The 7 Best Dividend ETFs for Beginners Over 40

So, you're in your 40s and you want to get started with investing. However, you want to reduce your risk and you also want to invest in assets that give you some sort of dividends or income on a monthly or quarterly basis. But, of course, you're a beginner and you don't know where to begin. So, in this video, I'm going to answer just that. I'm going to talk about three things. First, I'm going to go over my five ETF picking criteria that I use for myself, how I pick my dividend paying ETFs, how my community members also do it. Two, I'm going to go over seven ETF examples for you to pick and choose. Again, none of this is financial advice. You want to choose whatever you're most comfortable with, adding to your own portfolio. And number three, most importantly, I'm going to go over the risk and rewards. Okay? So this way you understand what it is that you're actually investing in, what you're getting yourself into. So if you haven't done so already, I highly encourage you to download the $1 million road map down below. It's going to include all of my study guides, including the one that you see right here. So let's talk about the five ETF picking criteria that I use for myself. Remember, this is just a guideline, not hard set rules. But if you were to follow these, I can almost kind of promise you that you're going to do well in your portfolio as long as you follow somewhat of these guidelines here. So, the very first thing is we're going to look at this third column. I already made videos on how to pick stable backbone ETFs and tech growth ETFs. If you haven't checked those out, you can check those out, too. But we're going to focus our attention on this third column, the dividend income ETF picking guideline. So first and foremost, we want to make sure that the 1-year, 5year, and 10-year trend is going upward, right? We want to make sure that whenever we look at the charts, we are investing assets that are going up in the long term, not going down, folks. Number two, we want to make sure that the 1-year, 5 year, and 10ear performance is around 7% around. Okay? It's not going to be necessarily high, say like 12, 15, 30% because today we are taking a look at dividend income ETFs, not tech growth ETFs where they can sometimes go up to say 15, 20 or 30% average annual returns. Third, of course, we're going to make sure that the expense ratio is below 050%. Fourth, we want to make sure that the dividend yield, you know, as opposed to what the tech and growth guidelines are, that they are between generally 2 to 4%. Okay? Maybe even 4.5%. Anything higher is going to give you the risk of the asset actually depreciating over time, which we'll talk about in a little bit. And then last but not least, we want to make sure that the holdings, the companies inside this ETF does not include any penny stocks, meme stocks, IPOs, because remember, we're over 40, 50 years old. We don't want to be risking all of our money into these high-risk individual companies or penny stocks or meme stocks, any of those right now. We want to make sure that we diversify ourselves, right? I'm currently 39 years old, as I say in all my other videos. So, I have a lot of friends who, you know, I actually know a lot of people in their late 30s, 40s where they invested in a lot of high-risk assets a couple of years ago and they lost a lot of money. So, I want to make sure that you are okay because we have families to take care of, we have kids, we have maybe parents to take care of. Okay, so that's my five ETF picking criteria. So, we're going to take this and put this into action right now. Let's take a look at seven ETF examples. So you can actually write this down if you want to. So the very first one is my personal favorite. I'm just going to start off with the one that I actually invest in. This is CHD. Again, whenever you see the letters CH, it just means that it's from Schwab. V means from his Vanguard. F means that it's from Fidelity. And then if it starts with an S, then most likely it's from Stateream. Okay. So this is Schwab's dividend equity ETF. So the very first thing is we're going to look at the one-year chart. Is it going upwards? Yes, it is. Right. upward trending five years. Yes, it is all. Yes, it is. It's all upward trending. So, boom. That gives us criteria number one checked off. Very good. Second, we're going to look at the 1, five, 10year performance. Okay. So, if we scroll down here, we can take a look at the performance on the very left hand side. Again, if you want to check this out, I highly encourage you to go to Yahoo Finance and learn to do this yourself. My whole goal here is to teach you financial independence so you can invest by yourself. You don't have to hire anyone else to do it for you. If we take a look at the last year or so for CHD, we had an average annual return of around 28 29% which is pretty