Shifting from higher-risk assets to consistent income sources is a natural progression for retirees. The solution doesn’t have to be complicated as exchange traded funds (ETFs) offer a straightforward, low-cost pathway to steady income.
Quietly but quickly, retirement investors are flocking to funds that pay dividends. This strategy can help to combat the wealth-eroding effect of inflation. Be aware, though, that dividend ETF investing isn’t a cheat code or a get-rich-quick scheme.
Rather, it’s a sensible way to build your nest egg, but only if you choose funds that are diversified while also offering decent yield, low expenses, and share-price growth. Right now, I’ll show you three ETFs that can help you grow your wealth without sacrificing your safety or peace of mind.
Schwab U.S. Dividend Equity ETF (SCHD)
I’m putting my favorite pick right up front today as the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is practically perfect for retirees. Immediate diversification could be at your fingertips with the SCHD ETF as it includes 101 holdings spanning multiple economic sectors.
Familiarity is the name of the game with the Schwab U.S. Dividend Equity ETF. With this fund, you’ll get exposure to famous names like Lockheed Martin (NYSE:LMT), Verizon (NYSE:VZ), Bristol-Myers Squibb (NYSE:BMY), and PepsiCo (NASDAQ:PEP).
In other words, you’re not just chasing dividend yields with the SCHD ETF. Instead, you’re balancing safety and diversification with high yield and share-price growth for the long term.
Speaking of yield, the Schwab U.S. Dividend Equity ETF emphasizes “the quality and sustainability of dividends,” so its not just picking stocks randomly. Impressively, the SCHD ETF advertises a trailing 12-month (TTM) distribution yield of 3.51%, so the fund is a powerful passive income generator.
In addition, the Schwab U.S. Dividend Equity ETF deducts a very low annualized expense ratio of 0.06%. That equates to just $0.06 per year for every $100 invested in the fund. Thus, the SCHD ETF is truly a low-cost wealth builder that retirees can turn to in 2026.
iShares Select Dividend ETF (DVY)
Another top-notch pick for yield harvesters the iShares Select Dividend ETF (NASDAQ:DVY). This one deducts a higher annualized expense ratio of 0.38%, but retirees will find that the DVY ETF gives them a real bang for their buck.
First and foremost, the iShares Select Dividend ETF offers access to 105 holdings; the main focus is on U.S. stocks with five-year records of paying dividends. The DVY ETF includes plenty of blue-chip stocks, such as Ford Motor (NYSE:F), Pfizer (NYSE:PFE), Altria (NYSE:MO), and Archer-Daniels-Midland (NYSE:ADM).
Clearly, the iShares Select Dividend ETF doesn’t delve into excessively risky assets. By covering a variety of industries and homing in on businesses that have paid dividends for at least five years, the DVY ETF takes much of the stress out of high-yield investing.
Like the other funds on this list, the iShares Select Dividend ETF pays out its dividend distributions every three months. Plus, you’ll surely be glad to know that the DVY ETF currently advertises a TTM distribution yield of 3.42%. This just goes to show that some funds are worthwhile for retirees even if they deduct slightly higher operating expenses.
In addition, like the SCHD ETF, the chart shows that the iShares Select Dividend ETF tends to rise over time. Hence, you probably won’t have to worry about the DVY ETF losing all of its value while you’re collecting the quarterly dividend distributions.
First Trust Morningstar Dividend Leaders Index Fund (FDL)
Our third pick is a fund that’s gaining traction and attracting attention among yield seekers of practically all ages. I’m talking about the First Trust Morningstar Dividend Leaders Index Fund (NYSEARCA:FDL), an ETF that’s bound to be the next dividend superstar.
Using a “proprietary screening model,” the First Trust Morningstar Dividend Leaders Index Fund selects companies that “have historically maintained consistent and sustainable dividend policies.” With 86 holdings, the FDL ETF includes market leaders like Exxon Mobil (NYSE:XOM), General Mills (NYSE:GIS), Conagra Brands (NYSE:CAG), and Merck (NYSE:MRK).
Along with its slew of high-quality holdings, the First Trust Morningstar Dividend Leaders Index Fund is catching the attention of retirement investors because it’s an upward-trending ETF. Encouragingly, the FDL ETF’s share price has risen 63% over the past five years.
Furthermore, while the First Trust Morningstar Dividend Leaders Index Fund deducts a 0.43% annualized expense ratio, the fund’s dividends will more than make up for that. Today, the FDL ETF carries a TTM distribution yield of 3.74%, so the costs are low when compared to the yield and the share-price appreciation.
For those reasons, the First Trust Morningstar Dividend Leaders Index Fund can be your secret weapon while more and more investors discover it. At the same time, retirement investors can conduct their due diligence on the SCHD and DVY ETFs to maximize their passive income prospects.
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