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These 8 Index ETFs Are a Retiree’s Best Friend
If you’re approaching or entering retirement — and, really, even if you’re far from retirement — consider including a big bunch of dividend-paying stocks in your portfolio. You can expect healthy and growing companies that pay dividends to increase in value over time and to generate cash for you regularly. Their dividend payouts will tend to increase over time, too.
Retirees can use that cash to help support themselves, and pre-retirees might just reinvest those dividends into more shares of stock. (Some good brokerages offer to reinvest your dividends for you automatically.)
Why dividends?
Don’t underestimate the power of dividends. After all, the fact that a company has committed to paying a dividend means that it has grown to a point where management is confident that earnings will support such a payout. Dividend payers tend to outperform non-payers, too.
Check out the numbers for S&P 500 companies below, from a Hartford Funds report:
|
Dividend-Paying Status |
Average Annual Total Return, 1973-2023 |
|---|---|
|
Dividend growers and initiators |
10.19% |
|
Dividend payers |
9.17% |
|
No change in dividend policy |
6.74% |
|
Dividend non-payers |
4.27% |
|
Dividend shrinkers and eliminators |
(0.63%) |
|
Equal-weighted S&P 500 index |
7.72% |
Data source: Ned Davis Research and Hartford Funds.
How to invest in dividend payers easily
One of the best — and easiest — ways to invest in dividend-paying stocks is to do so via exchange-traded funds (ETFs). An ETF is a fund — which often tracks a particular index — that trades like a stock.
Below are seven dividend-focused ETFs to consider, plus a simple S&P 500 index fund for comparison purposes — and also because it’s a darn fine ETF for anyone to consider.
|
ETF |
Recent Yield |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
|---|---|---|---|
|
iShares Preferred & Income Securities ETF (NASDAQ: PFF) |
6% |
3.29% |
4.11% |
|
Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) |
3.6% |
13.6% |
12.4% |
|
iShares US Real Estate ETF (NYSEMKT: IYR) |
2.7% |
4.2% |
6.8% |
|
Vanguard High Dividend Yield ETF (NYSEMKT: VYM) |
2.7% |
11.8% |
10.9% |
|
SPDR S&P Dividend ETF (NYSEMKT: SDY) |
2.3% |
10% |
10.8% |
|
iShares Core Dividend Growth ETF (NYSEMKT: DGRO) |
2.2% |
12.8% |
12.9% |
|
Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) |
1.7% |
13.3% |
12.7% |
|
Vanguard S&P 500 ETF (NYSEMKT: VOO) |
1.2% |
16.4% |
14.1% |
Data source: Morningstar.com, as of Oct. 15, 2024.
Each ETF, in a nutshell
You’ll notice that some of the funds sport hefty dividend yields, while others feature some terrific long-term growth rates over the past five and 10 years. In investing, there’s generally a trade-off between growth and income. Here’s a little more about each of these index funds and the index that each tracks:
-
iShares Preferred & Income Securities ETF: This tracks the ICE Exchange-Listed Preferred & Hybrid Securities Index, which includes a group of U.S. dollar-denominated preferred securities, hybrid securities, and convertible preferred securities. Note that preferred stocks tend to not increase in value much and their dividends aren’t usually big growers, either — but they do tend to feature generous payouts.
-
Schwab U.S. Dividend Equity ETF: This ETF tracks the Dow Jones U.S. Dividend 100 Index of high-dividend-yielding U.S. stocks that have consistently paid dividends. The ETF’s biggest holdings recently were Home Depot, BlackRock, and Cisco Systems.
-
iShares US Real Estate ETF: This ETF tracks the Dow Jones U.S. Real Estate Capped Index and encompasses many real estate investment trusts (REITs) — companies that own many properties and earn income by renting them out. This ETF’s top holdings recently included Prologis, American Tower, and Equinix. Respectively, they specialize in warehouses, telecommunications towers, and digital infrastructure, among other things.
-
Vanguard High Dividend Yield ETF: This ETF tracks the FTSE High Dividend Yield Index and focuses on domestic stocks with high dividend yields (excluding REITs). Its recent top holdings included Broadcom, JPMorgan Chase, and ExxonMobil.
-
SPDR S&P Dividend ETF: This ETF tracks the S&P High Yield Dividend Aristocrats Index, which encompasses companies that have paid dividends for at least 20 years and that meet certain criteria tied to liquidity and size. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC.) Its top holdings recently included Realty Income, Kenvue, and IBM.
-
iShares Core Dividend Growth ETF: This ETF tracks an index of U.S. stocks with a history of consistently growing dividends. Its top holdings recently were ExxonMobil, Apple, and Microsoft.
-
Vanguard Dividend Appreciation ETF: This ETF tracks the S&P US Dividend Growers Index, which features companies that have increased their payouts for at least 10 consecutive years. The top holdings recently were Microsoft, Apple, and Broadcom.
-
Vanguard S&P 500 ETF: This ETF, which tracks the S&P 500, is here for comparison purposes. It, too, features a dividend yield, but it also includes plenty of non-dividend payers. While the dividend yield isn’t very big, the fund makes up for that with a solid track record of growth. (Note that despite the returns in the table above, the long-term average annual gain of the stock market is closer to 10% than 16%.)
So consider any or all of these ETFs for your long-term portfolio, whether you’re in or approaching retirement or have decades to go before retiring.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Selena Maranjian has positions in American Tower, Apple, Broadcom, Microsoft, Realty Income, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends American Tower, Apple, Cisco Systems, Equinix, Home Depot, JPMorgan Chase, Kenvue, Microsoft, Prologis, Realty Income, Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and International Business Machines and recommends the following options: long January 2026 $13 calls on Kenvue, long January 2026 $180 calls on American Tower, long January 2026 $395 calls on Microsoft, long January 2026 $90 calls on Prologis, short January 2026 $185 calls on American Tower, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
These 8 Index ETFs Are a Retiree’s Best Friend was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
-
Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
-
Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
-
Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
-
Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
-
Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
-
Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
CoinShares said the United States and Bitcoin led crypto investment product dynamics last week amid growing optimism over a potential Republican election win in the US.
Bitcoin’s private keys won’t be breached any time soon, but the industry still needs to transition to “post-quantum cryptography.”
Despite record European inflows, Bitcoin has been unable to recover above the $70,000 psychological level since July.
Apechain mainnet launch and LayerZero’s integration translated to 100% price upside for APE in recent days.
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