5 Dividend ETFs for Lifetime Income Streams

For investors seeking reliable domestic income, the Schwab US Dividend Equity ETF (SCHD) stands out as a cornerstone holding. This passively-managed ETF tracks the Dow Jones U.S. Dividend 100 Index, holding 103 large-cap U.S. companies that have paid dividends for at least ten consecutive years. Each company is rigorously scored on four financial pillars: cash-flow-to-total-debt, return on equity, dividend yield, and five-year dividend growth. The resulting portfolio is market-cap weighted, tilting toward sturdy cash generators like AbbVie (ABBV), Chevron (CVX), The Home Depot (HD), and Altria (MO). With a 3.8% dividend yield and an exceptionally low expense ratio of just 0.06%, SCHD provides quality income at minimal cost.

Complementing SCHD is the First Trust Morningstar Dividend Leaders Index Fund (FDL), which tracks the Morningstar Dividend Leaders Index. FDL holds 100 large and mega-cap U.S. companies screened for consistent and sustainable dividend policies, requiring flat or positive 5-year dividend growth and earnings that cover indicated dividends. Unlike traditional market-cap weighting, FDL weights holdings by the dollar value of expected dividends, with a 10% cap on any single holding. This methodology has proven remarkably effective, making FDL one of the most consistent and stable ETFs over the past decade. Investors receive a compelling 4.21% yield, though the expense ratio is higher at 0.43%.

For maximum diversification within the domestic dividend space, the Vanguard High Dividend Yield Index Fund ETF (VYM) offers exposure to approximately 583 stocks forecast to pay above-average dividends. Tracking the FTSE High Dividend Yield Index and excluding REITs, VYM simply owns the higher-yielding half of the dividend-paying universe through market-cap weighting. This approach avoids value traps while providing exposure to the biggest, most stable dividend payers. Though its 2.4% yield is lower than others, VYM’s broad diversification and minimal 0.06% expense ratio make it an excellent core holding for conservative income investors.

Beyond domestic markets, the Vanguard International High Dividend Yield Index Fund (VYMI) provides crucial geographic diversification. Tracking the FTSE All-World ex-US High Dividend Yield Index, VYMI starts with large and mid-cap companies outside the U.S., removes REITs and non-dividend payers, then ranks the remainder by expected dividend yield. The fund holds the highest-yielding half of this universe, weighted by market capitalization. This strategy has delivered impressive results, with VYMI up 25.3% year-to-date as international firms benefit from USD weakness. With a 3.3% dividend yield and 0.17% expense ratio, VYMI offers investors a hedge against domestic market volatility while capturing global income opportunities.

For investors seeking higher yields through specialized instruments, the Virtus InfraCap US Preferred Stock ETF (PFFA) presents a unique alternative. Unlike traditional equity dividend ETFs, PFFA invests in preferred shares issued by companies with market caps over $100 million. These hybrid securities sit between bonds and common stocks, paying fixed or floating rates distributed before common dividends. This structure generates exceptionally high yields, with PFFA currently yielding 9.09% with monthly distributions. Though investors forgo significant upside potential, the current environment presents opportunity as PFFA trades at a ~17% discount, potentially recovering as interest rate cuts push investors toward preferreds. The 2.48% expense ratio appears high but primarily reflects interest payments, with the management fee at 0.80%.

The selection of these five ETFs reflects a strategic approach to lifetime income generation. By avoiding narrow sector-based ETFs and funds overly reliant on options—which could face catastrophe during market disruptions like the 2008 short-selling ban—investors can build a core portfolio designed to compound indefinitely. Each ETF brings distinct advantages: SCHD and FDL for domestic quality and consistency, VYM for broad diversification, VYMI for international exposure, and PFFA for high-yield specialization.

Together, these funds create a balanced income strategy capable of weathering market transformations. As the article notes, the stock market of 2045 will likely feature entirely different leading companies than today’s landscape. By focusing on time-tested methodologies rather than fleeting trends, these dividend ETFs provide the durability needed for retirement income that can truly last a lifetime. Their combination of rigorous screening, diversification, and reasonable costs makes them worthy candidates for any long-term income portfolio.