dividend

A stable income stream is the cornerstone of a worry-free retirement. By receiving reliable payments, retirees can focus on enjoying life rather than stressing over expenses. The right investments are crucial in making this possible.

Investing in high-quality dividend stocks can be a great source of reliable retirement income. Realty Income (O 1.12%) and Oneok (OKE 0.63%) have each demonstrated the durability of their dividend payments over many decades. This proven reliability makes them strong options for those seeking consistent income in retirement.

Image source: Getty Images.

Executing the mission

Realty Income has a clear mission. This real estate investment trust (REIT) aims to provide dependable monthly dividends that grow over time. The company has paid 664 consecutive monthly dividends throughout its history. It has raised its payment 132 times since its public market listing in 1994, including for the past 112 quarters in a row (and for more than 30 consecutive years). It stands out for its consistency among income stocks in the real estate sector.

The REIT offers investors an attractive dividend that currently yields 5.5%. That’s well above average (the S&P 500‘s dividend yield is around 1.2%). As a result, investors can generate more income from every dollar they invest in the company.

Realty Income backs its reliable dividend with very durable cash flows. It owns a diversified real estate portfolio (retail, industrial, gaming, and other properties), net leased to many of the world’s leading companies. Net leases provide it with very predictable cash flow because tenants cover all property operating expenses, including routine maintenance, real estate taxes, and building insurance. Meanwhile, the company owns properties leased to tenants in resilient industries. Over 90% of its rent comes from tenants in sectors resilient to economic downturns and isolated from the pressures of e-commerce, such as grocery stores, distribution facilities, and data centers.

The REIT pays out a conservative percentage of its stable rental income in dividends (about 75% of its adjusted funds from operations). That gives it a comfy cushion while enabling it to retain lots of cash to make additional income-generating real estate investments. Realty Income also has one of the strongest balance sheets in the sector, further enhancing its ability to make new investments. It should have no shortage of investment opportunities in the coming years, given the $14 trillion total estimated market value of real estate suitable for net leases across the U.S. and Europe. The company’s growing portfolio enables it to steadily increase its dividend.

A pillar of stability

Oneok has been one of the most reliable dividend stocks in the pipeline sector. The energy infrastructure company has delivered more than a quarter-century of dividend stability and growth. While Oneok hasn’t increased its payout every single year, it has grown it at a peer-leading rate over the past 10 years by nearly doubling its payment. The company currently offers a 6% dividend yield.

The energy company operates a balanced portfolio of premier energy infrastructure assets, backed predominantly by long-term, fee-based contracts. Those agreements provide it with very stable cash flow to cover its dividend. Oneok also has a strong investment-grade balance sheet backed by a low leverage ratio. This rock-solid financial position gives the company the flexibility to invest in organic expansion projects and make accretive acquisitions to grow its platform.

Oneok currently has several high-return organic expansion projects in the backlog, which it expects to complete through mid-2028. This gives it lots of visibility into its future growth. The company has also made several acquisitions over the past few years, which will continue to boost its bottom line in the coming years as it captures additional synergies. It has ample financial flexibility to approve new expansion projects and make additional acquisitions. With demand for energy expected to continue growing, especially for natural gas, the company should have no shortage of investment opportunities. This fuels Oneok’s view that it can grow its dividend by a 3% to 4% annual rate.

Reliable income stocks

For retirees seeking dependable, growing income, Realty Income and Oneok stand out as proven dividend payers. Their stable cash flow and prudent financial management provide confidence that these companies can continue delivering reliable income for years. Those features make them ideal dividend stocks for retirement portfolios.

The American dream is something like owning your own home, living comfortably, and seeing your children live happy and productive lives. That dream is even better if you can pass on your wealth to your children, which is basically what’s called generational wealth.

What if you don’t just pass on some money but instead pass on a reliable income stream? That’s what Realty Income (O 1.13%) could let you do. Here’s what you need to know about this unstoppable dividend stock.

The big number is, currently, 30

What does an unstoppable dividend stock look like? That’s pretty easy. It’s a company that manages to increase its dividend every year for decades on end. Real estate investment trust (REIT) Realty Income’s dividend streak is up to 30 years and counting at this point.

Image source: Getty Images.

What’s notable about that streak is that it includes some of the worst economic periods of recent history. And some of the worst bear markets. Realty Income’s dividend grew through the Dot.com crash, the Great Recession (and associated bear market) between 2007 and 2009, and the COVID-19 pandemic. What’s notable is that the Great Recession was particularly difficult for the real estate sector, and the pandemic was devastating to retailers, which make up over 70% of Realty Income’s tenants.