good, right? Very very good. If we take a look at the 5-year average annual returns, it's around 8.65% which is again not too bad. And then if we take a look at the 10-year average annual returns, it's around 12 13%. So, does this meet our criteria right here where it's more than 7%, yes, it does, right? Yes, it does. So, this fits the guideline here. The next thing we want to look at is the expense ratio, and we want to make sure that it's under 050%. So, we can scroll back up, go to summary here, and you can go to the bottom right corner. This is going to tell you the expense ratio. The expense ratio for CHD is 06%, which means that you pay 6 cents for every $100 invested. Anything that is over 050% I'm going to tell you mathematically. I calculated everything. It's going to compound to a point where you're going to be paying a lot of unnecessary expenses. Okay? So that's something that you want to be mindful of. A lot of these Vanguard, Schwab, Fidelity, State Street ETFs, they generally range between 02 03% and sometimes it might go up to 2 or maybe even 3%. Okay? But generally you want to keep it under 050%. Okay? Try your best. The next thing, the fourth criteria is we want to look at the dividend yield for SCD. You can see that the dividend yield is right here on the bottom right hand corner. It's 3.25%. Meaning that it pays $325 for every $100 invested for the entire year, which is generally pretty good. We're looking for what? Anything that's between 2 to 4%. That's generally ideal if you're looking for something that pays you some sort of dividend income on a monthly or quarterly basis. And the last thing is we want to make sure that the holdings, the companies that it holds are actually good companies. They're part of large indices, maybe the S&P 500, but I'm going to tell you right now, a lot of these dividend paying companies, they are generally going to a lot of them, not all, but a lot of them may be found in the Dow Jones Industrial Average 30 index, which just means that they're the old school 30 companies that have been around for a very long time. You can think of Coca-Cola, Home Depot, Walmart, Amazon, Google just got added to it, too. So, they are these companies that have been around for a long time. They have a long track history, a long record of actually producing income on a consistent annual basis. Right? So a lot of these companies once they mature from a growth company and they kind of transition into some sort of valuedriven company then they will start to pay out their shareholders like you and myself a larger dividend yield on a quarterly basis. Right? So you can take a look at some of these companies here. We see there's Qualcomm, Texas Instruments, United Health, right? Coca-Cola just like what I said before Chevron, Verizon, Proctor and Gamble, right? So, are these good companies that we are aware of that we know of? Yes, they are part of these larger indices, Dow30 and the S&P 500. So, great. I like CHD. The second ETF that we're going to look at is Vanguard's High Dividend Yield Fund ETF shares, which is VM. This is very popular amongst my community. Let's take a look at the one-year chart. over the last year 18% growth. 5 years 50% and then all 10 plus years yes it's also going upwards. Okay. If we take a look at the performance I'm going to guarantee you right now it is on the higher side too. It's all upwards more than 7%. Um right here if we take a look at the one year 26% 5year average annual returns 11 12%. Same thing with the last 10 years. If we go back to the summary and we take a look at the expense ratio. Expense ratio a little bit cheaper than SCHD. It's 04% meaning that you pay what? 4 cents for every $100 invested. And the yield is slightly lower. So it's not 3% up, it's 2.21%. If we take a look at the holdings, this is where it's slightly different. We initially had for Charles Schwab or SCHD, we had Qualcomm Texas Instrument United Health as the top holdings for Schwab's dividend equity ETF. But for VYM, it's going to be shifted towards Broadcom, JP Morgan, Exxon Mobile, right? J&J, Johnson and Johnson. So, it's a little bit different, but again, you're going to see a lot of patterns that a lot of these companies are part of the Dow Jones Industrial Average 30, right? And also the S&P 500. So, VYM also a popular choice here. All right, but here's the thing. If we take a look at the actual performance, you can see that VM has more of a consistent upward trend compared to SCHD where there was a little bit more of a consolidation. Just means that the stock, the ETF was trending sideways for a longer period of time. You can see this from 2025 all the way or the beginning of 2025 where we just kind of consolidated sideways and a little bit here in early 2026 where we're just kind of like going sideways over here or we had this little little U curve down here. Okay. Now, the third ETF that we can talk about is