3 Dividend ETFs to Buy With $2,000 and Hold Forever

Source Motley_fool

If you sense that growth stocks' long-lived leadership is finally waning, you're not imagining things. And that's not just because investors suddenly started locking in profits on the market's hottest tickers back in February, in response to new tariffs. There's a bigger mental reset taking shape here.

While the U.S. president's international trade-policy posturing has certainly played a part, growth actually began to lag less-risky investments (like value stocks and dividend payers) late last year. This shift is still bigger than any geopolitical standoff. So it might not be wrong for investors to switch strategic gears here...at least partially.

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Let's say you have a couple of thousand dollars (or any other amount) and you're ready to commit to a new kind of long-term investment. Here's a look at three fantastic dividend exchange-traded funds (ETFs) that would be at home in almost anyone's portfolio. Note that each of them offers something different, making them complementary holdings to one another.

ProShares S&P 500 Dividend Aristocrats® ETF

Income-minded investors often forget that there's more to picking dividend stocks than just tracking down tickers with high dividend yields. You may be buying into a new position with strong payouts, but if those dividend payments don't grow much (if any) from one year to the next, you'll soon be losing ground to inflation.

The ProShares S&P 500 Dividend Aristocrats® ETF (NYSEMKT: NOBL) sidesteps this potential problem.

If you're not familiar with them, Dividend Aristocrats (the term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC, a division of S&P Global) are S&P 500 (SNPINDEX: ^GSPC) constituents that have raised their annual per-share dividend payment for a minimum of 25 consecutive years. And some boast much better track records. Johnson & Johnson and Coca-Cola, for instance, have both upped their yearly dividend for over 60 years, while American States Water is now into its 70th straight year of annual dividend boosts.

The underlying philosophy of this index and the ProShares ETF that mirrors it is pretty obvious: Any company capable of maintaining such persistent payout increases is clearly doing something right, and will likely be able to continue growing its dividend indefinitely.

Now, there's an arguable downside here: The yield isn't exactly thrilling. The ProShares S&P 500 Dividend Aristocrats® ETF has a trailing yield of a little less than 2.1%, which could easily be topped by a handful of carefully selected blue chips.

Just keep the bigger picture in mind -- the Dividend Aristocrats® are clearly among the market's most proven and most resilient names. This means not only that their dividend growth is reliable, but also that these stocks have a knack for producing above-average capital gains. Indeed, number-crunching from mutual fund company Hartford suggests that since 1973 the net total return from stocks boasting consistent dividend growth is, on average, about twice that of the typical non-dividend payer.

Vanguard International High Dividend Yield ETF

Still, it would be nice for a new income holding to hit the ground running, with an immediately strong dividend yield.

The Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) fits the bill, boasting a trailing-12-month yield of just under 4.5%. You'd be hard-pressed to find a better yield with stocks of the same quality and caliber as this fund's holdings.

Just as the name suggests, the Vanguard International High Dividend Yield ETF holds a bunch of foreign dividend-paying tickers. Food giant Nestlé, pharma company Roche Holding, automobile maker Toyota Motor, and oil and gas giant Shell are among its biggest positions, highlighting the fund's geographical and sector diversification.

And that's no minor detail right now.

No matter which side of the political aisle you sit on, it's difficult to deny that the United States is going through economic disruption that -- for better and/or worse -- could linger a while. Other nations are in turn responding (again, for better or worse) in ways that make sense for them.

Why does this matter? In the same way that investors don't like stocks surrounded by too much uncertainty, companies prefer to do business with partners they can count on to remain suppliers and customers in the foreseeable future. This means foreign stocks can now be seen as safer than most U.S. companies, while the payouts of foreign dividend payers are a way of blunting impact from the newfound unpredictability of the U.S. dollar.

Schwab U.S. Dividend Equity ETF

Finally, if you have a bit of money you'd like to tuck away for a while in an easy-to-own income investment, add the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) to your list of dividend ETFs to buy.

In terms of risk, reward, and yield, the Schwab U.S. Dividend Equity ETF lies somewhere between the aforementioned ProShares and Vanguard funds. Its trailing dividend yield currently stands at just a tad over 3.7%.

And since it's based on the Dow Jones U.S. Dividend 100 Index, it only requires 10 years' worth of uninterrupted annual dividend growth to be considered for inclusion in the portfolio. This means the ETF is able to hold great stocks that simply haven't had the same chance to develop a payment pedigree like the Dividend Aristocrats®. Some of these holdings include telco outfit Verizon Communications, networking and software giant Cisco Systems, and drugmaker Merck.

The Schwab U.S. Dividend Equity exchange-traded fund brings another, more important nuance to the table, though -- one that most other index-based ETFs don't. It also ranks all the stocks that qualify based on their dividend histories by less-considered fundamental metrics, like free cash flow, debt, and return on equity. Then it selects the 100 highest-ranked tickers to make up the index.

This seems incredibly detailed...almost to the point of being needlessly tedious. The whole point of indexing is just to own a slice of the overall market, after all, and take individual stock-picking out of the equation.

But the strategy of using such a strict automated selection regimen actually makes a lot of sense. This approach incorporates important information that investors should consider, but often don't. It also removes the risks of overanalyzing, and making emotionally-charged investment decisions that can often do more harm than good.

Should you invest $1,000 in ProShares S&P 500 Dividend Aristocrats ETF right now?

Before you buy stock in ProShares S&P 500 Dividend Aristocrats ETF, consider this:

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James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Cisco Systems, Merck, ProShares S&P 500 Dividend Aristocrats ETF, and S&P Global. The Motley Fool recommends Johnson & Johnson, Nestlé, Roche Holding AG, and Verizon Communications. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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