Basically, Realty Income has proven that it has what it takes to survive over the long term while continuing to reward investors with a progressive dividend. But that’s not all. It also happens to have an investment-grade-rated balance sheet, so it is financially strong. And it is geographically diversified, with properties in both the U.S. market and across Europe. While the portfolio is tilted toward retail properties, they tend to be easy to buy, sell, and release if needed. The rest of the portfolio, meanwhile, adds some diversification. All in all, it is a well structured REIT.

Plenty of generational opportunity ahead

The big draw for Realty Income is going to be the dividend yield, which sits at 5.4% or so. That’s well above the 1.2% the S&P 500 index is offering today and the 3.8% or so yield of the average REIT. But, as highlighted above, this isn’t exactly a high-risk investment. Why is the yield so high?

The answer is that Realty Income is a boring, slow-growth business. Over the three decades of dividend growth, the dividend has increased at a compound annual rate of 4.2%. That’s above the historical growth rate of inflation, so the buying power of the dividend has increased over time. But all in all, this is not an exciting stock to own and, frankly, isn’t meant to be. The company trademarked the nickname “The Monthly Dividend Company” for a reason: The REIT’s goal is specifically to be a reliable dividend stock.

There’s no reason to believe it will be anything but reliable in the future. Notably, it is the largest net-lease REIT, giving it an edge on its competitors when it comes to costs and deal making. Management has also been diversifying the business with the goal of increasing the number of levers it has to pull to support its slow and steady growth. None of its efforts involve undue risk, either. Slow and steady is the goal, but so far that’s worked out very well for dividend investors.

A simple and generational proposition

What you are getting when you buy Realty Income is a boring dividend stock that will pay you well to own it. And when the time comes, you can pass that income stream on to the next generation. Building generational wealth is a great thing, but just handing on a pile of money isn’t the only way to do it.

Imagine living a comfortable retirement with the monthly dividends you collect from Realty Income. And while you do that, you can think about how much easier the lives of your children will be when they collect that income instead of you.

The S&P 500 index (^GSPC 0.53%) has a miserly yield of just 1.2% or so today. That’s a number that you can beat pretty easily, but you want to make sure you do it with reliable dividend stocks. There are some companies that have huge yields, but the risk involved isn’t worth it.

That’s why you’ll probably prefer to buy (and likely hold forever) companies like Realty Income (O 1.13%), Prologis (PLD 2.40%), and UDR (UDR 0.50%). Here’s a quick look at each of these high-yield dividend stocks.

1. Realty Income is boring, which is a good thing

Realty Income is the largest net lease real estate investment trust (REIT) you can buy. It owns over 15,600 properties and has a market cap that is more than three times larger than its next-closest peer. Add in a dividend yield of 5.4% and a 30-year streak of annual dividend increases and you can see why dividend investors would like this stock.

The key, however, is how boring a business it is. It starts with the net lease approach. A net lease requires the tenant to pay for most property-level expenses. That saves Realty Income cost and hassle, leaving it to, in a simplification of the situation, sit back and just collect rent. On top of that, the company’s primary focus is retail properties, which are fairly easy to buy, sell, and release if needed. But that isn’t the end of the story, either, since Realty Income is also geographically diversified, with a growing presence in Europe.

Slow and steady is the name of the game for Realty Income, which makes sense given that the REIT has trademarked the nickname “The Monthly Dividend Company.” This high yielder isn’t going to excite you, but that’s basically the point. Investing $1,000 into Realty Income will leave you owning roughly 16 shares.

2. Prologis is building from within

Prologis is another industry giant, this time focused on the industrial asset class. It is one of the largest REITs in the world, with a market cap of more than $100 billion. (It’s about twice the size of Realty Income, which has a roughly $50 billion market cap.) The dividend yield is around 3.5%, which isn’t nearly as nice as what you’d get from Realty Income, but there’s more growth opportunity. To put a number on that, Realty Income’s dividend has grown 45% or so over the past decade while Prologis’ dividend has increased by over 150%.

Like Realty Income, Prologis offers global diversification. It has operations in North America, South America, Europe, and Asia, with assets in most prominent global transportation hubs. It has increased its dividend annually for 12 years, with a high likelihood of years of dividend growth ahead. That’s because the REIT has a $41.5 billion opportunity to build new properties on land it already owns. What’s exciting now is that the dividend yield happens to be near the high end of the range over the past decade, suggesting today is a good time to jump aboard. A $1,000 investment will allow you to buy eight shares of the stock.

3. UDR is diversified and provides a basic necessity

UDR is an apartment landlord, offering the basic necessity of shelter. That’s not going to go out of style anytime soon. The company underwent a painful overhaul a few years back when it sold a portfolio of lower quality apartments, leaving it focused on its remaining and better-positioned assets. This was a good move for the REIT, but it led to a dividend reset (the painful part for shareholders). However, the dividend has been growing ever since, with an annual streak that’s now up to 16 years. There’s no reason to believe another cut is in the cards.