SPYD. This is from State Street. Again, starts with an S. Usually, it comes from State Street. If we take a look at the one-year chart, 12% not bad. 5 years 19% and then all is it upward trending? Yes, it is. Now we can take a look at the let me see here we can take a look at the expense ratio. Is it under 050%? Yes, it is 0.07%. So this is a little bit more expensive than the first two that we saw. Dividend yield it is on the higher side. Pretty good, right? It's 4% 4.18%. But if we take a look at the overall growth, see the overall growth over the 5 years for SPYD is around 19 20%. If we take a look at VM, this is different. You see it's 50%. Right? So 19% 50%. So this is where we always have to look at the tradeoffs. Are you willing to purchase a dividend paying asset where you want higher dividends? But more likely than not, the actual asset itself, the actual price of the ETF is not going to grow as much. Or you want to invest in dividend paying ETFs where the growth is higher but the dividend payouts aren't that much. It's up to you on what that trade-off is. Anything in life, right, with investing specifically, we want to always see what the trade-offs are. What do you want more of, right? And if you don't want any of the dividend paying income, dividend paying ETFs in your portfolio, you want to focus more on growth, then none of these ETFs are going to be for you. You want to focus on what my last video where I talked about tech and growth ETFs, right? Especially for those of you who have a longer time horizon with investing. This is generally for people who just want a calmer portfolio where you're able to withstand a lot of the market volatility in the short term. All right, let's take a look at the next one. This is iShares core dividend growth ETF, DGRO. So, we take a look at the one-year growth. This is around 18%. 5 years, 50%. Not bad, right? And then all you know, 10 plus years, 205 ever since inception here since what is it 2014. If we take a look at the expense ratio, okay, it's getting a little bit more pricey. 08% dividend yield. It's a little bit under our 2% benchmark, but 1.96, it's pretty much there. And if we take a look at the holdings, let's take a look at what these companies are. Oh, you see, very similar to what we've seen before. There's Broadcom, there's Apple, right? These are all dividend payers. There's Microsoft, JP Morgan, Exon Mobile, a lot of these part of the Dow Jones Industrial Average 30. Okay, very cool. Another ETF, right? This is what number five. The fifth one is going to be JP Morgan's equity premium income ETF. So this is where the fund manager or the you know with Drapenorgan they created this fund where they sell these options against the companies within this fund. That's why it's able to create this premium here. So this is like a covered call premium and it's very popular. So this is JPI. Now let's take a look at the performance. You see when we take a look at the one-year chart you can see that it hasn't really been going anywhere. It's been going flat. It's been consolidating. 5 years not so much. It's actually been going down a little bit, right? Negative -6%. All you can see that it hasn't been really going anywhere. So, it's been pretty flat. So, if you are someone who is looking for asset appreciation, JPI is not going to be for you folks. Okay? I'm just telling you this right now. Let's take a look at the expense ratio. Ah, it's much higher now.35%. So, for me, it's more on the expensive side, but if you like it, then go for it. And if we take a look at the dividend yield, of course, it's going to be higher because of what? The trade-off. The trade-off is the asset appreciation has not been as high compared to the other ones that we've seen. However, we get the higher dividend yield. In my opinion, I like to focus on both. I want for my portfolio at least, I want the asset appreciation, I want it to go up and at the same time give me consistent revenue and consistent income on a quarterly basis. If we were to take a look at the performance here, we're going to click on performance again. One month ago, just 1% negative 1% one year. This is 8%, 5 years, 7%, 10%. Oh, well, it didn't even go back to all the way then because if we take a look at the inception of JAPI, it is a relatively new ETF. It was uh created back in 2020. So it does break a little bit of my guidelines where we can't see the 10 plus year mark. So I can't see the I don't have enough data enough evidence to show that the companies inside the strategies that the managers use for JPI actually work in the long term. Okay, but again that's my opinion. You can see whatever it is that you're most comfortable with. Another ETF that is very popular amongst the dividend income ETF community is JPQ. JPQ again from JP Morgan. Anything that starts with J generally from JP Morgan, we can take a look at the one-year chart. Okay, not bad. It's