Exchange-traded funds (ETFs) can make it easy for you to build multiple streams of passive income. Choose wisely, and you could set yourself up to earn excellent long-term returns boosted by bountiful cash dividends. Here are two leading ETFs set to grow the wealth of their investors in the coming years.
A solid core
The Schwab U.S. Dividend Equity ETF(NYSEMKT: SCHD) can be a foundational piece of your investment portfolio. The fund tracks an index that prioritizes financially strong businesses with sustainable cash payouts.
The Schwab U.S. Dividend Equity ETF holds shares in over 100 companies. These are profitable, high-quality enterprises with average returns on equity of more than 28%. They're also mostly larger businesses with a weighted average market value of roughly $130 billion.
Here are some of the fund's biggest holdings, along with the percentages of its assets they comprise:
- Lockheed Martin, 4.46%
- AbbVie, 4.43%
- Home Depot, 4.21%
- BlackRock, 4.16%
- Coca-Cola, 4.12%
These industry leaders have long histories of rewarding their shareholders with steadily growing cash dividends. They're representative of the type of stalwart, competitively advantaged companies found throughout the Schwab U.S. Dividend Equity ETF's portfolio.
Income-focused investors will also appreciate the ETF's 3.6% dividend yield. That's nearly three times the yield of the broad market S&P 500 index. Moreover, value-focused investors will like the fund's price-to-earnings (P/E) ratio of about 17, which is notably lower than the S&P 500's P/E of over 24.
Better still, the Schwab U.S. Dividend Equity ETF sports a low expense ratio of just 0.06%. That amounts to only $0.60 per $1,000 invested annually. Lower fees mean you'll get to keep nearly all of the dividend fund's profits, which are likely to be substantial in the coming years. This high-performing ETF has delivered annualized returns of more than 13% to investors since its inception in 2011.
Global gains
If you'd also like to position your portfolio to profit from the success of companies based outside the U.S. -- while reducing your risk by increasing your diversification -- consider the Vanguard International High Dividend Yield ETF(NASDAQ: VYMI). This passive income-producing fund currently yields a hefty 4.5%.
Vanguard's ETF can boost your returns by providing you with a powerful global growth element. Buying shares of the fund is an easy way to invest in more than 1,500 international stocks.
Key markets include Japan, the United Kingdom, Switzerland, Canada, Australia, and China. Automotive titan Toyota, energy giant Shell, food conglomerate Nestle, and financial services leaders Royal Bank of Canada and Commonwealth Bank of Australia count among the fund's largest holdings.
Moreover, this international dividend stock ETF has a relatively low-cost expense ratio of 0.22%. That stacks up favorably to many comparable funds, which have expense ratios of 0.96% on average, according to Morningstar.
The Vanguard International High Dividend Yield ETF thus pairs nicely with the Schwab U.S. Dividend Equity ETF. Investing in both funds will set you up to earn passive income fueled by the long-term growth of the global economy.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lockheed Martin and Nestlé. The Motley Fool has a disclosure policy.