What dividend lovers get now, however, is fairly attractive. For starters, the portfolio is well-diversified by geographic region in the United States and by quality (A and B level assets only, the fixer-uppers it once owned are gone). Technology has been an increasingly important aspect of the business, with UDR working to use the internet to lease and serve tenants more nimbly. Essentially, UDR is a great way to get diverse exposure to apartments.

UDR’s dividend yield is 4.7% right now, which is fairly high for the REIT and well above the REIT average of around 3.8%. If you want to own a REIT that provides a basic necessity, UDR is worth looking at today. A $1,000 investment will get you roughly 27 shares.

Three high-yield, buy-and-hold options for your portfolio

If you are focused on yield, Realty Income is likely to be the most appropriate choice for your portfolio. If you like dividend growth, take a look at Prologis. And if you are fond of companies that provide basic services that everyone needs, that would be UDR. All three have lofty yields and are worth buying and holding for the long term.

I love to collect dividend income. It provides me with more cash to invest each month and a growing level of financial freedom. My goal is to eventually generate enough passive income from dividends and other sources to cover my basic living expenses.

To support my income strategy, I focus on buying high-yielding dividend stocks. Two companies in particular, Brookfield Infrastructure (BIPC -2.38%) (BIP -1.62%) and W.P. Carey (WPC), have consistently stood out. Here’s why I can’t stop buying these income stocks.

Image source: Getty Images.

A high-octane dividend growth stock

Brookfield Infrastructure currently yields nearly 4%, more than triple the S&P 500’s dividend yield (1.2%). The global infrastructure operator supports its high-yielding payout with very stable cash flows. Long-term contracts and government-regulated rate structures account for around 85% of its annual funds from operations (FFO). Most of those frameworks have no volume or price exposure (75%), while another large portion of its cash flow (20%) comes from rate-regulated structures that only have volume exposure tied to changes in the global economy. The bulk of these arrangements also either index its FFO to inflation (70%) or protect it from the impact of inflation (15%).

The company pays out 60% to 70% of its very resilient cash flow in dividends. That gives it a comfortable cushion while allowing it to retain a meaningful amount of cash to invest in expansion projects. Brookfield also has a strong investment-grade balance sheet. Additionally, the company routinely recycles capital by selling mature assets to invest in higher-returning opportunities.

Brookfield has grown its FFO per share at a 14% annual rate since its inception in 2008, supporting a 9% compound annual dividend growth rate. While its growth has slowed in recent years due to headwinds from interest rates and foreign exchange fluctuations, a reacceleration appears to be ahead. The company believes that a combination of organic growth driven by inflationary rate increases, volume growth as the economy expands, and expansion projects will drive robust FFO per share growth in the coming years. Additionally, it expects to get a boost from its value-enhancing capital recycling strategy. These catalysts should combine to drive more than 10% annual FFO per share growth.

The company’s strong financial profile and robust growth prospects easily support its plan to increase its high-yielding payout at a 5% to 9% annual rate. Brookfield has increased its payout in all 16 years since it went public.

Rebuilt on an even stronger foundation

W.P. Carey has a 5.4% dividend yield. The real estate investment trust (REIT) owns a well-diversified portfolio of operationally critical real estate across North America and Europe. It focuses on investing in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases featuring built-in rental escalation clauses. Those leases provide it with very stable and steadily rising rental income.

The REIT has spent the past few years reshaping its portfolio. It accelerated its exit from the office sector in late 2023 by spinning off and selling its remaining properties. W.P. Carey has also been selling off some of its self-storage properties, particularly those not secured by net leases. It has been recycling that capital into properties with better long-term demand drivers, such as industrial real estate.

W.P. Carey’s strategy should enable it to grow its adjusted FFO at a higher rate in the future. Its portfolio is delivering healthy same-store rent growth (2.3% year-over-year in the second quarter). Meanwhile, its investments to expand its portfolio are driving incremental FFO per share growth. W.P. Carey is on track to grow its adjusted FFO per share by 4.5% at the mid-point of its guidance range this year.

That growing income is allowing the REIT to increase its dividend. It has raised its payment every quarter since resetting the payout level in late 2023 when it exited the office sector, including a 4% increase over the past 12 months. With a strong portfolio and balance sheet, W.P. Carey has the financial flexibility to continue growing its portfolio, FFO, and dividend in the coming years.

