Selecting and monitoring a portfolio of stocks is a lot of work. Exchange-traded funds (ETFs) are a way to buy stocks with less effort. And, if you are a dividend lover, Schwab U.S. Dividend Equity ETF (SCHD 0.50%), SPDR Portfolio S&P 500 High Yield ETF (SPYD 0.43%), and Amplify CWP Enhanced Dividend Income ETF (DIVO +0.20%) are three great high-yield options for you to choose from. Here's what you need to know about each one.
Schwab U.S. Dividend Equity ETF does what you would do
Schwab U.S. Dividend Equity ETF uses a complex screen to select stocks. It starts by limiting its candidate pool to only those companies that have made at least 10 consecutive annual dividend increases. That's a screen that many dividend investors use, too. (Real estate investment trusts are excluded from consideration.) After that, it creates a composite score for the remaining stocks under consideration.
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The final score is a composite of cash flow-to-total debt, return on equity, dividend yield, and a company's five-year dividend growth rate. These are all factors that dividend investors consider, with the goal of highlighting financially strong, well-run companies that have attractive yields and growing dividends. The 100 stocks with the highest composite score are included in the portfolio, using a market-cap weighting system.
The dividend yield is around 3.3% today, three times higher than the 1.1% yield of the S&P 500 index (^GSPC +1.18%). And the expense ratio is a tiny 0.06%. The best part is that Schwab U.S. Dividend Equity ETF's complex approach has resulted in a generally rising price and dividend over time, which is exactly what most dividend investors want to achieve, too. You can buy around 16 shares with a $500 investment.
NYSEMKT: SCHD
Key Data Points
SPDR Portfolio S&P 500 High Yield ETF builds off the S&P 500
SPDR Portfolio S&P 500 High Yield ETF takes a shortcut by considering only S&P 500 index stocks. Companies in the index are selected by a committee and are generally large and economically important businesses. The ETF then sorts the list by dividend yield and selects the 80 stocks with the highest yields, weighting them each equally. Simple and easy to understand.
NYSEMKT: SPYD
Key Data Points
Using equal weighting helps to limit risk, since each stock has the same impact on performance. That's notable because selecting the highest-yielding stocks from the S&P 500 index will tend to lead to concentrations in utilities, financials, real estate, and in companies that are currently struggling. That said, the nearly 4.1% yield will hit a sweet spot for many dividend investors, and the 0.07% expense ratio is very modest. A $500 investment will let you buy around 10 shares.
Amplify CWP Enhanced Dividend Income ETF is a bit complex
Amplify CWP Enhanced Dividend Income ETF is an actively managed ETF, so there's no set stock selection approach. However, management focuses on well-run, dividend-paying companies. The portfolio generally includes around 30 or so stocks. Management strategically sells covered calls on these stocks to enhance the ETF's yield. So far, the results have been strong, with growth in the price and a fairly reliable dividend over time.
NYSEMKT: DIVO
Key Data Points
This covered call ETF offers an attractive yield of around 4.9%, but the dividend can vary greatly from month to month depending on the success of the options strategy. The active management also leads to a higher expense ratio of around 0.56%. While Amplify CWP Enhanced Dividend Income ETF probably shouldn't be the only high-yield ETF you own, it would pair nicely with either of the two ETFs above. You'll get around 11 shares with a $500 investment.
Getting more for less work
You don't need to spend hours finding dividend stocks and monitoring your portfolio if you don't want to. Dividend ETFs like Schwab U.S. Dividend Equity ETF, SPDR Portfolio S&P 500 High Yield ETF, and Amplify CWP Enhanced Dividend Income ETF provide you with diversification and high yields with one easy decision. Take the time to get to know this trio of high-yield dividend ETFs, and at least one is likely to find its way into your portfolio today.
