Dividend stocks are hard to beat because they offer three ways to make money. As a company grows, its share price will grow, benefiting shareholders. They will also pay cash dividends to these shareholders – typically quarterly. The bottom line is that healthy and growing dividend payers tend to increase their payouts over time. So if you receive $300 in dividends this year, it could become $600 or more in ten years.
Here are three solid dividend-focused exchange-traded funds (ETFs) from the folks at Fidelity. (Remember, an ETF is essentially a fund that trades like a stock, so it’s easy to get in and out of.)
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In the table below, you’ll find three Fidelity ETFs, as well as one excellent ETF S&P 500 Index Index funds, for comparison.
ETF
recent dividend yield
5-Year Average Annual Return
10-Year Average Annual Return
Fidelity High Dividend ETF (NYSE: FDVV)
3.02%
16.34%
not applicable
Fidelity International High Dividend ETF (NYSE:FIDI)
The ETF hasn’t been around long enough to have a 10-year track record, but its 5-year performance has been very solid, even beating the S&P 500. Fidelity High Dividend The index “is designed to reflect the stock performance of large and mid-cap dividend-paying companies that are expected to continue paying and increasing dividends.”
The ETF holds 103 stocks, with the top holdings including NVIDIA, apple, Microsoftand Broadcom. These aren’t big dividend payers, but they have been fast growers, and their inclusion suggests that the ETF is targeting growth and income.
Given its recent dividend yield of 3.02%, you would need to invest approximately $3,125,000 in the ETF to receive $100,000 in annual dividends. This may be a tall order, but even just $30,000 can generate $960.
While the above ETFs will hold some stocks with significant international exposure, this international ETF focuses on companies outside the United States, so it may be particularly attractive if you are worried about the near-term outlook for the U.S. economy and/or a possible recession. It has also performed well over its relatively short life, in part due to a weak U.S. dollar.
It holds 96 stocks, with its top holdings including State Grid, british american tobacco plcand nestle.
Given its recent dividend yield of 4.30%, you would need to invest approximately $2.3 million in the ETF to receive $100,000 in annual dividends.
Stocks outperform bonds over most longer periods, but many still prefer Include some bonds in its portfolio for diversification purposes.
This bond ETF recently invested in more than 4,400 securities, with the largest holdings being U.S. Treasuries and bonds. Given its recent dividend yield of 4.60%, you would need to invest approximately $2.18 million in the ETF to receive $100,000 in annual dividends.
I included this S&P 500 ETF because while Fidelity has an S&P 500 index fund, it is not offered in ETF form. However, Fidelity account holders generally may invest in other securities, such as this security.
It’s always worth considering an S&P 500 index fund in your portfolio, but it may not be worth it if you want to collect $100,000 in annual dividend income, since you’d need to invest more than $8 million in the ETF to do that.
Whatever approach you take, make sure you have a solid retirement plan and are following it. Don’t assume Social Security will be enough to support you in the future, as it could face benefit cuts.
You might want to invest in one or more of the ETFs mentioned above, or some other stable dividend-focused fund. Don’t worry if you don’t receive your $100,000 immediately. If you keep growing your portfolio and investing in more dividend payers, you’ll likely get $100,000.
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