3 Top Dividend ETFs That Work Better Together

The proliferation of dividend ETFs has created both opportunity and complexity for income-focused investors. Among the crowded field, three specific funds—Fidelity High Dividend ETF (FDVV), Schwab U.S. Dividend Equity ETF (SCHD), and JPMorgan Equity Premium Income ETF (JEPI)—stand out not just individually but particularly when combined. This strategic trio offers investors a balanced approach to income generation, with each ETF playing a distinct role in portfolio construction. The combination addresses multiple investor objectives simultaneously: yield enhancement, volatility reduction, and growth potential.

What makes this combination particularly compelling is how each ETF complements the others. FDVV provides growth-oriented income with technology exposure, SCHD offers defensive stability with consistent dividends, while JEPI serves as a high-yield volatility dampener. Together, they create a comprehensive income strategy that can be fine-tuned to meet specific yield targets, typically ranging from 3.5% to 6%, while managing overall portfolio risk. This approach allows investors to benefit from the strengths of each fund while mitigating their individual limitations.

The Fidelity High Dividend ETF (FDVV) represents a unique proposition in the income ETF space, offering a 3.1% yield while maintaining significant growth potential. Over the past two years, FDVV has delivered impressive performance, gaining approximately 48%—nearly keeping pace with the S&P 500. This strong performance stems from the ETF’s strategic positioning with greater technology exposure than most other dividend ETFs yielding above 3%.

FDVV’s technology tilt positions it well to benefit from ongoing technological trends, particularly the artificial intelligence revolution. As the source text notes, ‘Given the productivity gains that AI can provide to the broad economy, I think such a mild tech tilt ought to be desirable.’ This exposure to technology innovators provides potential for both capital appreciation and faster distribution growth as technological advancements drive corporate profitability. However, this tech orientation also means FDVV could underperform during AI-related market corrections compared to more conservative dividend ETFs.

The fund’s balanced approach allows investors to participate in growth trends while still receiving substantial income, making it an ideal core holding for those seeking both yield and appreciation potential. As the analysis indicates, FDVV enables investors to ‘do well over the long term by allowing for more income without requiring investors to shut out the top tech innovators that stand to gain the most as the AI revolution plays out.’

The Schwab U.S. Dividend Equity ETF (SCHD) serves as the defensive anchor in this income trio, currently yielding just below 3.8% with a beta of approximately 0.80. This lower beta indicates significantly reduced volatility compared to the broader market, making SCHD particularly valuable during market downturns. While growth-oriented funds like FDVV may outperform during bull markets, SCHD’s defensive characteristics help cushion portfolios during declines.

SCHD’s steadiness makes it an excellent complement to more growth-focused holdings. As described in the source, ‘While the S&P 500 or a slightly growthier income ETF like the FDVV is bound to outperform on the way up, the SCHD looks better equipped to fall less on the way down.’ This defensive quality provides ballast to a portfolio, reducing overall volatility while still delivering near-4% yield from quality U.S. dividend-paying companies.

The fund’s methodology focuses on companies with strong dividend histories and financial stability, creating a foundation of reliable income generation. This makes SCHD particularly valuable for investors seeking to balance growth potential with downside protection, serving as what the analysis describes as ‘a steadier component in the trio of ETFs.’

The JPMorgan Equity Premium Income ETF (JEPI) brings a different approach to income generation, utilizing covered call strategies to achieve an impressive 8.4% yield with remarkably low volatility. With a beta of just 0.57, JEPI exhibits significantly less correlation to S&P 500 movements than traditional equity investments. This combination of high income and low volatility makes it particularly valuable for yield enhancement and risk reduction.

JEPI’s covered call strategy involves selling call options on the fund’s holdings, generating premium income that funds the substantial dividend payments. As the source explains, ‘with the JEPI, you won’t get as much capital gains as with the S&P. But, at the very least, you’ll be able to pocket the premiums coming in.’ This approach creates a trade-off: investors sacrifice some upside potential in exchange for higher, more consistent income and reduced volatility.

The fund serves as what the analysis describes as ‘a yield powerhouse that can help add stability,’ making it particularly valuable for adjusting a portfolio’s overall yield. When combined with FDVV and SCHD, which might average around 3.5% yield together, JEPI can help boost the combined yield toward 5% or even 6%. However, given its capped upside potential, the analysis cautions that ‘the name might not be the best to overweight in for the growth-minded investors out there.’

The strategic combination of FDVV, SCHD, and JEPI allows investors to construct a customized income portfolio that balances multiple objectives. As the analysis suggests, investors might ‘start building an ETF on the SCHD and FDVV, while adding JEPI to adjust the portfolio’s overall yield to the right spot.’ This approach provides flexibility to emphasize different characteristics based on individual needs and market conditions.

For growth-oriented investors seeking income, a heavier weighting toward FDVV might be appropriate, leveraging its technology exposure and growth potential. Those prioritizing stability and downside protection might emphasize SCHD’s defensive qualities. Meanwhile, investors needing immediate income enhancement can utilize JEPI’s high yield while benefiting from its volatility-reducing properties.

The broader context of declining expense ratios across the ETF industry, mentioned in the source text, makes such strategic combinations increasingly accessible to investors. Lower fees mean more of the generated income flows directly to investors, enhancing the effectiveness of these multi-ETF strategies. As the ETF landscape continues to evolve, combinations like the FDVV-SCHD-JEPI trio demonstrate how investors can leverage specialized funds to create sophisticated, tailored income solutions.