SCHD, VIG, DGRO, VYM, SDY: 5 ETFs to Build Wealth for Retirement

It doesn’t hurt to have a source of passive income in your retirement supported by your investment portfolio. Whether you are inching closer to the golden years or are already retired, an investment portfolio that generates steady income can help cover your expenses. During retirement, it is best to keep things simple and identify investments that are cost-effective. 

Exchange-traded funds (ETFs) can be an ideal choice if you do not want a hands-on approach to investing. ETFs invest in a bundle of stocks and track an index. You’ll get to own a diversified portfolio at low cost and enjoy steady income over the years. ETFs tend to get the job done well, and with an ocean of products in the market, you don’t need to dig through each one. We’ve got that covered for you. Here are five ETFs to buy to enjoy a comfortable retirement. 

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is my favorite and I’ve covered it several times in the past. It has an attractive yield of 3.67% and is a strong performer. A higher yield means there’s a trade-off between modest capital appreciation and dividends. But if you’re someone who seeks steady income, SCHD won’t disappoint. 

The fund tracks the Dow Jones U.S. Dividend 100 index and includes only those companies that have 10 consecutive annual dividend increases. These stocks are given a composite score that looks at the cash flow to total debt, dividend yield, return on equity, and five-year dividend growth rate. The companies with the highest scores are included in the ETF. It allows you to own the best 100 businesses in the country. SCHD has a modest expense ratio of 0.06%. 

Its complex approach to picking dividend stocks set it apart from others. The fund has the highest allocation in the energy sector (19.23%), followed by consumer staples (18.81%) and healthcare (15.53%). The top 10 holdings are strong dividend payers like Coca-Cola, AbbVie, Chevron, and Verizon Communications. 

Vanguard Dividend Appreciation Index Fund 

One of the top ETFs from Vanguard, the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) is a solid performer. It tracks the performance of the S&P U.S. Dividend Growers Index. The ETF has a powerful dividend growth strategy and enjoys a yield of 1.63%. With VIG, you enjoy high capital appreciation potential and steady dividend income. 

It holds 337 stocks and has the highest allocation in the technology sector (26.10%), followed by financials (22.60%) and healthcare (15.10%). Its top 10 holdings include large tech players such as Microsoft, Apple, and Broadcom. But it also has strong dividend-paying stocks like Exxon Mobil, Walmart, and Johnson & Johnson. 

Its share price is up 239% in a decade and 51.10% in 3 years. The fund has an expense ratio of 0.05% and does its job well. 

iShares Core Dividend Growth ETF

An excellent ETF by iShares, the iShares Core Dividend Growth ETF (NYSE:DGRO) can turbocharge your portfolio. The dividend ETF has a yield of 2.19%. The fund tracks the Morningstar US Dividend Growth Index and focuses on companies with at least five years of uninterrupted dividend growth. 

It has an ultra-low expense ratio of 0.08% and ensure high-quality holdings. It only invests in companies that have a strong dividend growth record and includes real estate investment trusts (REITs). DGRO holds 397 companies and pays quarterly dividends. While dividends can fluctuate over time, the fund rebalances regularly to hold only the top-quality businesses. 

Its NAV is up 44% in 3 years and 91% in 5 years. It invests 20.31% in the financial sector, followed by 18.06% in information technology and 16.84% in healthcare. The top 10 holdings include some of the biggest dividend-paying companies such as Johnson & Johnson, Exxon Mobil, Procter & Gamble, Broadcom, and Home Depot.  

Vanguard High Dividend Yield Fund ETF

The Vanguard High Dividend Yield ETF (NYSEARCA:VYM) tracks the FTSE High Dividend Yield Index. It invests in 579 stocks and has an attractive yield of 2.48%. It is a yield-focused fund ,which can bump up your passive income without a lot of trouble. It invests in some of the biggest dividend-paying companies, like Walmart, Johnson & Johnson, Chevron, and ExxonMobil. 

VYM has the highest allocation in the financial sector (21.70%), followed by industrials (13.20%) and technology (12.20%). The fund offers a combination of both income and growth. Besides the yield, it has seen a 196% jump in its share price over the past decade. In 3 years, it has jumped 46%. 

The ETF has a low expense ratio of 0.06%, which is much lower than the industry average ratio for passively managed funds. Lower fees mean you get to keep more of your gains.

SPDR S&P Dividend ETF

The SPDR S&P Dividend ETF (NYSEARCA:SDY) tracks the highest dividend-paying companies in the S&P Composite 1500 index. It only invests in companies that have a dividend increase history for at least 20 years, making it one of the most reliable ETFs in the market. A bunch of the stocks qualify as dividend aristocrats. 

It has an expense ratio of 0.35% and invests 19.06% in industrials, followed by 16.82% in consumer defensive and 15.57% in utilities. The fund holds 149 stocks and pays quarterly dividends. SDY has a yield of 2.57% and also invests in REITs to generate steady income. Its top 10 holdings include Realty Income, Verizon Communications, PepsiCo, AbbVie, Johnson & Johnson, and Chevron. 

SDY is one of the most secure dividend ETFs for retirement wealth. It has generated a 3-year annualized return of 7.36% and a 5-year return of 10.96%. The fund is an ideal blend of passive income and capital appreciation.