and lease out real estate.
NYSEMKT: VNQ
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The ETF's REIT holdings span various industries, giving investors a healthy blend of real estate investments with just a single ticker symbol. The ETF is also great for the passive income it generates. Its current yield is just over 3.5% and the fund charges a reasonable expense ratio of just 0.13%.
Bonus round: These five compelling dividend ETFs complement the group above
6. Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (VYM 0.14%) seeks out prominent large-cap stocks with high yields. The ETF currently holds 566 stocks, led by financials, technology, industrials, and healthcare. The ETF yields a solid 2.4% with a very low expense ratio of just 0.06%.
7. Vanguard International High Dividend Yield ETF
The Vanguard International High Dividend Yield ETF (VYMI +0.16%) invests in high-quality, non-U.S. stocks with outsize dividend yields. The ETF holds over 1,500 names, with no single stock comprising more than 1.56% of the fund. International stocks are an essential component of a diversified portfolio, and this ETF makes investing in non-U.S. companies very simple.
8. Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (VIG 0.44%) dials back the yield and cranks up the growth. It yields just 1.6%, but focuses more on faster-growing companies and industries. That's why technology and financials combine for almost half of this ETF, with some "Magnificent Seven" stocks among its top holdings. A low 0.05% expense ratio makes this ETF a solid way to get some growth into your dividend portfolio.
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9. iShares Core Dividend Growth ETF
The iShares Core Dividend Growth ETF (DGRO 0.23%) offers a similar growth focus. It emphasizes companies with a track record of consistently increasing dividends. It also provides a bit more breadth, with financials, technology, healthcare, consumer staples, and industrials all carrying double-digit weightings. The ETF currently yields just over 2% and has a low expense ratio of 0.08%.
10. CGDV Capital Group Dividend Value ETF
The CGDV Capital Group Dividend Value ETF (CGDV 0.29%) rounds out the lot. It invests with a simple goal: to exceed the average dividend yield of U.S. stocks. That translates to its current 1.4% yield and a reasonable expense ratio of 0.33%. The companies in this ETF tend to be mature large-cap stocks, with the most exposure found in the technology, industrials, healthcare, and consumer discretionary market sectors.
