These 3 Dividend ETFs (SCHD, DIVO, MAIN) Should Be Your Passive Income Foundation

If you think you need to hand-pick hundreds of individual stocks to build a passive income foundation, think again. With only a few carefully chosen exchange traded funds (ETFs), you can turn your portfolio into an income-producing juggernaut.

Today, I’ll deliver several picks that provide diversification and can rightfully be classified as dividend champions. We won’t chase the highest yields, but instead will find consistent cash payers that aren’t too risky. So, get ready as we’re about to uncover three high-confidence investments for passive income enthusiasts.

SCHD for Dividend Growth

To build a passive income foundation that will last for a lifetime, investors should check ETFs for certain green flags. Among those green flags is an overall history of dividend growth.

The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) has a portfolio of 103 stocks, and it tracks the Dow Jones U.S. Dividend 100 Index. You’ll find plenty of long-term dividend growers in the fund’s holdings list, such as Coca-Cola (NYSE:KO), Chevron (NYSE:CVX), Lockheed Martin (NYSE:LMT), and Home Depot (NYSE:HD).

What you’ll get with the Schwab U.S. Dividend Equity ETF is excellent diversification, potential tax efficiency, and exposure to famous dividend growers. Is the SCHD ETF itself a long-term dividend grower, though?

There are no guarantees for future outcomes, and the quarterly dividend distributions of the Schwab U.S. Dividend Equity ETF may decrease sometimes. However, history indicates that SCHD has generally increased its dividend payouts over time.

From 2015 through 2017, the Schwab U.S. Dividend Equity ETF typically paid out $0.25 to $0.40 per share in quarterly dividend distributions. By 2024, it wasn’t unusual to see quarterly payouts exceeding $0.60 or even $0.70 from SCHD.

In percentage terms, the Schwab U.S. Dividend Equity ETF features a trailing 12-month distribution yield (i.e., a dividend yield) of 4.03%. Clearly, long-term dividend growth has its benefits and the SCHD ETF is a smart pick if you’re in the market for passive income.

DIVO for Income

To further enhance our passive income foundation, we should seek out assets that offer good yield while also providing exposure to great companies. As we’ll discover today, the Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) checks all the right boxes for safety-minded income collectors.

While the Amplify CWP Enhanced Dividend Income ETF only comprises 30 stocks, these are true powerhouses spanning multiple industries. Among the fund’s top holdings are mainstay large-cap names like Visa (NYSE:V), Caterpillar (NYSE:CAT), JPMorgan Chase (NYSE:JPM), Microsoft (NASDAQ:MSFT), and Goldman Sachs (NYSE:GS).

These aren’t just random selections as the fund’s holdings are specifically chosen to include “high-quality large cap companies with a history of dividend and earnings growth.” Thus, you’ll get a decent amount of diversification across a broad array of solid companies with the Amplify CWP Enhanced Dividend Income ETF.

To maximize its income-generating potential, the Amplify CWP Enhanced Dividend Income ETF collects dividends from its portfolio companies. In addition, the fund extracts even more income by writing covered calls on its portfolio’s stocks.

With those strategies, the Amplify CWP Enhanced Dividend Income ETF is able to offer an enticing annual distribution rate of 4.81%, paid out on a monthly basis. This makes the fund’s 0.56% annual expense ratio a fair price to pay as the DIVO ETF is a well-managed, reliable income-producing powerhouse. 

MAIN for Strong Dividends

And now, something you probably didn’t expect: an asset that’s not exactly an ETF but it has the diversification characteristics of an ETF. I’m referring to the stock shares of Main Street Capital (NYSE:MAIN) stock, a fascinating financier that’s not afraid to reward its loyal investors.

Main Street Capital “provides debt and equity capital to lower middle market companies” and sometimes just acquires businesses outright. Main Street Capital’s 70 portfolio companies span dozens of diverse industries from software to chemicals, machinery to telecommunications and more.

Be assured, Main Street Capital doesn’t just invest in any random business. Indeed, Main Street Capital focuses on companies with revenue of $10 million to $150 million. The target businesses should also have a seasoned management team, stable cash flow, and strong competitive advantages.

As a result, Main Street Capital remains a financially stable company. In fact, Main Street Capital’s first-quarter 2025 investment income totaled $137.046 million, up 4% year over year.

Along with the company’s diversified portfolio and financial firmness, investors should appreciate Main Street Capital’s commitment to paying hefty dividends. As reported by Yahoo! Finance, Main Street Capital offers a forward annual dividend yield of 7.55%.

Unless Main Street Capital’s investment income drops unexpectedly, there’s no evident reason to expect a massive dividend cut. Therefore, along with the SCHD and DIVO ETFs, investors can turn to MAIN stock for strong dividends as part of their passive income foundation.

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