Best Dividend ETFs for Long-Term Income: SCHD vs. SPYD

Why Invest in Dividend ETFs for Steady Income?

Investing in dividend stocks is a proven way to generate ongoing income, but relying on just one or two companies carries significant risk. If a dividend is cut or suspended, your portfolio's income stream could be disrupted. A smarter approach is to invest in a diversified exchange-traded fund (ETF) focused on dividend-paying stocks. ETFs offer exposure to dozens of companies, spreading risk and helping to deliver consistent cash flow over time.

Two standout options for dividend investors seeking both growth and reliability are the Schwab U.S. Dividend Equity ETF (SCHD) and the SPDR Portfolio S&P 500 High Dividend ETF (SPYD). Both funds boast attractive yields around 4%, making them ideal core holdings for a long-term, income-focused portfolio.

Schwab U.S. Dividend Equity ETF (SCHD)

Key Features

  • Low Fees: SCHD features a remarkably low expense ratio of 0.06%, keeping more of your returns in your pocket.
  • Focused Holdings: Unlike broad-market ETFs that hold hundreds or thousands of stocks, SCHD concentrates on approximately 100 high-quality names. This gives investors targeted exposure to established, dividend-paying companies.
  • Quality Emphasis: The fund invests in companies with strong fundamentals and a track record of sustainable dividends. Top holdings include household names like Coca-Cola, Home Depot, and Verizon Communications—companies well-regarded for their reliability and income potential.
  • Stability: Most of SCHD’s holdings are large-cap firms, with over 60% having market capitalizations above $70 billion. This focus on size and stability supports regular dividend payments.
  • Performance: Year-to-date, SCHD has experienced only a modest 2% decline amid market volatility. Its beta is under 0.8, suggesting lower overall risk and less price fluctuation than the broader market—an attractive feature for conservative, income-oriented investors.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

Key Features

  • High Yields: SPYD offers an impressive yield of around 4.5%, making it a strong option for those seeking higher dividend income.
  • Affordable Fees: With an expense ratio of 0.07%, SPYD is another cost-effective choice for long-term investment.
  • Blue-Chip Exposure: This ETF tracks the S&P 500 High Dividend Index, currently holding about 77 of the highest-yielding stocks in the prestigious S&P 500. This provides investors with access to thoroughly vetted, stable companies.
  • Diversification: No single stock accounts for more than 2% of the fund's weight, reducing the risk from any one company.
  • Defensive Sectors: SPYD leans toward defensive sectors such as real estate and utilities, which currently comprise roughly 42% of the portfolio. These sectors tend to offer stability and resilience during market downturns.
  • Performance: SPYD’s conservative approach means its returns have historically trailed SCHD and the broader S&P 500, but it remains down only about 1% year-to-date. For those prioritizing income over growth, SPYD is a compelling addition.

Which Dividend ETF Should You Choose?

Both SCHD and SPYD can serve as strong foundations for building long-term, dividend-focused portfolios. SCHD may be preferable for investors seeking quality and total return with less risk, while SPYD will appeal to those prioritizing highest yield and broader diversification within the S&P 500. By adding one—or both—to your portfolio, you can establish a steady, reliable income stream for years to come.

This content is for informational purposes only and does not constitute financial advice.

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