a little bit better than JPI. It's 13% over the last year. 5 years, 22% and then all again this is a fairly new ETF. It only backed states to around 2022. If we take a look at the expense ratio, still more on the pricey side.35%. However, trade-off 10% dividend yield. Is this something that you want? You can see for yourself if we take a look at the holdings. Let's see what's inside. H okay. You can see that there's Nvidia, Apple, Google, there's Micron, Microsoft. So with this ETF, it holds more high risk, high volatility companies inside compared to like Broadcom and Coca-Cola, Home Depot, the like the ones that we saw before, right? Johnson and Johnson. because of the higher volatility that these companies have because there's a lot more movement in the stock on a day-to-day, week- toeek, month-to-month basis. This causes a lot of option premiums in the option chain to expand because of the extrinsic value. I don't want to get into the specific details because this is a beginner video, but that is how the fund managers are able to sell larger or sell these contracts to collect a higher premium from these specific companies here. Okay, if you have no idea what I just said, it's totally okay, but just know that this is basically the performance of JPQ. If you are okay with this type of growth, with getting the 10% returns and with the trade-off of the higher expense ratio, then sure, you can go for this ETF here. I personally do not like any of these premium income ETFs here uh just because I like to sell cover calls myself. With these premium income ETFs, basically you are allowing these fund managers, creators to be the ones in charge of selling these contracts and they can sell whatever contracts they want on whatever expiration dates, whatever strikes. So we can't choose. So for me as a cover call seller where I like to sell cover calls to generate income on a monthly or quarterly basis, I get to choose which strikes, which expirations to sell. And I also get to choose when to not sell. For a lot of these ETFs, premium income ETFs, they are basically on autopilot. They're just consistently selling these contracts over and over again. So you have no control. So if you don't want control, if this is something that you don't care about, then sure, this could be for you. But if you want a little bit more autonomy, a little bit more uh hands-on experience in your portfolio, then JAPQ, JAPI, may not be for you. This is another one. This is number, what number are we on? Four. This is number seven. This is the NEOS S&P 500 high income ETF, SPY. Take a look at the one-year chart. 5% 5 years, 6% all right, relatively new. Again, 2022. A lot of these premium income ETFs, high income ETFs, they kind of came about in 2020, 2021, 2022, that area hit there, right? Expense ratio, I don't like this one. Why? Because 68% it's too expensive for me. And look at the performance. It's not good. It's been trending sideways, consolidating, right? 5% over the last one year for the last 5 years around 6% all around 6%. I don't like this one. Okay? If you like it, sure, go for it. But for me, it does not hit my guidelines. Look at the dividend yield. This is 050%. Really, this is very low. And this is an ETF that calls it a high income ETF, right? It doesn't make any sense. I still, if you're focusing on the dividend yield, I would focus on something that is more than 2%. Okay, this does not cut it. Take a look at the holdings again. You can see that it's Nvidia Apple Microsoft Amazon Google. It basically carries a lot of the S&P 500 just like the name says right here, the S&P 500 stocks and then it's probably sells like contracts against them to collect that income right there. Okay. Uh the reason why a lot of times these these ETFs consolidate sideways, I don't want to get into the mathematical details of it, but just rough summary here. A lot of the contracts that are sold are probably near the money or at the money, which means that whenever there is a big rise in the underlying stocks, they are capped out because of the contracts that were sold against them. So, if they sell at a strike price of $100 and the actual stock goes above $100 to $110, $120, you basically are capped at the $100 mark. Again, if you have no idea what I just said, it's okay. But for those of you who have been following me for a while, you understand cover calls, you're part of my paid strategy investing course, which is a free course by the way, if you want to check it out. I'll talk about that in a little bit. But yeah, if you have been through my videos there, then you know exactly what it is that I'm talking about. All right. And then here is another one. This is actually I was going to talk about seven, but let's just say that I'll squeeze in another one. This is number eight. This is Qyld, the Global X NASDAQ 100 cover call ETF. So let's take a look at the last one year performance around 