These 5 Dividend ETFs (SCHD, DIVO, JEPQ, QQQI, SPYI) Are Portfolio Game-Changers

If you want to play it safe and you’re in it for the long term, you can’t go wrong with buying dividend ETFs. These ETFs will spread your money across dozens or even hundreds of stocks that have a strong record of returning cash to investors.

And since many of these ETFs are overweight on cash-rich “steady eddies,” they swing less during downturns and keep your portfolio afloat regardless of what the economic cycle is. These ETFs are great for long-term compounding by reinvesting dividends, and you can also use those dividends as a safety net if a recession is bad enough to cause you distress.

Here are five dividend ETFs that are portfolio game-changers, since they give you a mix of stability and high yields. These have been featured on 247 Wall St.’s list of the top ETFs for fast-growing income.

Schwab US Dividend Equity ETF (SCHD)

Schwab US Dividend Equity ETF (NYSEARCA:SCHD) is a well-known dividend ETF that holds high-quality dividend stocks with strong fundamentals and a history of raising dividends. It combines fast-growing dividends, quality-first stock selection, competitive total returns, and ultra-low fees into one fund by tracking the Dow Jones U.S. Dividend 100 Index. The combination gives investors income today, raises that income every year, and does so with less volatility than a broad-market index, all at a cost of $6 per $10,000 invested.

The dividend yield here is 3.86% at the moment, and these dividends have grown at double digits. Trailing dividend growth is at 16.69%, whereas the dividend CAGR for the past five years has been at 11.44%. SCHD has increased its dividends for 13 consecutive years.

AbbVie (NYSE:ABBV) is the biggest holding here with 4.8% exposure, followed by Coca-Cola (NYSE:KO) at 4.64%, Amgen (NASDAQ:AMGN) at 4.49%, Cisco Systems (NASDAQ:CSCO) at 4.36%, and Pfizer (NYSE:PFE) at 4.25%.

It holds very solid companies, but I’d still recommend holding SCHD alongside other growth-focused ETFs. The value tilt here could cause you to miss out on some gains during a bull market. In the past two years, SCHD has notably underperformed the S&P 500 and the Nasdaq Composite. SCHD has more or less kept up with the S&P 500 and has even outperformed it at times, but the AI-heavy growth has led to this ETF lagging in recent years.

Amplify CWP Enhanced Dividend Income ETF (DIVO)

Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) is an actively-managed equity fund that has a concentrated portfolio of large-cap companies with consistent dividend and earnings growth. It also has a tactical covered-call program written on individual holdings to harvest extra option premiums.

The hybrid profile here fills a gap for investors who want more income than SCHD without taking on too much volatility. The trailing yield is at 4.75%

The strategy here has led to comparable total returns to the S&P 500, though DIVO has still underperformed in recent years due to the AI boom. It is also quite expensive and has a 0.56% expense ratio.

JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)

JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) is an actively managed ETF. It buys a portfolio of large-cap Nasdaq-100 stocks that it deems of quality. At the same time, it sells call options on the Nasdaq-100 through equity-linked notes (ELNs). The option premiums are collected as cash and paid out to shareholders every month.

JEPQ was launched pretty recently, just a bit over three years ago. Since then, this ETF has underperformed considerably. It is up just 6.87%. People mainly invest here for protection from downturns, and obviously, the dividends. It comes with an 11.61% trailing yield that is paid monthly.

Plus, if you believe large-cap tech will trade sideways after surging in the past three years, harvesting option premiums can look smarter than betting on more index upside.

JEPQ has an expense ratio of 0.35%.

NEOS Nasdaq-100 High Income ETF (QQQI)

NEOS Nasdaq-100 High Income ETF owns the same large-cap growth stocks found in the Nasdaq-100 index. It is very similar to JEPG as both of them are tech-heavy, with large-cap exposure, and both have separate income engines linked to options premiums for cash flow.

This ETF has a different strategy as it sells one-month, out-of-the-money index calls through equity-linked notes (ELNs).

Regardless, the returns have also underperformed compared to the Nasdaq-100. If you want even higher yields paid monthly and you’re comfortable accepting higher fees and higher day-to-day volatility, this ETF should fit you.

The QQQI has a yield of 14.37% and an expense ratio of 0.68%.

NEOS S&P 500 High Income ETF (SPYI)

NEOS S&P 500 High Income ETF (BATS:SPYI) is another actively-managed ETF. It also launched pretty recently in August 2022.

The portfolio team first buys the 500 stocks in the S&P 500. They then overlay a systematic call-spread: short out-of-the-money SPX index calls are sold to harvest option premium, and a further-out-of-the-money long call may be purchased so that part of the index can still participate in rallies.

SPX options are cash-settled Section 1256 contracts, so any gains are taxed 60% long-term / 40% short-term, regardless of holding period, a materially lower blended rate than ordinary income for many investors.

Managers harvest losses in the equity sleeve to offset gains, and this allows most of the monthly payout to be classified as return of capital (ROC).

If you want the high income but you don’t like the volatility the Nasdaq-100 brings, this may be for you. It gives you both the S&P 500’s diversification and a double-digit yield.

SPYI comes with a 12.4% yield and a 0.68% expense ratio.

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