If you’re approaching retirement or are already retired, you’d be thinking harder than ever for ways to supplement your income. Many retirees dream of building a large enough portfolio that they can live off dividend income. But this needs planning, timely investment, and a diverse set of investment assets. To be able to build a nest egg for retirement, you need to set up multiple income streams for the years. One way to achieve it is through dividends.
There are several companies that pay dividends to shareholders, but if you do not want to research and regularly update your investment portfolio, consider investing in exchange-traded funds (ETFs). They are low-risk, highly diversified investment products that also pay dividends. One of the most popular dividend ETFs is the Vanguard High Dividend Yield ETF (NYSEARCA:VYM). It has a yield of 2.85% and pays quarterly dividends. However, there are better dividend ETFs worth considering. We’ll take a look at them here.
SPDR S&P Dividend ETF
A premier dividend ETF by State Street, the SPDR S&P Dividend ETF (NYSE:SDY) was launched in 2005 and has $20 million in assets under management. The fund tracks the performance of the S&P High Yield Dividend Aristocrat index. It holds companies that have increased dividends for at least two decades, and the stocks are weighted by their dividend yield. Stocks in the ETF have both dividend income and capital growth potential.
It holds 149 stocks and has an expense ratio of 0.35%. The fund has a yield of 2.58% and pays quarterly dividends. It has generated a return of 10.80% in 3 years and 11.68% in 5 years.
The fund has the highest allocation in industrials (18.88%), consumer staples (16.78%), and utilities (16.16%). Its top holdings include strong dividend-paying companies such as Realty Income, Verizon Communications, Chevron Corporation, PepsiCo, Johnson & Johnson, and NextEra Energy. The top 10 stocks account for 18.95% of the portfolio.
The biggest advantage offered by the ETF is the impressive track record of dividend increases of the stocks held in the portfolio. Some of the companies are dividend aristocrats that have not only generated passive income but also shown impressive capital appreciation. Exchanging hands for $139, the NAV is up 6.3% in 2025 and 43% in five years.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is one of the best dividend ETFs to buy today. Offered by the experts at Charles Schwab Asset Management, the ETF tracks the Dow Jones U.S. Dividend 100 index. It only invests in stocks that have a history of consistent dividend payouts. Each stock is screened for fundamentals and compared to its peers in the industry. This ensures top-quality stocks in the fund.
SCHD holds 103 stocks and owns the top dividend-paying companies. The fund only invests 12.5% in the technology industry and communication services. It invests 19.2% in energy, 18.8% in consumer staples, and 15.5% in healthcare. The fund has a low expense ratio of 0.06% and a yield of 3.93%. Its top 10 holdings include AbbVie, PepsiCo, Chevron Corporation, Coca-Cola, and Home Depot.
The fund has generated a cumulative return of 11.27% in 3 years and 12.05% in five years. Its NAV has remained flat in 2025, but the fund focuses on steady income over growth. With SCHD, you get to own top-quality businesses that have strong fundamentals and the ability to sustain dividends. This ensures a higher total return. When we consider total return, it includes dividends and capital gain.
SPDR Portfolio S&P High Dividend ETF
Another ETF by State Street, the SPDR Portfolio S&P High Dividend ETF (NYSEARCA:SPYD) tracks the performance of the S&P 500 High Dividend Index. The fund invests in 80 high dividend yield companies and focuses on steady income. It has a yield of 4.77% and a low expense ratio of 0.07%.
SPYD gives you an opportunity to invest in real estate. The fund has 21.99% holdings in real estate, 16.63% in consumer staples, and 15.27% in financials. Its top 10 holdings are a diverse mix of different industries. The stocks include Best Buy Inc., CVS Health Corporation, AbbVie, and Energy Inc. With a high weightage on the real estate and utilities sector, SPYD could see a potential rebound in the coming months. The ETF has generated a 3-year return of 12.54% and a 5-year return of 15.19%.
Investors continue to worry about the market these days, and this is when SPYD can be a smart investment. Since it invests in only 80 companies, the weightage on each company is high, ensuring you get the most of its growth. The fund can deliver quality results even in uncertain times.
SPYD has an NAV of $43.42 and has remained flat this year. The fund has a no-nonsense approach, and its high yield makes it an ideal choice for retirees.
JPMorgan Equity Premium Income ETF
The JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) is a slightly different fund that enjoys the highest yield out of all the ETFs discussed here. It provides monthly dividends and offers equity market exposure with less volatility. The fund has an options call strategy. It invests 80% of the assets in stocks and the balance in equity-linked notes. JEPI sells call options on the S&P 500 index and collects a premium as an income, thus maintaining an impressive yield of 7.17%.
It holds 124 stocks and has a defensive equity portfolio, which has carefully selected stocks based on research and stock rankings. JEPI has the highest allocation in the technology sector (15.5%), financials (13.3%), and industrials (11.8%). Its top 10 holdings include the biggest tech names, such as Meta Platforms, Amazon, and Visa.
JEPI has generated a cumulative 3-year return of 44.26% and 5-year return of 65.65%.
The ETF’s options-writing strategy has been a game changer for investors. It is hard to find a yield of 7% at low risk. JEPI has an expense ratio of 0.35%. While there’s little risk due to the equity- linked notes, the diverse portfolio ensures steady premium and dividend payouts. Since the fund pays monthly dividends, it can help cover expenses, and reinvestment of the dividends can enhance your overall portfolio value.
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