10% five years negative 17% has been going down all not good right this is a downward trending ETF this breaks number one right here right that we want to be investing in upward trending ETFs again I meet a lot of people in their 40s they are looking for some sort of discount we're not at TJ Maxx we're not at Kohl's or anything looking for some sort of discount we are looking for high quality high premium assets that are going to rise over time Okay, the saying here is we want to buy high and sell even higher. Cuz I know the mentality is for a lot of beginners, they want to buy things that are cheap and they think the stock or ETF is going to rise up. But I'm going to tell you right now, that's not how Wall Street works. Generally, a trend in motion stays in motion, right? You want to let the trend be your friend. If it's going upwards, it's been going upwards for the last 5 years, 10 years, 15 years. There's momentum. there is evidence that show that the companies are doing extremely well then most likely it's going to continue to do that over time okay so this is something that I do not like uh and then if we take a look at the expense ratio again 60% over our 5.0% 0% benchmark, which I don't like. Too expensive for me. And the dividend yield is 5.77%, which is not bad. But again, you're going to have that trade-off. You're going to have the underlying asset itself depreciate over time, which is something that I don't want. A lot of times, people will go for these high income, high dividend yield ETFs, and they will justify it by saying, well, the yield is really high, so I don't care if the asset depreciates. But if you actually do the math, a lot of times you're just losing money. You're just losing money. So you want to make sure that you are actually doing the calculations and you yeah you you make sure that it fits your portfolio and your risk tolerance. Let's talk about the third part of this video which is to talk about the pros and cons. This is so important here folks. You see the pros are of course you get that steady cash flow. Whenever you invest in dividend high income ETFs, a lot of times when people or when they're nearing retirement, they will use execute the 4% rule where they might sell a portion of their portfolio on a quarterly or annual basis so they can release their cash and then they can use live off of that cash, right? However, there are some people who don't want to go through the trouble of selling their shares. That's why they invest in these high dividend paying ETFs where there's just consistent cash flow coming in. And here's the thing, folks. Whenever you invest in these dividend paying ETFs, just know that the dividends are actually coming from the stock price itself. So if you have a stock price that is say $100, right? And the dividend payout is $1. When that $1 payout is given to you, the stock price will actually drop from $100 to $99. The dividend doesn't just come out of thin air. It comes from somewhere. It actually comes from the asset itself. Okay? So, that's just something that you want to be aware of. So, the pro here is yes, you get that consistent cash flow. You don't really need to do anything. It's really passive. It's as passive as it gets. The other pro is maybe this is a pro for you, maybe it's a con for you, but there's low volatility. So, if you're someone who can't stomach the crazy roller coaster rides within the stock market, if you notice that in the last pullback correction that you did not feel comfortable with a 5% drop, 10% drop, or maybe you went through a period where the entire stock market went down to maybe went down 20%, 30%. You didn't like that, then you can gravitate towards more of these dividend income ETFs because they have lower volatility in general. I'm going to show you some historical proof in a little bit, so stay tuned. And yeah, this also stacks well with your cover call strategy if you are someone who like to sell cover calls. So this way you get cover call premiums and dividend income at the same time. So you have two income streams within your portfolio. What are the cons? Just like what I said before, there's a trade-off. The main trade-off is slower growth, right? And you get capped on the upside whenever there's some sort of market rally. So whenever you see a broadbased rally where the entire stock market just jumps up, you're going to see that the one that performs the least is going to be these ETFs that are more dividend income driven. Okay? All right. So let's take a look at tradingview.com. Go ahead and go to this website right now so we can do it together. I want you to type in one ETF, one dividend paying ETF that you like. So I'll just type in SCHD. I'm going to type in the ticker symbol SCHD. Again, tradingview.com. It's free. You can use it up to a certain limit. But yeah, feel free to do some analysis here. But let's compare SCD to a high volatile maybe