Investors seeking passive income streams are turning to dividend-paying stocks, with exchange-traded funds offering an accessible entry point. A table of data from Ned Davis Research and Hartford Funds covering 1973 to 2024 shows dividend growers and initiators achieved an average annual total return of 10.24%, outperforming non-payers at 4.31%.
Dividend income can provide regular cash without selling portfolio assets. Healthy dividend-paying stocks often increase payouts over time, helping offset inflation. Their stock prices also tend to rise despite market fluctuations, offering growth alongside income.
Twelve dividend-focused ETFs are currently available, ranked by recent yield. The iShares Preferred & Income Securities ETF leads with a 6.37% yield, while the Vanguard S&P 500 ETF offers 1.13%. Data from Morningstar.com as of January 8, 2026, shows performance varies across time periods.
Some ETFs balance yield and growth effectively. The State Street SPDR Portfolio S&P 500 High Dividend ETF yields 4.53% with 10.37% five-year average annual returns. The Schwab U.S. Dividend Equity ETF yields 3.82% with 9.13% five-year returns.
Investors can spread allocations across multiple ETFs. Options include sector-specific funds like the Vanguard Energy ETF for energy exposure or the Vanguard Real Estate ETF for real estate investment trusts. The Vanguard Total World Stock ETF provides global market access with dividend income.
Dividends serve both retirees needing living expenses and pre-retirees reinvesting for compound growth. With $400,000 invested at a 3% average yield, annual income could reach approximately $12,000, potentially growing over time.