3 Dividend-Paying ETFs to Double Up on and Buy Even if the S&P 500 Sells Off in October

Key Points

• The Vanguard Dividend Appreciation ETF is a low-cost way to ramp up your passive income.

• The JPMorgan Nasdaq Equity Premium ETF has demonstrated resilience in declining markets.

• The consumer staples sector is out of favor in this growth stock fueled market.

• 10 stocks we like better than Vanguard Dividend Appreciation ETF ›

After gaining more than 20% in 2023 and again in 2024, the S&P 500 (SNPINDEX: ^GSPC) is up 12.3% year to date at the time of this writing. That means it could close out the final three months of the year flat and still post an above-average return.

Some investors may feel that such a rapid run-up in the market makes it more prone to a sell-off. Whereas others may argue that artificial intelligence (AI) is fueling innovation and can accelerate economic growth, so the market deserves a premium valuation.

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Investors who are wary about valuations or are simply looking for investment ideas outside of red-hot growth stocks have come to the right place.

Here's why these Fool.com contributors believe that exchange-traded funds (ETFs) like the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG), JPMorgan Nasdaq Equity Premium ETF (NASDAQ: JEPQ), and Vanguard Consumer Staples ETF (NYSEMKT: VDC) are great buys in October.

Image source: Getty Images.

Passive income aficionados will appreciate the Vanguard Dividend Appreciation ETF

Scott Levine (Vanguard Dividend Appreciation ETF): The S&P 500 has been on a tremendous bull run in 2025, but smart investors know the party can't last forever. To better prepare themselves for a market downturn, many are choosing to fortify their holdings with resilient passive income providers. For those recognizing the value of adding a reliable income stock to their portfolio, the Vanguard Dividend Appreciation ETF with its 1.6% dividend yield is a great choice right now.

Designed to track the performance of the S&P 500 U.S. Dividend Growers Index, which is comprised of stocks with track records of dividend increases, the Vanguard Dividend Appreciation ETF consists of 337 holdings committed to boosting their payouts and representing a variety of sectors. Mostly, the ETF is packed with information technology and financials stocks, representing 26.1% and 22.6%, respectively.

Though not as substantial, healthcare stocks also have a sizable presence with a 15.1% weighting. Those looking for security will certainly find the fund's diversification with respect to different sectors appealing as it reduces the risk of a downturn in a particular industry.

While the Vanguard Dividend Appreciation ETF is focused on income, investors also gain exposure to a number of notable names at the forefront of growth industries. Investors gain significant artificial intelligence (AI) exposure, for example, with the fund's top two holdings: Broadcom and Microsoft. And Apple isn't far behind as the fourth-largest position. With the boon in AI contributing to tech companies generating boatloads of free cash flow, Broadcom, Microsoft, and Apple certainly have room to raise their dividends. Investors looking for exposure to other sectors will find energy stalwart ExxonMobil, which is one of the most reliable oil dividend stocks in the energy sector.

With its extraordinarily low 0.05% expense ratio, investors won't pay an arm and a leg for more passive income with this solid dividend growth-focused ETF.

This ETF offers a mix of monthly income and downside protection

Lee Samaha (JPMorgan Nasdaq Equity Premium Income): Much has been written about this ETF and its sister fund, the JPMorgan Equity Premium Income ETF. The primary difference between the two is the former focuses on Nasdaq-100 stocks, while the latter focuses on S&P 500 stocks in the equity portion of its strategy.

The two ETFs invest up to 80% of their assets in equities and up to 20% in equity-linked notes (ELNs), which are tied to a strategy of selling call options on the respective indexes that the ETFs focus on. Both offer massive monthly distributions for investors.

As you might expect, the risk (measured by standard deviation) in the Nasdaq version is higher than the S&P 500 version, and so is the maximum monthly drawdown. You can read all the data in the article linked to this. However, the key point I'm making in recommending the ETF can be seen in the red rectangle in the following chart, which compares the monthly performance of the Nasdaq-100 index (x-axis) to the ETF's performance (y-axis).

Data source: JPMorgan. Chart by author.

As you can see in the chart above, the ETF has demonstrated the ability to incur minimal losses or even generate a positive return when the Nasdaq-100 achieves a low-single-digit return in a given month. To put this into perspective, a 1% decline in the index every month would result in an 11.4% decline in the index for the year. However, if the ETF's performance above is replicated, then the ETF might even deliver a positive total return for the year.

Such a performance would make it an excellent ETF for defensive investors to consider.

This ETF is chock-full of ultra-reliable dividend stocks

Daniel Foelber (Vanguard Consumer Staples ETF): When selecting dividend-paying ETFs, you can go with a growth-driven option like my colleague Scott's Vanguard Dividend Appreciation pick or an income-oriented choice like Lee's JPMorgan Nasdaq Equity Premium Income ETF. Both are excellent ideas. Or you can find something in the middle. Investors who are worried about a market pullback may find a sector-based option like the Vanguard Consumer Staples ETF particularly compelling.

Consumer staples has been one of the worst-performing sectors in 2025 -- down 1% compared to a 12.3% gain in the S&P 500. It's normal for consumer staples to underperform in a strong bull market because the sector's strength is its consistency. Consumer staples tend to benefit less from economic growth than technology, financials, industrials, and other cyclical sectors. But this time around, the consumer staples sector isn't just underperforming because of broader market dynamics.

Many retailers are grappling with pullbacks in consumer spending. The stocks that have held up well are value-oriented companies like Walmart and Costco Wholesale -- the two largest holdings in the Vanguard Consumer Staples ETF. But companies like Coca-Cola, PepsiCo, and Procter & Gamble are all seeing slowing growth as consumers look to cut spending or switch from premium-priced name brands to generic alternatives.

Now is a phenomenal time for long-term investors to scoop up shares of top beaten-down consumer staples stocks. One option is to buy shares in high-conviction names. Another is to go with a low-cost fund like the Vanguard Consumer Staples ETF. The fund sports an expense ratio of just 0.09%, or $.90 for every $1,000 invested. It also yields 2.3%, which is more than a full percentage point greater than an S&P 500 index fund.

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Daniel Foelber has positions in JPMorgan Equity Premium Income ETF, JPMorgan Nasdaq Equity Premium Income ETF, and Procter & Gamble. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Costco Wholesale, Microsoft, Vanguard Dividend Appreciation ETF, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.