Dividend stocks are a simple way to generate passive income. Get a 3% return or more right away by investing in high-yield dividend payers. This yield may rise as stocks raise dividends over time. For almost 60 years, Procter & Gamble has increased its dividend.
However, building a dividend stock portfolio is difficult. High yields are often associated with struggling companies or slow-growing ones, making them hazardous. You can also pick a corporation that's crushed by competition.
That's where ETFs make sense as investments. ETFs can provide diversity and market sector exposure in one purchase. I'm studying the Vanguard High Dividend Yield ETF (NYSEMKT: VYM), which invests in large dividend-paying firms. Investors can earn large passive income from the fund's 3% yield. It would pay $200 in dividends per month with $80,000 invested.
Money goes where? ETF investors should know where their money is going. This cash won't go to fees, which is good for long-term returns. Vanguard funds have some of the lowest expenditure rates in the industry.
VYM's major holdings include many Dow Jones Industrial Average firms. Johnson & Johnson, Procter & Gamble, Home Depot, and Walmart are among its top 10 value investments.
No big tech or growth stocks are on this list. This ETF doesn't own the "Magnificent Seven" since it prioritizes yield over growth. Tech makes up barely 9% of its portfolio, with consumer staples, energy, and financials taking up more space. Investors that hold tech companies like Apple or a fund that mirrors the S&P 500 should benefit from it. These expensive stocks can be balanced with the Vanguard High Dividend Yield ETF.
What to anticipate When stock markets fall and recession worries rise, the ETF may perform well. In contrast, market rallies produce weak short-term results. In 2023, the fund gained 6% while the S&P 500 rose 25%.
That kind of short-term volatility doesn't concern dividend investors. Instead, keep costs low and diversify into high-yield stocks. Vanguard High Dividend Yield ETF investors get that.
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