One fund stands out for outperforming the S&P 500 while offering a significantly higher dividend yield.
Dividend stocks have a unique advantage, really, because they provide three potential revenue streams. As companies expand, their stock prices rise, which benefits shareholders. Plus, they typically pay out cash dividends, often on a quarterly basis. The best part? Many of these strong dividend-paying companies tend to raise their dividends over time. So, if you earn $300 in dividends this year, there’s a chance that in ten years, that could be more than $600.
Here are three recommended dividend-centered exchange-traded funds (ETFs) from Fidelity. Just a quick reminder, ETFs function like stocks, making them easy to buy and sell.
The chart below presents three Fidelity ETFs alongside an S&P 500 index fund for comparison.
|
ETF |
Latest dividend yield |
Average annual revenue over 5 years |
Average annual revenue over 10 years |
|---|---|---|---|
|
Fidelity High Dividend ETF |
3.02% |
16.34% |
Not applicable |
|
Fidelity International High Dividend ETF |
4.30% |
12.37% |
Not applicable |
|
Fidelity Total Bond ETF |
4.60% |
0.50% |
2.99% |
|
Vanguard S&P 500 ETF |
1.12% |
15.15% |
15.07% |
Now, let’s dive deeper into each of these ETFs.
1. Fidelity High Dividend ETF
This ETF hasn’t existed long enough for a 10-year track record, but its five-year performance has been impressive, even surpassing the S&P 500. The High Fidelity Dividend index aims to track large- and mid-cap dividend-paying companies that not only pay dividends but are expected to grow over time.
It holds 103 stocks, featuring major names like Nvidia, Apple, Microsoft, and Broadcom. While these companies may not offer large dividends now, they are growing rapidly, indicating that the ETF is targeting both growth and income.
With a recent dividend yield of 3.02%, an investment of around $3.125 million would be needed to generate $100,000 in annual dividends. That might sound quite steep, but if you consider a $30,000 investment, you could realistically earn around $960 in dividends.
2. Fidelity International High Dividend ETF
This ETF is different as it focuses on companies outside of the U.S., making it appealing if you’re worried about the U.S. economic outlook. Notably, it has performed well, aided by the weaker dollar.
It includes 96 stocks, with top holdings like National Grid, British American Tobacco, and Nestlé.
With a dividend yield of 4.30%, you would need to invest roughly $2.3 million to secure $100,000 annually.
3. Fidelity Total Bond ETF
While stocks usually outperform bonds historically, bonds can still be a favorable choice for many investors. It can make sense to include some bonds for diversification.
This bond ETF holds over 4,400 securities, primarily in U.S. Treasuries. The recent dividend yield is 4.60%, which means you’d need about $2.18 million invested for a $100,000 yearly dividend income.
4. Vanguard S&P 500 ETF
This S&P 500 ETF is included because Fidelity has an S&P 500 index fund, but no ETF version. However, Fidelity account holders can still invest in other funds like this.
It’s smart to consider an S&P 500 index fund for your portfolio, but keep in mind that aiming for $100,000 in annual dividends would mean investing more than $8 million in this ETF.
No matter what you decide, having a solid retirement strategy is crucial. Don’t rely solely on Social Security for your future, especially with benefits potentially facing cuts.
Whether you opt for one of these ETFs or different dividend-focused funds, that’s fine. Just remember, reaching that $100,000 mark might take time. Keep investing, and there’s a good chance you’ll get there.
