3 dividend ETFs that are a retiree’s best friend

Retirement should be a stress-free time, but unfortunately, that isn’t always the case. Aside from work, I do a lot of planning for retirement, especially the financial aspect. Investing is one area where people can take the stress off because there are so many things you can do.

Investing doesn’t have to be, and shouldn’t be, complicated. Exchange-traded funds (ETFs) allow investors to cover a lot of ground with just a few investments. When investing for retirement, holding dividend-paying ETFs is beneficial because they provide stable returns regardless of stock price fluctuations.

Here are three dividend ETFs that may be suitable for retirees and offer a mix of income, stability, and diversification. All of these are important for the growth of your retirement portfolio.

1. SPDR S&P 500 ETF Trust

The S&P 500 is the U.S. stock market benchmark for stock performance and dividend yield. Most people don’t automatically think of dividends when they consider the S&P 500, but the yield is often between 1.5% and 2%. It may not seem like much, but it has had a surprising effect on the total return of the S&P 500 over time.

You invest $10,000. SPDR S&P 500 ETF Trust (spy 0.43%) Based on the share price appreciation when it first began trading in January 1993, it would be worth about $103,000 today. And factoring in dividends, it would be worth more than $184,000, which could make a big difference.

SPY data from YCharts.

SPDR S&P 500 ETF Trust is the most popular S&P 500 ETF, with over $434 billion in assets under management. It’s a good ETF because it offers diversification (all major sectors are represented), access to quality companies, and a proven long-term track record.

Over the past 15 years, the SPDR S&P 500 ETF Trust has delivered average annual returns of 11.6% and annual total returns of 13.8%. There’s no way to know if it will continue at this pace, but even an average annual return of 10% is enough to build a good nest egg consistently over time.

Because the S&P 500 includes virtually every industry leader and most influential company in the United States, an investment in the S&P 500 is essentially an investment in the broader U.S. economy. This is one of the safest long-term investments you can make for retirement.

2. Vanguard High Dividend ETF

that much Vanguard High Dividend Yield ETF (VYM 0.25%) We focus on large-cap stocks that pay above-average dividend yields. Because the ETF focuses on large-cap stocks, there is some overlap with the S&P 500, but noteworthy technology stocks are swapped out for more dividend-friendly companies.

The Vanguard High Dividend Yield ETF typically has a dividend yield about 2 to 3 times higher than the S&P 500. The 12-month trailing dividend yield is slightly over 3.1%.

VYM dividend yield data from YCharts.

The Vanguard High Dividend Yield ETF can be a good two-for-one investment for retirees. You get the stability and growth potential of the S&P 500 and large-cap stocks, plus above-average dividends.

3. Vanguard Total International Stock ETF

Part of having a well-rounded retirement stock portfolio is investing in companies outside the United States. There’s nothing wrong with focusing on US companies, but you don’t want to limit yourself and be exposed to many great companies around the world.

Investing in international companies is not that simple, as factors such as geographical location, political and economic stability, and exchange rates must be taken into consideration. That’s not to say you shouldn’t consider the case for U.S. companies, but foreign markets are a bit more complicated. That’s why we have a wide range of international ETFs, including: Vanguard Total International Stock ETF (VXUS -0.02%) helpful.

International markets are considered to be classified as developed or emerging markets. Investors view developed foreign markets as having more established financial systems and stable economies. Emerging markets are moving in that direction, but it’s still early days. The Vanguard Total International Stock ETF includes both companies and serves as a one-stop shop for international companies.

The 12-month junior dividend yield is 3%, providing retirees with geographic diversification and a good source of dividend income.