3 Schwab ETFs to Buy in May for Massive Passive Income in Retirement

Every so often, the stock market smacks investors upside their head with a wakeup call that things can go awry. The last two months have been such a reminder that stocks do indeed go down.

Since the middle of February, the S&P 500 has fallen into correction territory by losing 14% of its value. It’s been even worse for tech stocks with the Nasdaq 100 briefly dipping into a bear market after losing 23% of its value.

While the volatility can be unnerving, investors need to keep a level head because profits are made in these markets. It is no coincidence Warren Buffett has been a net seller of stock for over two years and built up a massive $334 billion cash warchest at Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B).

The Oracle of Omaha has been waiting to pounce on market discounts and buy his favorite stocks at a discount. You should be on the lookout, too.

A fortress built on dividends

To take advantage of the market selloff, buying dividend stocks can be one of the best investments you can make. 

For the past 50 years, income-generating stocks produced annual average returns of 9.2% versus 4.7% for non-payers, according to data from Hartford Funds, 

Yet some investors buying dividend stocks make the mistake of chasing those with the highest yields. While Wellington Management separately found that high-yield dividend stocks outperformed all other classes between 1930 and 2022, they also discovered that those with high yields — but not the highest — performed best. 

They beat the S&P 500 70% of the time and have never had a decade where they didn’t generate positive returns for investors. 

Below are three high-yield dividend exchange-traded funds (ETFs) from Charles Schwab (NYSE:SCHW) that offer excellent income potential to help soften the blow of any further market implosion.

Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is the first high-yield ETF investors should buy in May, It offers a compelling blend of income, stability, and growth. Its 4.1% is three times greater than the S&P 500’s 1.4%, delivering reliable cash flow for income-focused portfolios. 

Tracking the Dow Jones U.S. Dividend 100 Index, SCHD holds around 100 quality U.S. companies like Coca-Cola (NYSE:KO) and Altria (NYSE:MO), selected for consistent dividends and strong financials. Its 0.06% expense ratio, among the lowest in its class, ensures investors keep more returns. 

Over the past 10 years, SCHD has raised the payout at an 11.8% compound annual growth rate, and it is almost 13% over the past five years. It hiked the payout 22% just last quarter. 

The ETF is down 7.5% from the market’s February peak, but with defensive sectors like energy, consumer staples, and healthcare accounting for 55% of the portfolio, SCHD is a top pick for steady income and long-term wealth-building at its current valuation.

Schwab International Dividend Equity ETF (SCHY)

Look at the Schwab International Dividend Equity ETF (NYSEARCA:SCHY) as the foreign markets equivalent of SCHD. The ETF tracks the Dow Jones International Dividend 100 Index, or the top 100 or so high-dividend, financially stable companies across developed markets like Europe and Asia, including stalwarts like Unilever (NYSE:UL). 

The dividend also yields 4.1% while its ultra-low 0.08% expense ratio ensures cost efficiency, helping to maximize investor returns. With a Silver Morningstar Medalist Rating, SCHY’s focus on low-volatility, high-profitability firms enhances stability in a down market as it has allocated 43% of its portfolio to consumer staples, financials, and industrials that help shield against volatility. As evidence, where the markets are spiraling lower, SCHY is up more than 14% year-to-date. 

Considering the ongoing tariff battle, even if it is currently on hold, SCHY’s international exposure mitigates domestic risks, making it a top choice for diversified, high-yield income now.

Schwab U.S. REIT ETF (SCHH)

The third high-yield ETF to buy in May is the Schwab U.S. REIT ETF (NYSEARCA:SCHH). It offers investors strong income growth and real estate exposure. With a 4.1% 30-day SEC yield, SCHH also outstrips the S&P 500, it also makes the ETF ideal for income-focused portfolios. 

SCHH tracks 123 U.S. real estate investment trusts (REITs) spanning telecommunications towers, industrial properties, and retail, with top holdings like American Tower (NYSE:AMT) and Realty Income (NYSE:O)  ensuring stability. 

Its 0.07% expense ratio, among the lowest, maximizes returns. The ETF’s 99.8% occupancy rate and 8.6% five-year annualized return shows resilience. Potential interest rate cuts this year enhance REIT valuations by lowering borrowing costs, further boosting SCHH’s appeal. Its $9 billion in assets and a diversified portfolio reduce risk. As inflation hedges, REITs thrive, making SCHH a top pick for steady, high-yield income and long-term growth in today’s volatile market.

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