3 Passive Income ETFs Worth Holding for the Long Haul
Yahoo Finance ·
Are you looking to build an income portfolio you can simply set up and forget about for a long time without needing to check in on it regularly? A collection of dividend-paying exchange-traded funds (ETFs) will do the trick nicely. You won't even need that many. Here's a closer look at three that could be enough on their own. If there's only room for one income ETF in your portfolio right now, start with the Schwab U.S. Dividend Equity ETF ( SCHD +0.43% ) . If you happen to keep tabs on the relative performance of exchange-traded funds , you may know that this one has suspiciously lagged the S&P 500 ( ^GSPC +0.42% ) and its tradeable counterpart SPDR S&P 500 ETF Trust ( SPY +0.42% ) since early 2023, even after factoring in the dividend payments it made in the meantime.
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Dividend growth ETFs like SCHD are considered core assets that provide stable cash flow for long-term investors. Despite recent underperformance relative to the S&P 500, the compounding effect through dividend reinvestment remains an attractive investment point. Investors should focus on dividend sustainability and corporate financial health rather than short-term market yield gaps.
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- Dividend Stocks — Dividend ETFs like SCHD are optimized for long-term cash flow generation. In a rate-cut environment, stable dividend yields serve as a robust defense and a reliable source of income for investors.
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- Growth Stocks — The recent underperformance compared to the S&P 500 suggests that dividend stocks may be overlooked in tech-dominated bull markets. This can lead to opportunity costs for investors seeking aggressive capital gains.
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Dividend growth ETFs offer a defensive cushion in volatile markets. While tech-driven rallies may leave dividend-focused portfolios lagging, the long-term reliability of consistent payouts, combined with the power of reinvestment, builds significant wealth over time. Investors should prioritize quality balance sheets and dividend growth history to weather economic cycles.
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