2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Core Insights - Not all investors prioritize high-growth stocks; many seek investments that provide reliable passive income [1] - As investors age, the appeal of steady income sources increases, allowing for reinvestment of dividends to build wealth over time [2] - High-yield dividend ETFs may be preferable to individual high-yield stocks to avoid potential value traps [3] Investment Options - The Schwab U.S. Dividend Equity ETF (SCHD) offers a yield of 3.9% and has a low expense ratio of 0.06%, making it attractive for income-focused investors [5] - This ETF tracks the Dow Jones U.S. Dividend 100 Index, which employs strict criteria to avoid unsustainable high-yield stocks, focusing on metrics like free cash flow to total debt ratio and return on equity [6] - The index is reconstituted annually, ensuring that only companies meeting its standards remain, with 20 new stocks added and 17 removed last year, including Pfizer due to increased debt from an acquisition [7] - The Schwab U.S. Dividend Equity ETF has delivered a 12.2% average annual return since its inception in October 2011 [7] Market Context - High-yield ETFs can provide a reliable income stream for retirees, with the Schwab U.S. Dividend Equity ETF helping to mitigate the risk of value traps [8] - The Alerian MLP ETF also offers a high yield, with MLPs currently at low valuations and showing strong growth potential and improved balance sheets [8]