Want Decades of Passive Income? Buy This ETF and Hold It Forever.

Core Insights - The article emphasizes that not all investments require a trade-off between income and growth, highlighting the potential of exchange-traded funds (ETFs) as a low-maintenance, income-generating investment option [1] Dividend ETFs Overview - Not all dividend ETFs are created equal, with some offering better long-term investment potential than others [2] - The Schwab U.S. Dividend Equity ETF (SCHD) currently has a trailing yield of 3.9%, outperforming the Vanguard High Dividend Yield ETF (VYM) which has a yield of 2.5% [3] Performance Analysis - The Schwab U.S. Dividend Equity ETF has underperformed the S&P 500 and other major dividend funds since 2023, primarily due to its lack of exposure to technology stocks benefiting from the AI trend [4] - Despite its above-average dividend yield, the ETF's overall performance has been subpar, raising concerns about its future relative strength [5] Recommended ETF - The iShares Core Dividend Growth ETF (DGRO) is presented as the ideal buy-and-hold dividend ETF for income-focused investors [6] - DGRO has less than $35 billion in assets, significantly smaller than the Vanguard Dividend Appreciation ETF (VIG) and Schwab's U.S. Dividend Equity ETF [7] Fund Characteristics - DGRO tracks the Morningstar US Dividend Growth Index, which includes companies with a minimum of five consecutive years of annual payout increases and excludes the highest-yielding 10% of stocks [9] - The ETF's holdings are weighted based on the value of their dividend payments, with major positions including Johnson & Johnson, Apple, JPMorgan Chase, Microsoft, and ExxonMobil [10] Performance Metrics - DGRO's quarterly per-share payment has nearly tripled over the past decade, showcasing its ability to provide both reliable dividend income and capital appreciation [12] Investment Strategy - While owning multiple income-focused ETFs can be beneficial, DGRO offers a balanced approach that does not require sacrificing growth for reliable income [14] - The only drawback of DGRO is its lower starting dividend yield, which may be acceptable for long-term investors seeking growth [15]