When you retire, a significant shift in your investing strategy is necessary. Your aim shifts from capital accumulation to preservation, meaning you no longer take considerable risks. Instead, you try to keep as much as you have while making the most income out of it. Sensible retirement investing will get you fair gains that keep you ahead of inflation.
The market has delivered terrific gains in the past three years. Historically, such gains are precursors to big corrections. No one can say when that can happen, but it’s better to err on the safe side if you are retired. The best way to do so is by investing in dividend exchange-traded funds that can buck the trend and keep mailing you checks regardless of what the broader economy is doing.
Here are five dividend ETFs to look into:
Amplify CWP Enhanced Dividend Income ETF (DIVO)
Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) is an actively-managed ETF with a dual-income strategy. It invests at least 80% of its assets into dividend stocks and uses a covered call writing strategy.
DIVO takes stocks from the S&P 500 index and overlays them with covered calls. This is much more stable compared to ETFs that almost exclusively rely on premiums for income. You get more exposure to equity upside with a lower beta (volatility) than the broader market. A beta of 1 means an asset is just as volatile as the broader market. DIVO has a 0.72 beta.
DIVO comes with a 4.51% trailing 12-month yield and pays dividends monthly. The yield comfortably beats most other ETFs of its class, and monthly payments are more convenient for retirees.
The expense ratio is 0.56%, or $56 per $10,000.
Franklin International Low Volatility High Dividend Index ETF (LVHI)
Franklin International Low Volatility High Dividend Index ETF (BATS:LVHI) tracks the QS International Low Volatility High Dividend Hedged Index. It gives you exposure to international dividend-paying stocks while keeping volatility and currency risk low.
At least 80% of its assets go towards that index. LVHI also uses currency hedging to mitigate exposure to exchange-rate fluctuations between the USD and other international currencies. This helps protect investors from currency-related losses when international markets decline relative to the dollar.
LVHI has a 5.09% yield and an expense ratio of 0.40%, or $40 per $10,000.
iShares 20+ Year Treasury Bond ETF (TLT)
Not all your dividend ETFs have to derive their income from the stock market. The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) is an excellent choice as it gets you stellar yields while keeping risks low.
When you zoom out on TLT, you may immediately notice that it has declined 46.2% over the past five years. That’s mainly due to interest rate hikes making it unappealing for investors to park their money in TLT. However, that’s what makes it so appealing right now, since interest cuts are underway once more. The Federal Reserve cut interest rates last week, and the market expects cuts to continue.
TLT is currently at $88.9, which is near its historical lows of around $80. As interest rates go down, TLT will surge back in earnest and can deliver triple-digit returns.
In the meantime, you can collect a 4.34% dividend yield, paid monthly. The expense ratio is also 0.15%, or $15 per $10,000.
Janus Henderson AAA CLO ETF (JAAA)
Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) invests in AAA-rated collateralized loan obligations. The ETF maintains at least 80% of its portfolio in AAA-rated CLOs under normal market conditions.
AAA is the highest possible credit rating, and these CLOs are solid in terms of stability. They are unlikely to default even during a recession, so you’ll keep getting dividends.
JAAA pays monthly and has a 5.63% dividend yield. The expense ratio is 0.20%, or $20 per $10,000.
NEOS Nasdaq-100 High Income ETF (QQQI)
While stability and capital preservation should be your main focus, having exposure to tech stocks and their upside is also important. The NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI) gives you that exposure and pays handsomely.
It uses covered call options to generate a double-digit yield. The ETF first buys Nasdaq-100 stocks while simultaneously writing call options against the NDX (Nasdaq-100 Index), which generates premium income for monthly distributions.
QQQI also uses call spreads that allow for greater participation in upward market movements when they occur. However, if the market does go down sharply, QQQI will have a hard time, though you’re still likely to make money long-term.
QQQI yields 13.42% and has an expense ratio of 0.68%, or $68 per $10,000. It pays monthly.
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