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For income-focused investors, high-yield dividend exchange-traded funds (ETFs) present a reliable way to generate steady cash flow while benefiting from a diversified portfolio of dividend-paying companies. These funds often provide lower volatility than individual stocks, making them an attractive option for new and seasoned investors. They can also provide a faster path to diversification because they often contain hundreds of equities, bonds and other types of securities.
Not all high-yield ETFs are created equal. As an investor, you want to key in on a few crucial factors: fees, holdings and track records. Some ETFs can be riskier but provide rewards in the form of higher returns. ETFs aren’t the only way to earn high yields. There are other alternative high-yield investment options outside of traditional markets to consider.
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Reliable Option 1: Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSE:SCHD) focuses on high-dividend-yielding U.S. stocks, emphasizing quality and sustainability. It tracks the returns of the Dow Jones U.S. Dividend 100⢠Index, with 90% of its net assets invested in these stocks. With a trailing 12-month yield of 3.43% and a 10-year annualized return of 10.84%, SCHD can be a solid choice for investors seeking income and growth potential. This ETF’s top holdings include major companies such as Lockheed Martin (NYSE:LMT), AbbVie (NYSE:ABBV) and Home Depot (NYSE:HD), offering a balanced blend of stability and profitability.
Reliable Option 2: Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (NYSE:VYM) uses the FTSE High Dividend Yield Index as a benchmark and focuses on stocks forecasted to have above-average dividend yields. It follows a passively managed, full-replication approach. With a trailing 12-month yield of 2.87% and a 10-year annualized total return of 10.07%, VYM has consistently provided investors with both reliable income and capital appreciation. Top holdings include Broadcom (NASDAQ:AVGO), JPMorgan Chase & Co. (NYSE:JPM) and Exxon Mobil (NYSE:XOM), making VYM a robust choice for conservative investors.
Reliable Option 3: iShares Select Dividend ETF
The iShares Select Dividend ETF (NASDAQ:DVY) is another reliable option for income seekers. Its benchmark is the Dow Jones U.S. Select Dividend Index. The ETF has had a trailing 12-month yield of 3.52% and a 10-year annualized return of 9.61%. DVY’s portfolio includes high-yield stocks such as Altria Group Inc. (NYSE:MO), Phillip Morris International (NYSE:PM) and AT&T (NYSE:T), offering a reliable blend of income and potential capital appreciation.
Risky, Ultra High-Yield Option: Global X SuperDividend ETF
For investors with a higher risk tolerance, the Global X SuperDividend ETF (NYSE:SDIV) offers a compelling, albeit risky, opportunity. SDIV targets the highest-yielding dividend stocks globally, boasting a trailing 12-month yield of 10.72%. However, the ETFâs 10-year total return of -3.60% reflects the significant risks involved. SDIV’s portfolio is composed of companies like Lufax Holding (NYSE:LU), Yue Yuen Industrial and Astra International. Although 35% of current holdings are U.S.-based, this ETF has heavy exposure to Hong Kong, Britain and Australia.
Moving Beyond ETFs
While high-yield dividend ETFs can be a way to generate passive income, investors might also want to explore alternative options for potentially higher returns. Two such options are Yieldstreet and Groundfloor.
Yieldstreet
Yieldstreet offers access to a diverse range of asset classes, including real estate, art, and legal finance, allowing accredited investors to diversify beyond traditional stocks and bonds. The platform’s investments typically offer yields between 7% and 12%, depending on the risk profile and duration. Yieldstreet allows individuals to invest in professionally managed alternative assets that were previously reserved for institutional investors.
Groundfloor
Groundfloor is a real estate crowdfunding platform focused on short-term, high-yield real estate debt investments. Aiming to offer returns between 8% and 15%, Groundfloor allows investors to fund real estate projects across the U.S. with a minimum investment of just $10. The platformâs unique approach can allow investors to earn high yields by participating in the funding of residential real estate projects, often with shorter holding periods compared to traditional real estate investments.
High-yield dividend ETFs can be a powerful tool for building a reliable stream of passive income. While the three reliable ETFs highlighted above offer a balanced mix of income and stability, the Global X SuperDividend ETF presents a riskier, potentially higher-yielding option for those looking to maximize their income potential. Additionally, alternative platforms like Yieldstreet and Groundfloor provide intriguing opportunities for investors willing to explore beyond traditional dividend-paying assets. As always, itâs crucial to consider your risk tolerance and investment goals when selecting the best options for your portfolio.
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This article Boost Your Passive Income With These High-Yield Dividend ETFs And Alternative Investment Options originally appeared on Benzinga.com
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