High-quality, high-yielding dividend stocks

Brookfield Infrastructure and W.P. Carey stand out for their stable and growing cash flows, as well as high-yield dividends. Brookfield offers inflation-protected cash flows that minimize risk, while W.P. Carey generates reliable rental income from long-term leases. With lots of income and growth ahead, I just can’t stop buying these high-quality, high-yielding dividend stocks.

Don’t just look at share price appreciation. Why? It doesn’t tell the whole story. Thousands of stocks pay dividends. And those dividends often significantly boost the stocks’ total returns.

You can especially make a lot of money when you invest in stocks with juicy dividend yields in addition to tremendous share price growth potential. Here are two ultra-high-yield dividend stocks with a total return potential of up to 41% over the next 12 months, according to select Wall Street analysts.

Kenvue

Kenvue (KVUE 1.98%) ranks as the largest pure-play consumer health company in the world. Johnson & Johnson (JNJ 0.31%) spun off Kenvue as a separate entity in 2023. The new business inherited an impressive lineup of products, including Band-Aid bandages, Listerine mouthwash, Neutrogena skin care products, and over-the-counter pain relievers Motrin and Tylenol .

In addition, Kenvue inherited J&J’s status as a Dividend King. The consumer health company has continued to increase its dividend since the spin-off two years ago. It now boasts an impressive streak of 63 consecutive annual dividend hikes. Kenvue’s forward dividend yield also tops 5.1%.

However, one reason why Kenvue’s yield is so high is that its stock has performed dismally. Revenue growth has been weak. Profits have declined sharply since the company became a stand-alone entity.

More recently, Kenvue announced a shake-up at the top in July with Kirk Perry stepping in as interim CEO while Thibaut Mongon was shown the door. The company also underwent a public relations crisis after President Donald Trump and Secretary of Health and Human Services Robert F. Kennedy Jr. claimed that the use of Tylenol during pregnancy could be linked with autism in children.

Kenvue responded quickly to refute those claims adamantly. So did several healthcare organizations, including the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, the Autism Science Foundation, and the Society for Maternal-Fetal Medicine.

Several Wall Street analysts think that the worst could be over for Kenvue. For example, Bank of America (BAC 5.11%) and JPMorgan Chase (JPM 2.80%) have price targets for the stock that reflect an upside potential of roughly 29%. If they’re right and Kenvue continues to pay dividends at least at the current level, investors could enjoy a total return of more than 34% over the next 12 months.

United Parcel Service

United Parcel Service (UPS 0.10%) is the world’s largest package delivery company. It operates in more than 200 countries and territories. UPS delivers roughly 22.4 million packages every business day.

Image source: United Parcel Service.

Although UPS isn’t a Dividend King like Kenvue, it has a pretty good dividend pedigree. The company has increased its dividend for 16 consecutive years. It has never cut the dividend since going public in 1999. UPS’ forward dividend yield is a mouthwatering 7.9%.

The bad news is that UPS’ tremendous yield is due largely to its atrocious stock performance over the last few years. Plenty of factors contributed to this decline, including higher costs resulting from a contract with the Teamsters union and lower shipment volumes following the COVID-19 pandemic.

Management’s decision to significantly reduce the shipments handled for Amazon (AMZN 0.05%) is causing revenue to decline. The Trump administration’s tariffs are especially hurting UPS’ business in its most profitable lane between China and the U.S.

However, some analysts on Wall Street are nonetheless upbeat about UPS’ prospects. As a case in point, Citigroup‘s (C 0.66%) latest 12-month price target is around 35% higher than UPS’ current share price. With such an ambitious target and the package delivery giant’s hefty dividend yield, UPS stock could deliver a total return in the ballpark of 42%.

Are these analysts right about Kenvue and UPS?

I’m iffy about whether or not Kenvue and UPS can deliver the lofty total returns over the next 12 months that some analysts predict. However, I think both stocks could be winners for investors over the long run. Kenvue and UPS could also be solid picks for investors seeking income.

It’s easy to feel complacent in today’s market. The S&P 500 hasn’t fallen by more than 3% from its all-time high for over five months — meaning volatility is virtually nonexistent.

Artificial intelligence (AI) spending deals are resulting in big stock pops and record runs for chip giants. The rift between winners and losers is growing, with just a handful of stocks making up a massive percentage of the index. That said, it’s a mistake to sell winning stocks just because they have gone up. So a better approach is to stay even-keeled and build a balanced financial portfolio.

Here’s why Netflix (NFLX -0.07%) is a growth stock that can back up its expensive valuation, and why Texas Instruments (TXN 1.95%) is a reliable high-yield dividend stock to buy in October.

Image source: Netflix.

