Generating consistent, safe, and reliable dividend income can be extremely valuable for retirees. Investing in the stock market comes with risk, which can make it an unappealing option for risk-averse retirees who would rather just have a steady stream of income and not worry about price movements.
One way retirees can keep their risk relatively low is by putting their money in exchange-traded funds (ETFs). By gaining access to a diverse mix of stocks through just a single investment, retirees can collect some attractive yields without having to take on much risk at all. A couple of high-yielding ETFs that could be ideal for retirees are the iShares International Select Dividend ETF (NYSEMKT: IDV) and the Pacer Global Cash Cows Dividend ETF (NYSEMKT: GCOW). These funds offer mouthwatering payouts and can give your portfolio some great diversification.
iShares International Select Dividend ETF
The iShares International Select Dividend ETF yields 6.7%, offering investors an incredibly high payout -- more than five times the S&P 500 average of 1.3%. The fund targets safe international stocks that also pay high yields. For investors looking to diversify outside of the U.S. market, this can be a key part of a comprehensive investment strategy.
With around 100 holdings in the fund, investors are getting a good variety of stocks. And there isn't a risk of being too dependent on any single stock -- the largest holding in the fund is British American Tobacco, which accounts for approximately 4.8% of the ETF's total weight. Other big names in the fund include telecom giant Vodafone and carmaker Mercedes-Benz.
More than 31% of the holdings are financial stocks, with utilities accounting for 16%, and communications stocks at just under 12% being the only other segment with double-digit representation.
In the past five years, the ETF has generated total returns (including dividends) of around 30%. The S&P 500's total returns are just over 100% during that time frame, but for investors who prioritize dividend income and stability, the International Select Dividend ETF may be a good option to consider. The fund charges an expense ratio of 0.51%.
Pacer Global Cash Cows Dividend ETF
Retirees can collect another high yield from the Pacer Global Cash Cows Dividend ETF -- it pays 6.3%. Its expense ratio of 0.6% is slightly higher, but it too can provide some great diversification for investors.
The Pacer fund focuses on companies that generate significant free cash flow and have a high ability to pay dividends. Unlike the International Select Dividend ETF, this ETF includes U.S. stocks as well. It has a great weighting system for dividend investors, as it has 100 stocks and selects stocks based on which ones have both the highest free cash flow yield and highest dividend yield. And with holdings capped at 2% when it does its semi-annual rebalancing, this keeps the risk down even further for investors.
The top two stocks in the fund as of now are healthcare giants Roche and Gilead Sciences, with each accounting for around 2.3% of the ETF's total weight. There's a good mix of stocks in the fund, with many sectors accounting for between 10% and 20% of the ETF's holdings, including energy, healthcare, consumer staples, communication services, and industrials.
Over the past five years, the Pacer ETF has generated total returns of 46%, performing better than the International Select Dividend ETF. But depending on your strategy, you may want to consider one or both of these ETFs for your portfolio, as they can each provide you with some great dividend income.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Gilead Sciences. The Motley Fool recommends British American Tobacco P.l.c., Roche Ag, and Vodafone Group Public and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.
