Building Income Through Top Dividend ETFs: 2 Solid Picks for Income Investors

For those seeking steady passive income, high-yield dividend ETFs offer an attractive pathway—but not all are created equal. The key is finding top dividend etfs that balance attractive yields with quality fundamentals.

Why Dividend ETFs Matter in Your Portfolio

Dividend investing serves as a cornerstone for long-term wealth building, especially for those approaching retirement or seeking reliable income streams. High-dividend ETFs can lower portfolio volatility while delivering regular payouts. The challenge: avoiding value traps by prioritizing underlying company quality over yield alone. Mature, financially stable dividend-paying companies tend to weather economic cycles better than their peers.

SPYD: Cast a Wide Net Across Dividend Sectors

The SPDR Portfolio S&P 500 High Dividend ETF (ticker: SPYD) holds the 80 highest-yielding stocks from the S&P 500, equally weighted and rebalanced semi-annually. Trading near $43 per share, SPYD sports a trailing 12-month dividend yield of approximately 4.5%—significantly higher than the broader S&P 500’s 1.2%.

Cost and Scale: With a rock-bottom expense ratio of just 0.07%, annual fees on a $10,000 investment amount to merely $7. The fund manages over $7.3 billion in net assets.

Sector Composition: Real estate dominates at 21.4%, followed by financials (17.3%), consumer staples (16.3%), and utilities (13.4%). Tech exposure? Minimal—less than 2% as of late 2025. This allocation reflects the fund’s dividend-hunting mandate, as tech companies historically retain earnings rather than distribute them.

Performance Reality Check: SPYD has delivered roughly 130% total return since inception in 2015, substantially trailing the S&P 500’s 300%+ return. Top holdings include CVS Health, Merck, Ford, AbbVie, and US Bancorp—classic dividend aristocrats.

Tax Consideration: Because SPYD holds significant REIT positions (pass-through entities with unique tax structures), dividends face ordinary income tax rates rather than favorable capital gains treatment—a factor to weigh for taxable accounts.

SCHD: The Stability-Focused Alternative

Schwab US Dividend Equity ETF (ticker: SCHD) takes a different approach, filtering for companies with strong balance sheets, high profitability, and reliable dividend track records. Currently trading around $28 per share with a 3.8% yield, it tracks the Dow Jones U.S. Dividend 100 Index.

Scale and Diversity: With nearly $73 billion in assets under management and approximately 100 holdings, SCHD provides exposure to blue-chip names like Bristol Myers Squibb, Cisco, PepsiCo, Coca-Cola, and Verizon. Over 58% of the portfolio comprises companies with market capitalizations exceeding $70 billion—the investment world’s most established players.

Sector Tilt: Energy (19.34%), consumer staples (18.5%), and healthcare (16%) provide defensive characteristics across economic cycles.

Cost Efficiency: At 0.06% expense ratio, SCHD is virtually free to own. Over the past decade, it has returned more than 200% (roughly 11-12% annualized), lagging the S&P 500 but still delivering solid wealth accumulation for conservative investors.

The Choice Between Them

Choose SPYD if you want maximum current yield (4.5% vs. 3.8%) and don’t mind real estate and financials dominating your allocation. Expect lower capital appreciation but steadier income.

Choose SCHD if you prioritize quality and balance—moderate yield paired with large-cap stability and slightly lower tax drag in taxable accounts.

Both qualify as top dividend etfs for building systematic income, especially when dividends are reinvested to harness compounding power. The lower expense ratios of each ensure that more of your returns stay in your pocket rather than funding fund managers. For conservative investors seeking passive income without excessive volatility, either fund provides a straightforward entry point into dividend-focused investing.