Netflix is worth the premium price

Like many growth stocks, Netflix’s valuation is arguably overextended. But it could still be a good buy for patient investors. The simplest reason to buy and hold Netflix is that the company has become somewhat recession-proof. It is one of the few consumer-facing companies that continues to deliver solid earnings growth despite a challenging operating environment.

Inflation and cost-of-living increases have been no match for Netflix. Despite a crackdown on password sharing and price increases, Netflix’s subscribers are sticking with the platform — which is a great sign that folks believe the subscription is worth paying for, even as they pull back on other discretionary goods and services like restaurant spending.

Netflix is a textbook example of the effectiveness of boosting the quality of a product or service to justify higher prices. The company isn’t just making the same bag of chips and hiking the price in the hopes that customers give in and buy. Rather, the value of the platform has grown immensely due to the depth, breadth, and quality of its content.

Netflix’s business model acts like a snowball. The more subscribers there are, the more revenue it generates, the more content it can create, the more valuable the platform becomes, and the greater the justification for increasing prices.

What Netflix is doing sounds simple, but it is far from it. It has taken Netflix well over a decade to perfect its craft — developing content that resonates with subscribers of all interests. No other streaming platform comes close to replicating this efficiency, as evidenced by Netflix’s sky-high operating margins of 29%.

At about 47 times forward earnings, Netflix is far from cheap. But it’s the kind of stock that can grow into its valuation because the business can do well even during an economic slowdown.

A dividend play in the semiconductor space

The semiconductor industry has been soaring — led by massive gains in Nvidia, Broadcom, and most recently, Advanced Micro Devices. The iShares Semiconductor ETF, which tracks the industry, is up a mind-numbing 34.7% year to date — outpacing the broader tech sector’s 24.8% gain. So investors may be wondering why Texas Instruments, commonly known as TI, is down over 4% in 2025.

The most likely reason TI is underperforming the semiconductor industry is that it doesn’t sell graphics processing units and central processing units, which are in high demand by hyperscalers to build out data centers. Instead, TI makes analog and embedded semiconductors that are used across the economy.

The industrial and automotive markets accounted for around 70% of TI’s 2024 revenue. So this is a far different business model than chip companies that are playing integral roles in building out data centers. In fact, TI’s core business is in the midst of a multi-year slowdown, as evidenced by TI’s negative earnings growth.

Despite these challenges, the company is a coiled spring for a cyclical recovery in its key end markets. Lower interest rates should help boost spending by industrial customers and jolt demand in the automotive industry.

TI is a great buy for investors who value free cash flow and dividends. In its 2024 annual report, TI stated, “Looking ahead, we will remain focused on the belief that long-term growth of free cash flow per share is the ultimate measure to generate value. To achieve this, we will invest to strengthen our competitive advantages, be disciplined in capital allocation, and stay diligent in our pursuit of efficiencies.” This is a far different mantra than companies that are throwing capital expenditures at shiny new ideas.

With a 3.2% dividend yield and 22 consecutive years of dividend increases, TI stands out as an excellent buy for income investors in October.

Are all dividend funds the same? They often are, even if each one is structurally and strategically unique. There’s only so much difference possible when a company and its stock’s primary purpose is just generating cash flow.

And yet, owners of the Schwab U.S. Dividend Equity ETF (SCHD -1.70%) know all too well that dividend-oriented exchange-traded funds can at times be considerably different than one another. Their fund has measurably underperformed other dividend ETFs like the Vanguard Dividend Appreciation ETF, the iShares Core Dividend Growth ETF, and Vanguard High Dividend Yield ETF over the course of the past three years. Indeed, the disparity’s been wide enough to leave them wondering if they made a mistake that should be corrected as soon as possible.

Well, they didn’t make the wrong choice, so there’s no correction to be made. The very reason this dividend ETF has underperformed of late, in fact, is the very same reason income-seeking investors might want to buy the Schwab U.S. Dividend Equity ETF now.

The same, but different — and more different than the same

What’s Schwab’s U.S. Dividend Equity ETF? It’s meant to mirror the performance of the Dow Jones U.S. Dividend Index, which, just as the name suggests, is dividend-focused. So is the Morningstar US Dividend Growth Index that serves as the basis for iShares’ Core Dividend Growth ETF, though, along with the Vanguard Dividend Appreciation ETF’s underlying S&P U.S. Dividend Growers Index, for that matter.

They’re not all the same, though. And it matters.

Take a comparison of the S&P U.S. Dividend Growers Index behind Vanguard’s Dividend Appreciation fund to the iShares Core Dividend Growth ETF’s Morningstar US Dividend Growth Index as an example. The former consists of U.S.-listed companies that have raised their dividend payments for at least the past 10 years, but it excludes the very highest-yielding tickers (on concerns that the high yields are unsustainable). The latter only requires five years of uninterrupted dividend growth, although it also generally excludes stocks with suspiciously high yields.

