Of all the hurdles facing investors, one of the major challenges is to avoid running out of money before they die. Economically safe retirement is a top priority. Based on a long history of success, the Monday Morning Millionaire Program recommends properly selected market index ETFs held in tax-advantaged accounts. This approach has been the investor’s best way for growing savings and is likely to remain so for many years.
- iShares Core S&P 500 ETF (IVV)
- Vanguard S&P 500 ETF (VOO)
- SPDR S&P 500 ETF Trust (SPY)
- Schwab U.S. Large-Cap ETF (SCHX)
- iShares S&P 500 Growth ETF (IVW)
- Guggenheim S&P 500 Equal Weight ETF (symbol RSP)
The first five are market-cap-weighted. The sixth one is equal-weighted.
Now, let us consider these ETFs and dividends. A dividend income from a sufficiently large portfolio has been a very reliable retirement income source for many investors. For instance, selling colored sugar water, Coca-Cola (NYSE: KO), has paid an increasing dividend every year for 56 consecutive years! Such is the power of marketing, but we are here to talk about dividends with a focus on the best ETFs which track the S&P 500, that is, the four noted above.
To qualify as a dividend aristocrat, a company must have paid out an increasing dividend for 25 years or more. Fewer than 20% of the companies among the S&P 500 qualify! No ETFs do; none have been around for 25 years. SPY is not quite 25 years old in the first place and IVV and VOO were launched much later. Nevertheless, the four that interest Monday Morning Millionaire Program members, namely SPY, VOO, IVV, RSP do pay dividends, an aspect which will interest many.
To qualify for the dividend, an investor must buy the security, that is, be on the company’s records, just one day before the ex-dividend date. The value of the security will drop by the amount on the dividend, of course, however, since we, Monday Morning Millionaire Program members invest for the long term, this is of little interest to us.
The bottom line on Market index exchange-traded funds (ETFs) tracking the S&P 500 and dividends is that investors can get the full benefit of ownership including dividend payouts as well as growth in the American economy. To do so to the greatest extent, we simply need to practice the habits of highly effective investors, namely,