Three Dividend-Focused ETFs Worth Investing in for Effortless Earnings
Investing, even for a short period, emphasizes the significance of diversifying your portfolio to reduce risk. This can be achieved in various ways, including diversifying sectors and market capitalizations. For income investors, diversifying sources of passive income is crucial, especially when you can find exchange-traded funds (ETFs) that offer higher yields than the S&P 500's current yield of around 1.2%.
One such ETF is the Energy Select Sector SPDR Fund, or XLE (-2.08%). This ETF is a great choice for investors seeking passive income and exposure to leading businesses in the energy sector. The fund aims to offer investors a comprehensive representation of oil and gas businesses, energy equipment and services, and consumable fuel businesses. XLE has a yield of around 3% and a low expense ratio of 0.08%, which means investors won't lose a significant portion of their dividends to fees.
Top holdings in the fund include oil supermajors such as ExxonMobil, Chevron, and ConocoPhillips, along with pipeline stocks like Williams Cos. and ONEOK.
Another appealing option is the iShares Select Dividend ETF, or DVY (-0.45%). This ETF includes U.S. stocks with a five-year history of paying dividends, which means it covers a broad swath of industries and market caps. Utilities and financials stocks make up the most significant positions in the iShares Select Dividend ETF: 29% and 28%, respectively.
While the fund prioritizes stocks with a five-year history of paying dividends, it still features tickers with impressive streaks of hiking their payouts for decades. For instance, Altria, a tobacco stock, has boosted its dividend every year for over five decades, making it a Dividend King.
Finally, there's the Vanguard Utilities ETF, or VPU (-0.03%). This ETF includes various utilities, such as electricity, water, gas, and independent power producers, aimed at tracking the performance of a benchmark index that measures the investment return of stocks in the utilities sector.
Renewable energy giants, like NextEra Energy and Constellation Energy, are among the top two positions in the fund with weightages of 11.2% and 7.2%, respectively. The Vanguard Utilities ETF has a yield of around 2.9% and an extremely low expense ratio of 0.09%. Utility stocks are often sought after for their reliability and consistent cash flows, which is why the Vanguard Utilities ETF is a great choice for investors focused on dependable income sources.
So, if you're an investor interested in the opportunities that sector ETFs can provide, you should explore these options further, especially since they charge tiny management fees. If, instead, you want exposure to a wider swath of industries, the iShares Select Dividend ETF might be more appealing.
Diversifying your portfolio to mitigate risk in the world of finance often involves exploring sector ETFs. For instance, the Energy Select Sector SPDR Fund (XLE) aims to supplement income by offering exposure to leading businesses in the energy sector, with a yield of around 3%. To supplement your income and mitigate risk, you might consider selecting ETFs like XLE or the iShares Select Dividend ETF, which includes a broad swath of U.S. stocks with a five-year history of paying dividends. Effective portfolio management can involve finding ETFs that outperform the benchmark, like the Vanguard Utilities ETF, which has a yield of around 2.9% and low expense ratios.