End result? The Vanguard fund’s top three holdings right now are Broadcom, Microsoft, and JPMorgan Chase, while the iShares ETF’s biggest three positions at this time are Apple, Microsoft, and Johnson & Johnson. They’re more different than alike, even if there is some overlap.

Image source: Getty Images.

The Vanguard High Dividend Yield ETF’s underlying FTSE High Dividend Yield Index, by the way, currently holds Broadcom, JPMorgan, and Exxon-Mobil as its top three positions — three names that offer the high yield that the index prioritizes. Even so, the fund’s trailing yield is a modest 2.45% at this time, versus the iShares ETF’s yield of 2.2% and the trailing dividend yield of 1.6% currently offered by the Vanguard Dividend Appreciation fund.

Where does Schwab’s U.S. Dividend Equity ETF stand? The Dow Jones U.S. Dividend Index’s biggest three positions right now are AbbVie, Lockheed Martin, and Cisco Systems, followed closely by Merck and ConocoPhillips. In fact, you won’t start seeing any serious overlap between this fund and the other three dividend ETFs in focus here until those positions are so small that they don’t really matter.

That’s why this ETF has underperformed the other three funds in question since early 2023; it’s not holding many of the market’s most popular growth names right now. Indeed, it currently holds a bunch of the market’s least popular value stocks.

SCHD Total Return Level data by YCharts

But that’s exactly why income-minded investors might want to dive into the Schwab ETF at this time, particularly in light of its sizable trailing dividend yield of right around 3.7%.

What went wrong for dividend-paying value names?

In retrospect, the fund’s recent underperformance actually makes a lot of sense. The few technology stocks that pay any dividend at all have performed exceedingly well since the launch of OpenAI’s ChatGPT in November 2022, setting off an artificial intelligence arms race that sent a bunch of these stocks sharply higher. The dynamic was also bullish for financial stocks like JPMorgan, which helps companies raise funds or make the acquisitions they need to take full advantage of the AI revolution.

At the other end of the spectrum, most of the Schwab U.S. Dividend Equity ETF’s holdings have been on the wrong side of one force or another. Regulatory headwinds and the impending expiration of key patents have proven problematic for pharmaceutical outfits AbbVie and Merck, for instance.

Inflation and the subsequent rise in interest rates are another one of these forces, and arguably the biggest. Although both have historically been more of a challenge for growth stocks than value names, in this instance, the opposite has been (mostly) true.

Just bear in mind how incredibly unusual the past three years have been. The bulk of growth stocks’ leadership has been fueled by the aforementioned advent of artificial intelligence, creating a secular growth opportunity that wouldn’t be stymied by any economic backdrop.

Also know that the so-called “Magnificent Seven” stocks have done the vast majority of the market’s recent heavy lifting, so to speak, fueled by AI. Data from Yardeni Research suggests that without the help of these seven tech-centric tickers, the S&P 500‘s would be about one-third less than what it’s actually been since early 2023.

It would also be naïve to pretend that value stocks like Merck, Cisco, and ConocoPhillips just haven’t offered the excitement that most investors have craved in the post-pandemic, AI-centered environment.

Here comes the pendulum

As is always the case, though, the cyclical pendulum will eventually swing back the other way. And that’s likely to happen sooner or later. As number-crunching done by Morningstar analyst David Sekera recently prompted him to note, “By style, value remains undervalued, trading at a 3% discount, whereas core stocks are at a 4% premium and growth stocks are at a 12% premium.” He adds, “Since 2010, the growth category has traded at a higher premium only 5% of the time.”

This dynamic, of course, works against dividend ETFs’ growth names, and works for dividend ETFs like the Schwab U.S. Dividend Equity ETF, which almost exclusively holds value stocks. The market just needs a catalyst to start such a shift.

That may be in the offing, though. JPMorgan CEO Jamie Dimon recently lamented in an interview with the BBC, “I am far more worried about that [a market correction] than others… I would give it a higher probability than I think is probably priced in the market and by others.” And this worry follows Federal Reserve Chairman Jerome Powell’s recent comment that U.S. stocks are “fairly highly valued.” That’s a screaming red flag from someone who makes a point of maintaining composure and not inciting panic.

Sure, such a setback could undermine the Schwab U.S. Dividend Equity ETF as much as it does any other stock or fund. That’s not the chief concern of any correction, though. It’s what happens afterward. That bearish jolt may well inspire investors to rethink everything about the risks they’ve been taking, souring them on tech names and turning them onto value names that also dish out above-average income.

You’ll just want to be positioned before it all starts to happen.