like a growth ETF. How about we talk about VGT? So, I'm going to click on this plus button on the top left corner. Type in VGT, which is the Vanguard Information Tech ETF. It's a growth ETF. Awesome. So, now you're going to see these two charts. [music] The bottom chart right here, the red and the green, this is SCHD, the performance of SCHD. If we take a look at the blue line, this is VGT. What is the main difference that you see here? That's right, VGT. All of these growth tech ETFs, more likely than not, it's going to outperform these dividend paying ETFs by a lot. Look at from 2020 all the way to now, SCHD grew 64%. However, VGT grew 281%. Big difference. That spread is very very big right there. However, let's talk about volatility. If we take a look at this period here from 2021 all the way to 2022, what do you notice? So, I'm going to zoom in and then I'm going to set this so that inception the beginning of the graph starts at roughly around 2022. You can see that whenever there is a market pullback, there is market uncertainty, anything that's going around the world, there's some sort of war, trade war, there's some sort of conflict, whatever election, anything that shakes the market that spooks the world, there will generally be some sort of sell-off where the entire stock market will go downwards. And this is just a natural occurrence whenever you're an investor. Okay? There's nothing to be scared about. If we take a look at VGT, look how it went from where it was here and then it dropped all the way down here. Take a look at the right side. It dropped around 32 33%. All the way to the bottom. 32 33%. So ask yourself, is that something that you are comfortable with? Right? If it is, then sure, you can add a little bit more technology growth ETFs into your portfolio. If you say, "Oh, no. This is not for me. I do not want to see my portfolio drop 30 something%." Well, take a look at CHD. It also dropped but not as much right you can see that it dropped all the way down to around 14% right 15% which is half the decline of these growth tech ETFs so generally speaking not always generally a lot of these value dividend paying companies in market uncertainty a lot of institutions will flock will start going hiding into these value companies and they'll take out their money from these growth ETFs and hide them into these value companies. Why? Because when there's market uncertainty, institutions still want to make some money. So, they will put their money into these dividend payers because even when the stock market goes down, they still get paid a high dividend. And if you think about it from a mathematical perspective, whenever there is a market drop, the dividend yield will naturally increase over time. Why? Because if there's a stock that is $100 and it pays you $1, the dividend yield is 1%. Right?$1 divided by 100. However, if the stock goes from $100, drops down to $50 and the dividend yield is still $1. Dividend payout is still $1. Well, what's one out of 50? Ah, now it's 2%. You see, whenever the underlying asset, the stock itself drops and the dividend payout is still the same because usually it's still the same, then the dividend yield will naturally increase over time when the stock market drops. Okay? So, just something to think about from a mathematical perspective here. So, this is why a lot of times they a lot of institutions are incentivized to flock into some sort of safety value companies during market uncertainty. Okay. All right. 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All my YouTube lessons, my sheets here that I spent hours and hours on compiling all this information. I used to be a public school teacher, so I love tables and numbers and everything. But if you want to take a look at how you want to allocate your portfolio, allocation ideas, different examples of ETFs, I put them all right here. So, you get all of this and you get access to all of my videos, all my courses. And because I'm a teacher, I also will quiz you to make sure that you understand everything before you move on to the next quiz. on top of the videos, on top of the quizzes, you also get to ask me questions within the community where I will answer them. Me or my team members, if I'm too busy, my team members will answer your questions. And if you still have more questions, you can also join my live streams every Thursday. That's when I'm hosting them right now. Every Thursday at 5:00 p.m. Pacific time, I will jump on a call with you with other 10, 15, 20 people or so. 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Okay, so yeah, I highly encourage you to download the road map, go through the paid strategy investing course, the 5day investing challenge, and if you have any questions, please let me know in the comments. I'm going to try my best to answer your questions this week. And yeah, that's pretty much it. I will see you in the next video.