Want Decades of Passive Income? Buy This ETF and Hold It Forever.
Key Points
Passive income is wonderful -- especially with little effort required.
Dividends are an especially glorious form of passive income.
This terrific ETF offers a hefty dividend yield that was recently 4.5%.
- 10 stocks we like better than SPDR Series Trust - SPDR Portfolio S&P 500 High Dividend ETF ›
It's smart to seek passive income in your investing life because it's money that simply flows to you with little effort expended on your part. Sources of passive income include interest paid on savings accounts, rent checks for properties you own and lease out, or from an annuity you purchased that sends you a check every month.
A particularly great way to get passive income is from dividends, and one of the easiest and most effective ways to invest in dividend-paying stocks is via dividend-focused exchange-traded funds (ETFs) such as the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD).
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Don't underestimate the power of dividends
Many people assume dividend stocks are mainly for their grandparents. That's not true, though, as plenty of dividend payers have outperformed growth stocks. Check out the table below and prepare to be surprised:
|
Dividend-Paying Status |
Average Annual Total Return, 1973-2024 |
|---|---|
|
Dividend growers and initiators |
10.24% |
|
Dividend payers |
9.20% |
|
No change in dividend policy |
6.75% |
|
Dividend non-payers |
4.31% |
|
Dividend shrinkers and eliminators |
(0.89%) |
|
Equal-weighted S&P 500 index |
7.65% |
Data source: Ned Davis Research and Hartford Funds.
Meet the SPDR Portfolio S&P 500 High Dividend ETF
The SPDR Portfolio S&P 500 High Dividend ETF tracks the S&P 500 High Dividend index, which aims to deliver meaningful income and the chance of stock price appreciation, too. It encompasses the 80 top-yielding stocks in the S&P 500. Here's how the ETF has performed in recent years:
|
Over the past... |
Average annual gain |
|---|---|
|
12 months |
6.42% |
|
3 years |
6.52% |
|
5 years |
13.59% |
Source: Morningstar.com, as of August 7, 2025.
The past few years have not been amazing, but the past five years showed solid performance. Remember that this is a dividend-focused ETF, too, with a recent dividend yield of 4.5%. That's quite generous, considering that the S&P 500's overall dividend yield is only around 1.2%.
A yield like that means that even during market downturns or stagnant periods, you'll be collecting meaningful income from the ETF. Invest $10,000, for example, and you're looking at $450 in annual income. Better still, healthy and growing dividend payers tend to increase their payouts over time. So in the future, you might be collecting $600 or $800 or $1,500 per year.
There are fees, too, but low ones. The fund's expense ratio is just 0.07% annually, which means you'll have to cough up $7 for each $10,000 you have invested in the fund.
What's in the SPDR High Dividend ETF?
The SPDR Portfolio S&P 500 High Dividend ETF recently had the following top 10 holdings, which together made up a little over 13% of its total value:
|
Stock |
Percent of ETF |
|---|---|
|
CVS Health |
1.39% |
|
Kimberly-Clark |
1.37% |
|
Edison International |
1.37% |
|
Altria Group |
1.36% |
|
Duke Energy |
1.35% |
|
Dominion Energy |
1.35% |
|
FirstEnergy |
1.34% |
|
Evergy |
1.34% |
|
Archer-Daniels-Midland |
1.33% |
|
AbbVie |
1.33% |
Source: SSGA.com, as of Aug. 7, 2025.
The ETF was recently skewed toward midsized companies (with a median market cap of $23.5 billion), and ones that are considered more value stocks than growth stocks. Some 22% of the fund's assets were in real estate companies and 18% in consumer staples companies. Financials (15%) and utilities (13%) were the next biggest sectors.
As part of your overall retirement plan, it can be smart to set up some passive income and, ideally, multiple income streams, so that if one runs into trouble (as perhaps Social Security might), you'll have others to rely on.
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Selena Maranjian has positions in AbbVie and Altria Group. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends CVS Health, Dominion Energy, and Duke Energy. The Motley Fool has a disclosure policy.
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