Exchange-traded funds (ETFs) are one of the best investments for those looking for lower-effort ways to get involved in the stock market, and the right investment can help you build long-term wealth while barely lifting a finger.

But with some investors worried about potential volatility, it can be tough to choose the right ETF. While there’s no single best investment for every portfolio, there are a few good reasons why the Vanguard High Dividend Yield ETF (VYM -2.00%) could be a great buy in 2025.

Image source: Getty Images.

1. Its diversification can help limit risk

The Vanguard High Dividend Yield ETF contains 579 stocks, which are fairly evenly allocated across 10 different industries. It’s most heavily allocated to the financials sector, representing close to 22% of the fund.

This level of diversification can help mitigate risk. In general, the more stocks you own across a wider variety of industries, the safer your portfolio will be. There are limits to diversification, but if you’re investing in hundreds of stocks across 10 industries, your portfolio won’t be crushed if a handful of stocks or even an entire sector is hit hard in a market downturn.

One thing that makes this fund somewhat different from many other ETFs is its lighter allocation toward tech stocks at only 12% of the fund — compared to, for example, the Vanguard S&P 500 ETF, which devotes over 33% of the fund toward tech.

Tech stocks often deliver higher returns than those from other sectors, but they can also be highly volatile. Relying less on this industry can help reduce risk and short-term turbulence, which can be a major advantage in periods of uncertainty.

2. It offers consistent performance

This ETF won’t experience the same returns as, say, a high-powered growth ETF, and that’s OK. Each fund has its own unique strengths and weaknesses, and the High Dividend Yield ETF’s biggest strength is consistency.

All the stocks in this fund have a history of delivering high dividend yields year after year. Companies with strong dividend payouts are often more mature and established than their younger and more volatile counterparts, as the latter are generally more focused on growing and stabilizing the business than paying out dividends.

This doesn’t mean that these companies won’t face shakiness in the near term, especially during a market downturn. But many of the stocks in this ETF have a decades-long track record of recovering from even the most severe economic rough patches while still paying out consistent dividends to shareholders.

3. Its high dividend can generate passive income

Perhaps the biggest advantage of investing in a dividend ETF is the dividend income itself. This fund most recently paid out a quarterly dividend of around $0.84 per share, and while that may not sound significant, it adds up when you accumulate dozens or hundreds of shares over time.

Dividend ETFs can be particularly strong investments during periods of market uncertainty. Besides the general consistency and diversification that this fund offers, you can also rely on it as a steady source of passive income via dividend payments. While you can reinvest those dividends back into the fund, you can also choose to cash them out each quarter for some extra income.

High-yield dividend funds specifically are designed to pay higher dividends compared to other stocks and ETFs. If you’re looking to grow a stable stream of passive income, the Vanguard High Dividend Yield ETF can help you get there.

It’s unclear where the stock market may be headed throughout the rest of 2025. But during periods of uncertainty, investing in a dividend ETF can help keep your portfolio more protected, regardless of what’s coming.

I never shy away from a chance to tell someone how lucrative dividend stocks can be. Reliable distributions may not be as fun to brag about as share price appreciation, but they can quietly help you build wealth, particularly if you reinvest them to benefit from compound growth. And succeeding with an income investment strategy doesn’t require the acumen of a Wall Street veteran, either. It can be as simple as investing in a dividend-focused exchange-traded fund (ETF).

There are numerous worthwhile dividend ETFs on the market, but if you’re looking for one to invest $1,000 in now, I say look no further than the Schwab U.S. Dividend Equity ETF (SCHD -1.67%). It checks off many of the boxes that dividend investors should have on their lists.

Image source: Getty Images.

A good vetting process

One of the boxes the Schwab U.S. Dividend Equity ETF checks off (and arguably the most important one) is that it contains only high-quality companies. It tracks the Dow Jones U.S. Dividend 100, and entry into that index requires that companies have consistent cash flow, a strong balance sheet, a track record of at least 10 years of dividend payouts, and strong profitability.

These criteria mean that its components aren’t picked solely based on their dividends, and that they’re unlikely to be yield traps — stocks where the yields are high (and thus, attractive on the surface) because their share price has declined meaningfully due to poor business performance.

This doesn’t mean companies in this ETF won’t ever face challenges, but they have businesses built to withstand them. Below are the fund’s top 10 holdings:

Source: Charles Schwab. Percentages as of Oct. 7.

These companies aren’t the high-flying tech stocks that get a lot of attention in the media and on Wall Street, but they’re reliable, generate consistent cash flows, and have proven that their businesses can hold up during tough economic times. That’s always important, but it’s especially so with dividend stocks, which provide much of their long-term value to shareholders by steadily distributing profits.

