Key insights
- The article suggests investors seeking passive income consider dividend ETFs like SCHD (high yield, strong financials) and VIG (dividend growth focus). Increased interest in dividend stocks is noted amid economic uncertainty and geopolitical risks. While not directly bearish, the shift towards defensive stocks signals potential caution regarding overall market growth.
After largely being pushed to the side by investors during the multi-year tech and artificial intelligence (AI) rally, dividend stocks are making a comeback in 2026. With the U.S. economy looking uncertain and the Iran war adding another wild card to the mix, investors are starting to find comfort in more durable, defensive stocks that generate plenty of cash.
Folks looking to create sustainable passive income streams can take advantage of the cash flow those companies are generating. Exchange-traded funds (ETFs) with low yields can still provide dividend growth over time, but those with high yields can drive how much you actually earn.
Let's look at one of each. This pair of dividend ETFs below has a long history of paying and growing dividends, and they're perfect if you want to set up a lifetime stream of passive income.
The Schwab U.S. Dividend Equity ETF (SCHD 0.22%) might be the gold standard of dividend ETFs. This ETF targets stocks with a combination of strong balance sheet health, long dividend payment histories, and high yields. This ETF
By looking for companies delivering the best combination of high yield, balance sheet strength, and dividend growth, you end up with an elite portfolio of dividend stocks that can deliver for years to come. Currently, the ETF offers offers a 3.4% dividend yield.
The Vanguard Dividend Appreciation ETF (VIG 0.38%) is more of a pure dividend growth fund and looks for companies with 10-plus consecutive years of increasing their annual dividends.
This ETF is the most popular dividend growth ETF in the marketplace. Its strategy is simple: Target companies that have raised their annual dividend for at least 10 consecutive years. These are the companies that have already demonstrated a commitment to growing their dividends and should continue doing so for years to come.
As a result of this strategy, this ETF has a more modest dividend yield of 1.7%.