Long-term investing has consistently proven effective, and is one of the core pillars of wealth generation that millions of Americans live by. Even the most astute and most renowned active investors of all time such as Warren Buffett have famously advocated for holding investments indefinitely, and in particular, using passive index funds to do so. 

I’ve touted many passive index funds in the past as great vehicles for long-term investors to grow their wealth. However, with most indices and sectors typically providing relatively low dividend yields (with the average S&P 500 yield around 1.3% at the time of writing), that’s not a lot of passive income for those looking to generate a reliable income stream in retirement.

The good news is that there are plenty of exchange traded funds (ETFs) which are almost entirely focused on creating market-beating yield for those entering or nearing retirement. I’m going to focus on three such funds I think long-term investors looking for dividend growth over time (as a greater proportion of their overall total return) may want to consider. These funds should provide consistent capital appreciation upside over the long-term as well, but are more aimed at those investors looking to create robust passive income streams to rely on in retirement to be able to live off of (without selling one’s capital). That’s a great way to go, and is a strategy I’ve long thought certainly makes sense.

Without further ado, here are three of the best ETFs I think passive income investors may want to take a close look at right now.

Key Points About This Article:

• Dividend income matters, and investors looking to generate growing passive income in retirement certainly have their work cut out for them with where average dividend yields are today.
• However, for those looking to ramp up their exposure to top income ETFs, here are three excellent options to consider right now.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

WisdomTree U.S. Quality Dividend Growth Fund (DGRW)

The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) is an excellent option to consider for investors seeking an ETF that can grow one’s passive income stream over time. That’s because DGRW focuses on large-cap U.S. stocks with market-beating dividend growth historically. And as one might expect, companies that have traditionally raised their dividends consistently are more likely to do so in the future. That’s what makes this ETF, which is focused on both quality and dividend growth, one of the top options I’m looking at right now. 

Of course, past performance is no indication of how these companies will deliver over the long-term. But because this ETF is weighted more heavily toward companies that are ranked on other quality factors (such as return on equity and earnings growth, in addition to dividend growth potential), there’s a lot to like about this fund’s ability to deliver over time in a much more stable fashion than other yield-focused funds. 

It’s also worth pointing out that DGRW has provided notable returns in the past, with a year-to-date return of roughly 15% and a a 317% return since inception. This fund’s yield is relatively low compared to the other options on this list (at around 1.5%), but that’s a reflection of the quality of companies included in this portfolio, with top holdings being Microsoft (7.15%), Apple (5.13%), and NVIDIA (3.14%).

So, while this ETF’s holdings aren’t entirely dividend stocks (yet), the quality underpinning this particular ETF makes it a worthy pick for any investor with a long-term investing time horizon in my view. 

JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) is another popular investment vehicle aimed at providing dividend investors with solid dividend income, while also offering some degree of downside protection. This ETF is one I’d certainly put more in the higher-yield bucket, with a current dividend yield just shy of 7% at the time of writing. Accordingly, this ETF does have a higher risk profile than the other two options on this list, but its yield certainly compensates investors for this risk. 

Launched in mid-2020, JEPI has shown strong total returns, rising nearly 20% in aggregate since inception while delivering an average yield of around 7.5%. So, investors looking at this particular ETF are generally those who want to receive most of their return from the dividend side of the equation. There’s certainly nothing wrong with that, and it’s a strategy that could continue to pay off nicely, particularly if interest rates continue to come down around the world courtesy of central bankers becoming more accommodative.

JEPI’s portfolio includes a diverse range of sectors, with significant allocations in technology (16.97%), healthcare (12.63%), and industrials (11.73%) among others. This diversification helps mitigate risks associated with sector-specific downturns, and makes this ETF one I think is worth considering right now. 

SPDR Portfolio S&P 500 High Dividend ETF

The last entrant on this list is the SPDY Portfolio S&P 500 High Dividend ETF (SPYD). With a dividend yield of 3.9%, this ETF is more middle of the pack in terms of its yield and capital appreciation upside, making it perhaps the most attractive pick for the average investor out there. Maybe I should have led with this one, but I think comparing and constructing the different kinds of yield-generating investments out there is an important thought exercise to take on.

The SPYD ETF is aimed at providing a portfolio that mimics the performance of the top 80 high-yielding dividend stocks within the S&P 500. Thus, the fact that the companies included in this list are S&P holdings ensures some stability and quality metrics are baked into the portfolio. And with a rock-bottom expense ratio of just 0.07%, this ETF is among the most cost-friendly for dividend investors looking for roughly triple the S&P 500 yield, something that certainly makes sense in my view (at least in terms of the average passive investor).

For those investors looking to build a portfolio with strong core building blocks, this is a top income-focused ETF I think is worth considering right now.

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