A dividend that will grow over time

Not only do the Schwab U.S. Dividend Equity ETF’s criteria rule out companies with shaky or unstable dividends, they also favor companies that prioritize regularly increasing their payouts. Over the past decade, the ETF’s dividend per share has increased by 187% to $0.26 per quarter.

At the ETF’s price at the time of this writing, that works out to around a 3.8% yield, meaningfully above its average over the past decade.

SCHD Dividend Yield data by YCharts.

Although the Schwab U.S. Dividend Equity ETF’s dividend yield will inevitably fluctuate as the prices of the stocks in its portfolio do, if we assume it remains around 3.8%, that would pay out around $38 annually per $1,000 invested. That’s not life-changing money. However, it can add up over time, especially if you reinvest your dividends and focus on acquiring more shares.

How much could a $1,000 become worth?

There’s no way to predict how a stock or ETF will perform, but for the sake of illustration, let’s assume the Schwab U.S. Dividend Equity ETF continues to deliver at the same pace it has averaged over the past decade: an average annualized total return of 11.7%. At that rate, here is roughly how much a $1,000 investment would be worth after various periods (accounting for SCHD’s 0.06% expense ratio):

• 10 years: $3,007.
• 15 years: $5,215.
• 20 years: $9,044.
• 25 years: $15,685.

Those are impressive gains, but your results would be even better if you steadily invested more money in it over time. Adding $100 a month would give you a holding worth around $23,700 in 10 years, $48,670 in 15 years, $91,980 in 20 years, and $167,080 in 25 years. Those are huge differences from just the one-time $1,000 investment.

Nothing is guaranteed in the stock market, but the Schwab U.S. Dividend Equity ETF has a track record of being a great choice for investors seeking reliable and consistent income.

Even though we’ve been through this before, the U.S. government shutdown can be an unsettling time. Swaths of federal employees are off the job — or still working but not being paid — and it’s unclear how long the deadlock will last.

At the same time, it’s scary for non-government workers, too. We rely on the government for Social Security checks, Medicare, Medicaid, veterans’ benefits, and for much-needed services such as air traffic control.

People will still get their checks and veterans’ benefits, but some services will be delayed. And travelers are already reporting delays and cancelled flights at airports.

Fortunately, the stock market has a history of holding its own during a government shutdown. Keeping your money in the market has traditionally been a smart move. And if you’re worried about making sure you have a steady flow of income, a dividend exchange-traded fund (ETF) like the Vanguard Dividend Appreciation ETF (VIG -1.92%) can be a good option.

Image source: Getty Images.

About the Vanguard ETF

First, it’s important to understand why the Vanguard Dividend Appreciation ETF includes the stocks it does. And to do that, you have to understand the principles of the underlying index, which is the Nasdaq US Dividend Achievers Select Index.

This index includes companies that are on the Nasdaq US Broad Dividend Achievers Index, with some important exceptions. First, it excludes the top 25% of companies in the index by dividend yield. That’s to make sure the Nasdaq US Dividend Achievers Select Index doesn’t have unstable companies with dividends that are artificially high because their businesses are unstable.

And second, the fund excludes all master limited partnerships and real estate investment trusts. Lastly, it only includes companies that have increased their dividend annually for at least 10 consecutive years.

The stocks left make up the Nasdaq US Dividend Achievers Select Index, and those names are skewed toward the technology, industrial, and financial sectors, which account for a collective 64% of the fund.

That’s the index that the Vanguard ETF strives to duplicate, so you can find the same breakdown by stock and sector in it. The top 10 holdings are all blue chip names, with no stock having more than a 6% weighting.

Source: Morningstar

Only two of these companies in the Vanguard Dividend Appreciation ETF’s top 10 are in the red after 12 months. That’s the beauty of an ETF: Rather than trying to guess the one or two best stocks to buy, you get an entire bushel of them with the Vanguard ETF.

The other thing I really like about this ETF is that it gives you a good mix of performance and yield. Compared to some other popular dividend ETFs, it provides the best one-year performance, with a gain of 10%. Combine that with a dividend yield of 1.6%, and you get a nice total return from Vanguard Dividend Appreciation.

VIG data by YCharts.

The bottom line

Yes, this can be an unsettling time, and it’s only natural to make sure that you’re investing in a fund that can provide you with some guaranteed quarterly income, especially if you’re worried that you’re going to have to cover a shortfall by another source.

The Vanguard Divided Appreciation ETF provides the best combination of dividend payout and one-year performance. And when you also consider that it has a low expense ratio of only 0.05%, or $5 annually per $10,000 invested, then I’m comfortable parking funds here while waiting for the government to restart.