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Two High-Returns Dividend Exchange-Traded Funds to Invest in for Passive Income Generation

Two High-Return Dividend Exchange-Traded Funds Worth Investing in for Passive Income Generation
Two High-Return Dividend Exchange-Traded Funds Worth Investing in for Passive Income Generation

Two High-Returns Dividend Exchange-Traded Funds to Invest in for Passive Income Generation

In today's high-interest environment, you can easily get yields of 3%, 4%, or more. But if you're looking for a high yield combined with long-term growth potential, it's a bit trickier. Dividend-paying stocks are your best bet, but not everyone is comfortable investing in individual stocks. That's why I've got two top ETFs for you that offer excellent dividend yields and growth potential.

A versatile dividend ETF for every portfolio

The Vanguard High Dividend Yield ETF (VYM 0.86%) could be an excellent choice for investors seeking passive dividend income, without sacrificing long-term growth potential. This ETF invests in a portfolio of stocks with above-average dividend yields, with larger position weights on top-performing stocks. Top holdings include tech giants like Broadcom, banking giants such as JPMorgan Chase, and industrial titans like ExxonMobil and Home Depot. The fund's portfolio focuses on large-cap, stable companies with consistent cash flows and impressive track records of delivering strong returns.

Over the last decade, VYM has delivered an impressive annualized total return of around 10.2%, all while keeping expenses to a minimum with a low 0.06% expense ratio. As of now, the ETF offers an annualized dividend yield of approximately 2.7%.

A promising REIT ETF in a shifting interest rate landscape

The real estate sector has been under pressure due to interest rate sensitivity. When risk-free interest rates rise, yields for income-oriented investments tend to increase, which can put pressure on real estate investment trust (REIT) prices. However, falling interest rates could boost REITs, as the Federal Reserve is widely expected to continue lowering rates this year and beyond.

If you're looking for exposure to the REIT sector, the Vanguard Real Estate ETF (VNQ 1.23%) could be an excellent addition to your portfolio. This ETF, which offers a 3.7% dividend yield, invests in a weighted index of REITs. Over the long term, REITs have historically produced returns similar to or slightly higher than the S&P 500 with less volatility.

Dividend stocks: A solid pick even in uncertain times

Both VYM and VNQ have strong long-term growth and income potential, making them excellent investments regardless of current interest rates or economic conditions. While the Fed may continue cutting rates, now could be an ideal time to add these ETFs to your portfolio, as they could benefit from long-term tailwinds.

While the Vanguard High Dividend Yield ETF and the Vanguard Real Estate ETF offer excellent long-term growth and dividend yields, it's crucial to consider your investment strategy and risk tolerance when deciding whether to invest in these funds or other dividend-paying stocks. Properly managing your money and finances, including investing, can contribute significantly to your financial well-being.

To further diversify your portfolio and potentially boost your returns, you might consider exploring various investment strategies, such as investing in individual dividend stocks or sector-specific ETFs that align with your financial goals and risk appetite.

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