The Only 4 Dividend ETF’s You Will Ever Need
With yields as high as 12%
Dividends are a powerful force in a portfolio that allows for the steady generation of income. They reward shareholders for owning the company, and optimally start a snowball of wealth in long periods of time.
Introducing Dividend ETF’s
Much like the name states, dividend ETF’s are exchange traded funds that seek to pay the investor consistent and relatively high cash payments, while compromising on certain aspects like growth and appreciation.
In this article I will be showcasing you 4 of my favorite dividend ETF’s that each offer different strategies when it comes to generating income and distributing it to investors.
What’s all the hype around dividends?
Historically speaking, companies that have paid dividends for extended periods of time have experienced less volatility, along with more stable growth. On the contrary, companies that don’t pay dividends to their shareholders instill less investor confidence, as there is no intrinsic value to hold shares.
One of the most valuable parts of dividend investing, however, is…
Exponential Growth
That’s right! If an investor chooses to re-invest their dividend payments, they are able to accumulate more shares, allowing them to collect more from future payments.
Although this process is slow, starting early will heavily reward investors in the future.
In this figure above, a simulation is casted with a 1% yield per month, with no other contributions or costs. As you can see, after 50 years, $1,000 turns into >$40,000!
Top 4 Dividend ETF’s
#4: Global X NASDAQ 100 Covered Call ETF (QYLD)
Volatility: Medium/High
Dividend Yield (%): 12%
Strategy: QYLD holds the Nasdaq 100 index of stocks, and sells covered calls on those stocks to generate income. Selling covered calls is an options strategy that limits the stock’s upside in return for a premium that is paid out as the near 1% monthly dividend. Beware, however, that QYLD is not downside protected, and is hit hard by market corrections. It fits perfectly in a young and aggressive dividend investor that can stomach broad market downturns without batting an eye.
#3: Schwab US Dividend Equity ETF (SCHD)
Volatility: Medium
Dividend Yield (%): 3.5% + Growth
Strategy: SCHD holds companies that pay high dividends and plan on increasing them year-over-year. These types of companies are also known as “dividend aristocrats.” SCHD, despite its low technical yield, offers plenty of share appreciation along with a larger buffer of historically safe companies that you can rest assured with during a market downturn. SCHD is the perfect pick for someone who wants to capture equity while also getting paid a large amount in dividends.
#2: JPMorgan Equity Premium Income ETF (JEPI)
Volatility: Medium
Dividend Yield (%): 8% + Growth
Strategy: JEPI is one of my all-time favorite ETF’s, due to its massive dividend and growth combination. JEPI generates returns through investing in manager-chosen undervalued S&P 500 companies, while selling options to retain a monthly dividend. This combination allows for an almost-unheard of dividend yield coupled with lower volatility and decent growth. If I had to pick only 1 ETF from this list to invest into for the rest of my life, I would choose JEPI.
Keep in mind that this is the only ETF on this list that is not passively-managed, which comes with manager risk alongside it.
#1: Nationwide Risk-Managed Income ETF (NUSI)
Volatility: Low
Dividend Yield (%): 8%
Strategy: NUSI is a lot like QYLD, which starred at #4 on this list, except with 1 major difference. NUSI is downside protected, at a small sacrifice of the dividend yield. With a monthly dividend payment and an annual yield of 8%, NUSI is probably the safest option on this link. If the markets choose to plunge beyond a certain point, options that NUSI holds will trigger minimizing any further losses. NUSI is perfect in a portfolio for someone who is thinking about retiring and wants a stable and low-volatility investment that they can forget about.
Conclusion
Those who are in the market for a dividend ETF have a lot to do research about. With lucrative and appetizing new ETF’s springing up at a fast pace, it gets harder to discern which one is the best fit for your portfolio.
I hope you found value in this article, and remember that this is not financial advise.
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