For investors prioritizing reliable cash flows and steadier investment returns, high-dividend yield exchange-traded funds (ETFs) represent a viable pathway. Such ETFs distribute dividends from mature and financially stable companies, providing investors with a source of regular passive income. This income can be especially beneficial to those focused on long-term wealth growth through dividend reinvestment or investors approaching retirement seeking portfolio stability.
However, to build an effective dividend-focused portfolio, it is important to balance a high-income objective with the selection of ETFs that maintain robust underlying fundamentals. Careful scrutiny helps to avoid value traps where an enticing yield might mask challenges in the underlying holdings. With this perspective, we examine two ETFs that offer compelling dividend yields backed by solid company fundamentals.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
The SPDR Portfolio S&P 500 High Dividend ETF, trading under the ticker SPYD, tracks a basket comprised of the top 80 highest-dividend-yielding companies drawn from the S&P 500 index. This fund is passively managed and currently trades near $43 per share.
What sets SPYD apart is its focus on sectors traditionally known for higher yields, including real estate, utilities, financials, and consumer staples. The trailing 12-month dividend yield for this ETF hovers around 4.5%, significantly exceeding the broader S&P 500's yield, which is approximately 1.2%. In terms of cost efficiency, the fund has a very low expense ratio of just 0.07%, meaning a $10,000 investment incurs only around $7 annually in fees.
SPYD achieves its sector concentration by equally weighting the selected 80 companies. The portfolio is rebalanced semi-annually to ensure it maintains exposure to the highest-dividend payers within the S&P 500. The ETF commands over $7.3 billion in assets under management, underscoring its popularity among investors seeking dividend income.
With a current sector weight distribution of approximately 21.4% in real estate, 13.4% in utilities, 17.3% in financials, and 16.3% in consumer staples, SPYD notably limits its exposure to the tech sector to less than 2%. This low technology weighting diverges from the tech sector’s influence on broader market returns in recent decades.
Regarding total returns, SPYD has delivered around 130% since its inception in 2015, substantially lower than the S&P 500's total return exceeding 300% in the same timeframe. The ETF’s portfolio includes companies like CVS Health, Viatris, Invesco, Merck, Ford, AbbVie, and US Bancorp, representing a blend of healthcare, financial services, and industrial sectors.
Investors should be aware of the fund’s income tax treatment. Due to significant holdings in real estate investment trusts (REITs), which are pass-through entities with distinctive distribution structures, SPYD's dividends are taxed as ordinary income rather than qualifying for lower capital gains rates.
Overall, SPYD presents a low-cost, dividend-focused option for investors with moderate risk tolerance seeking exposure to high-yielding companies vetted through the S&P 500 benchmark.
Schwab US Dividend Equity ETF (SCHD)
Another noteworthy option is the Schwab US Dividend Equity ETF (ticker SCHD), trading near $28 per share with a dividend yield of approximately 3.8%. This ETF endeavors to replicate the performance of the Dow Jones U.S. Dividend 100 Index, which prioritizes companies characterized by strong balance sheets, consistent dividend payments, and high profitability.
SCHD’s portfolio tilts toward sectors frequently associated with defensiveness and earnings stability, including energy (about 19.3%), consumer staples (18.5%), and healthcare (16%). The fund maintains approximately 100 stock positions, providing investors with diversified exposure to stable dividend payers. Notable holdings include Bristol Myers Squibb, Cisco, ConocoPhillips, PepsiCo, Lockheed Martin, Coca-Cola, and Verizon.
With nearly $73 billion in assets under management, SCHD ranks as a substantial choice for dividend-focused investors. The fund’s expense ratio stands at a competitive 0.06%, enhancing its appeal for cost-conscious investors.
Looking at performance, SCHD has generated a total return in excess of 200% over the past decade. Although this lags somewhat behind the S&P 500, it translates into an annualized return rate in the 11% to 12% range, contingent on the measurement period.
Given this track record and portfolio composition, SCHD suits investors seeking dividend income from large-cap, blue-chip companies exhibiting financial strength and steady profitability across various economic cycles.
Conclusion
Both SPYD and SCHD offer dividend-oriented investors an opportunity to capture attractive yields alongside portfolio diversification grounded in mature, established companies. SPYD leans heavily into high-yield sectors with an emphasis on real estate and financials, whereas SCHD focuses more broadly on financially robust firms with strong dividend histories. Their low expense ratios further enhance their suitability as long-term investment vehicles.
Investors should consider their risk tolerance, tax implications, and desire for capital appreciation when selecting between these ETFs. SPYD’s tax treatment due to REIT holdings and lower capital appreciation potential contrasts with SCHD’s slightly lower yield but broader sector stability and superior total returns over time.
Ultimately, these two ETFs represent compelling options for income-focused investors seeking quality dividend-paying stocks for 2026 portfolios.