Best ETF to buy now with $1,000 for reliable income

Are you looking to add an income-producing component to your current portfolio? There is certainly no shortage of options. If you’re looking for simple, efficient, and affordable options, an ETF actually makes a lot of sense.

But not just any ETF.

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While names like Vanguard Dividend Appreciation ETF (NYSEMKT: VIG ) or d Vanguard High Dividend Yield ETF (NYSEMKT: VYM ) are respectable options, despite a 19% run-up from early November lows Schwab US Equity ETF (NYSEMKT: SCHD ) Still your highest-yielding and most attractive prospect.

The key is not what it has, but what it is no to keep

One would think that an exchange traded fund with the word “will” in the name would be similar. However, this is not the case.

Buy the Vanguard Dividend Appreciation ETF mentioned above. It’s the only stock with a long-term track record of annual dividend payout growth, regardless of how much shareholders collect from the stock. This particular Vanguard has a stock of technology enhancements, incl Broadcom, Appland Microsoft. They pay ever-growing dividends, but none of them actually offer huge dividend income. Its trailing yield is only 1.6%.

As for the Vanguard High Dividend Yield ETF, it faces comparable but different structural limitations. To react FTSE® High Dividend Yield IndexBroadcom is also its largest holding at less than 1% despite its stock’s growing yield. Other major properties, incl JPMorgan Chase, ExxonMobiland Walmartis more along the lines of what you would expect from such an index and fund. Even then, though, the continued premium pricing of these blue-chip stocks means that this fund’s trailing dividend yield is a modest 2.3%.

The Schwab US Dividend Equity ETF, however, is distinctly different from both of these seemingly good alternatives. Based on the Dow Jones U.S. Dividend 100™ Index, it looks for strong dividend yields first and foremost, and then selects only 100 of those eligible names using key fundamental factors such as free cash flow and returns.

The result? Its properties are often not the names of technologies associated with the artificial intelligence revolution. This ETF includes large positions Lockheed Martin, Verizonand coca cola — Although as an equally weighted fund, these names will not hold the largest positions after the end of the current quarter. These are boring non-technical companies, but they do their first and foremost job of generating good, reliable income. Even with the fund’s rally since early November, you’ll be facing a healthy trailing yield of 3.4%.

There is more to this issue than just dividend yield, of course, such as dividend growth. In that vein, the Schwab ETF’s quarterly dividend payout has grown at an annualized rate of 6.8% over the past five years, easily outpacing inflation.

Perhaps the best reason to buy into SCHD, though, is less obvious: It’s essentially a value fund in an environment where growth stocks may be on the verge of running out of gas.

Think about it. It’s not just a coincidence that this ETF’s price has risen of late while the rest of the growth-led market has struggled. Cracks are starting to form for many of the market’s most popular technology names, making economically resilient companies like Coca-Cola and Verizon future must-have stocks.

Before you buy stock in the Schwab US Dividend Equity ETF, consider this:

of the Motley Fool Stock Advisor The analyst team identified only what they believed 10 best stocks For investors to buy now… and the Schwab US Dividend Equity ETF was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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JPMorgan Chase is an advertising partner of Motley Fool Money. James Bromley holds positions in Coca-Cola. The Motley Fool owns and recommends positions in Apple, JPMorgan Chase, Microsoft, Vanguard Dividend Appreciation ETF, Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends Broadcom, Lockheed Martin, and Verizon Communications. Motley Fool has a disclosure policy.

The Best Stock ETFs to Buy Right Now with $1,000 for Reliable Income was originally published by The Motley Fool.