Three ETFs that have been doing well lately are SCHD, XLF, and XLE. All three of these funds have solid dividend growth rates and are easy to sell options on. I discuss below why they are great ETFs for earning dividends and selling options.
In this article, we will look at each of these ETFs in turn, looking at their dividend growth rates and how they select the companies they invest in. We will also discuss how selling options can help you boost your dividends from these ETFs.
SCHD
First up we have the SCHD ETF, which invests in US companies with strong dividend growth potential. It is also known as Schwab US Dividend Equity ETF.
SCHD pays a total dividend of $2.43 per share for the past 12 months. The last ex-dividend date was Jun 22, 2022. The dividend yield is 3.26%. It trades around $77 per share.
The Schwab US Dividend ETF (SCHD) has a 12% five-year dividend growth rate with an expense rate of 0.06%.
In the next 10 years, the growth rate is expected to be between 7-8%. This is because the companies in the ETF have strong fundamentals, including dividend growth and earnings power.
To be included in the fund, a company must have increased its dividend for at least ten consecutive years. This ensures that the companies in the fund have a history of growing their dividends.
The fund is rebalanced quarterly to ensure that it stays on track. This helps to keep the fund’s performance consistent.
XLF
The XLF ETF is an exchange-traded fund that invests in financial companies. It is also known as the Financial Select Sector SPDR Fund.
XLF paid $0.66 per share for the past 12 months and the last ex-dividend date was Jun 21, 2022. It currently has a 1.96% yield and is trading at around $35 per share.
The Financial Select Sector SPDR Fund (XLF) is a low-cost way to get exposure to the financial sector. The ETF has an expense ratio of 0.13% with a growth rate of 16.61% over the past 10 years.
The fund invests in a variety of financial companies, including banks, insurance companies, and real estate investment trusts (REITs).
The fund is well diversified, with the top ten holdings making up less than 30% of the total. This helps to reduce risk.
XLE
And lastly, we have the XLE, which is the Energy Select Sector SPDR ETF. This one invests in companies involved in the energy sector including oil, gas, and coal producers, as well as energy equipment and services providers. It is a well-diversified energy ETF with multiple holdings.
XLE boasts a dividend yield of 3.66% and paid out $2.80 per share over the past year. Dividends are disbursed every three months, with the most recent ex-dividend date being Jun 21, 2022. It is currently trading at around $77 per share.
If you are looking for a five-year investment plan that will give you great returns, the XLE is your best bet. In fact, its EPS Growth rate over just the past three to five years has been 14.76%.
When it comes to options, the XLE fund is a smart choice for selling covered calls. By doing so, investors can increase their dividend income while still maintaining downside protection. Cash-secured put options are also popular with this ETF, as they offer a way to generate income when purchasing shares.
In addition to that, the XLE fund is a good choice for investors who want to get exposure to the energy sector without having to pick individual stocks.
How does each ETF pick stocks?
So now that we know a little bit more about each of these three great ETFs, let us take a closer look at how they select the companies that are included in their portfolios.
SCHD
As we mentioned earlier, the companies in this ETF must have increased their dividend for at least ten consecutive years. This ensures that the companies in the fund have a history of growing their dividends.
Here are some of the top holdings in the SCHD ETF
- Merck & Co. Inc
- PepsiCo Inc.
- International Business Machines Corp
- Coca-Cola Co
- Amgen Inc
- Verizon Communications Inc
- Pfizer Inc
- Cisco Systems Inc
- Texas Instruments Inc
- Home Depot Inc
XLF
The XLF fund focuses on the financial sector, allocating its resources to industries such as banking, insurance, real estate investment trusts (REITs), capital markets, diversified financial services, consumer finance, and real estate management and development.
Here are some of the top holdings in the XLF ETF
- Berkshire Hathaway Inc
- JPMorgan Chase & CoBank of America Corp
- Wells Fargo & Co
- S&P Global Inc
- Morgan Stanley
- Goldman Sachs Group Inc
- Charles Schwab Corp
- Citigroup Inc
- BlackRock Inc
XLE
The XLE invests in companies involved in the energy sector including oil, gas, and coal producers, as well as energy equipment and services providers. Mostly all the companies in this fund engage in the exploration, production, and distribution of energy.
Here are some of the top holdings in the XLE ETF
- Exxon Mobil Corp
- Chevron Corp
- Occidental Petroleum Corp
- ConocoPhillips
- EOG Resources Inc
- Schlumberger Ltd
- Pioneer Natural Resources Co
- Marathon Petroleum Corp
- Valero Energy Corp
- Phillips 66
Why these 3 ETFs?
So, why these three ETFs? Well, the three ETFs are great for earning dividends and selling options. They are also well diversified, with multiple holdings in each fund. This helps to reduce risk.
In addition, the SCHD and XLF both have strong track records, outperforming the S&P 500 over the past five and 10 years. The XLE fund has also performed well over the past three to five years, with an EPS Growth rate of 14.76%.
It is easy to double your dividend income by selling covered calls with these ETFs. And, if you are looking to generate cash when buying shares, cash-secured put options are an excellent choice.
Conclusion
These are three great ETFs for earning dividends and selling options. They offer a well-diversified portfolio of stocks, with a history of outperforming the market. They provide a straightforward way to increase your dividend income through covered call and cash-secured put writing. So, if you are looking for a great investment strategy, consider these three ETFs.
