Three Divider-Rich Exchange-Traded Funds (ETFs) to Acquire for Generating Passive Revenue

Three Divider-Rich Exchange-Traded Funds (ETFs) to Acquire for Generating Passive Revenue

Earning money without putting in any effort is known as passive income. Although the income isn't derived from your usual salary, you need to put in the work to pick the right investments that align with your objectives.

Exchange-traded funds (ETFs) are a path to consider. You can select ETFs that produce income while matching your risk and profit goals. Equity ETFs invest in stocks, providing diversity like a mutual fund. Yet, they also offer liquidity since they trade like equities throughout the day.

This extensive universe has three ETFs that cater to passive income seekers.

1. Charles Schwab U.S. Dividend Equity ETF

The Charles Schwab U.S. Dividend Equity ETF (SCHD 0.66%) operates passively, following the Dow Jones U.S. Dividend 100 Index. Due to its index nature, it maintains low expenditures, with a minimal 0.06% expense ratio. This means investors avoid large expenses that lower returns.

The underlying index contains high-dividend-yield U.S. stocks with a history of payments and financial stability. The ETF has the most significant weight in the financial sector, 18.2%, followed by healthcare with 15.8%, consumer staples with 14%, industrials with 13.5%, and energy with 11.9%.

Individual stock holdings make up less than 5% each. The money management firm BlackRock holds a 4.7% weight, while Cisco Systems, Home Depot, Bristol Myers Squibb, and Chevron each contain more than a 4% weight in the ETF.

The Charles Schwab U.S. Dividend Equity ETF has a 3.6% yield, which surpasses the S&P 500's 1.2% yield.

2. Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (VYM 0.69%) is another passive option. This ETF targets the FTSE High Dividend Yield Index, resulting in a modest 0.06% expense ratio.

As the title suggests, the index includes over 500 high-dividend-yielding stocks. Financial stocks take up the most significant portion, approximately 22% of the portfolio. Industrials (12.7%), healthcare (11.7%), consumer staples (10.8%), and consumer discretionary (10.1%) are the next considerable sector weightings.

Broadcom is the largest stock holding with a 4.4% weight. JPMorgan Chase has a 3.6% weighting, and ExxonMobil is next with slightly under a 3% weight.

The Vanguard High Dividend Yield ETF had a near 2.5% yield at the end of November.

3. Wisdom Tree U.S. Small Cap Dividend Fund

The Wisdom Tree U.S. Small Cap Dividend Fund (DES 0.59%) provides investors with another opportunity to invest in an index. This ETF aims to mirror the outcomes of the Wisdom Tree U.S. SmallCap Dividend Index.

Despite the fund's name, it allocates 62% to mid-capitalization stocks, or those with market capitalizations between $2 billion and $10 billion. The ETF divides the remaining amount among small-cap stocks.

Many small-capitalization stocks don't pay dividends as many companies focus on growth. However, the index opens up access to this sector, enabling investors to invest in smaller stocks and still receive dividends. As the name suggests, the ETF invests in U.S. stocks.

Financials have the most significant weight, 29.2%. Industrial and consumer discretionary stocks hold 14.5% and 11.8% weights, respectively.

The Wisdom Tree U.S. Small Cap Dividend Fund carries a 2.7% yield.

Investing in ETFs like the Charles Schwab U.S. Dividend Equity ETF can help individuals seeking passive income, as it follows an index of high-dividend-yield U.S. stocks and has a low expense ratio, allowing investors to maximize their returns. By investing in ETFs, individuals are able to diversify their finance portfolio and potentially earn a higher yield compared to other investment options, such as the S&P 500.

In addition to the Charles Schwab U.S. Dividend Equity ETF, the Vanguard High Dividend Yield ETF is another passive income option, targeting the FTSE High Dividend Yield Index and featuring a modest expense ratio. By investing in a diversified portfolio of high-dividend-yielding stocks, individuals can reinvest their dividends and potentially grow their wealth over time. Investing in ETFs such as these can be an effective way to incorporate finance and money management into their overall investing strategy.

Read also: