3 Dividend ETFs to Buy With $2,000 and Hold Forever

Investing $2,000 in dividend-focused ETFs could be the start of a lifelong portfolio, generating passive income through compounding returns and steady distributions. Dividend ETFs offer diversification, low management fees, and a focus on companies with histories of rewarding shareholders. Below are three ETFs designed to grow wealth over decades, paired with the data and context to support their long-term potential.

1. Schwab U.S. Dividend Equity ETF (SCHD)

The Schwab U.S. Dividend Equity ETF (SCHD) screens for companies with strong dividend growth and financial health, excluding those with high debt or inconsistent payouts. This strategy has led to a 2.8% dividend yield (as of early 2024) and a 0.06% expense ratio, making it one of the most cost-effective options.

Since its launch, SCHD has outperformed the S&P 500 by roughly 0.5% annually, thanks to its focus on quality over quantity. Its portfolio includes blue-chip firms like Microsoft, Johnson & Johnson, and Coca-Cola, which have a history of raising dividends consistently.

2. Vanguard High Dividend Yield ETF (VYM)

The Vanguard High Dividend Yield ETF (VYM) prioritizes yield over growth, targeting companies in the MSCI US Broad Market Index with the highest trailing yields. This approach delivers a 3.4% dividend yield but also exposes investors to sectors like utilities and real estate, which are traditionally defensive.

VYM’s 0.07% expense ratio is among the lowest in its category, and its $50 billion in assets under management reflects its institutional-grade reliability. While its yield is higher than SCHD’s, VYM’s holdings include companies like AT&T and Verizon, which have faced slower growth but steady payouts.

3. iShares Select Dividend ETF (DVY)

The iShares Select Dividend ETF (DVY) combines dividend consistency and yield, selecting stocks from the CRSP US Dividend Index that have increased payouts for at least five consecutive years. This strategy has produced a 3.1% dividend yield and a 0.35% expense ratio, which is higher than its peers but still reasonable for the diversification it offers.

DVY holds a mix of large-cap firms like ExxonMobil and Chevron, alongside healthcare and technology leaders. Its $10 billion in assets under management underscores its popularity, though its higher fee makes it slightly less efficient than SCHD or VYM.

Conclusion: Building Wealth Through Dividends

With $2,000, an investor could allocate roughly $666 to each of these ETFs, creating a portfolio diversified across yield, growth, and defensive sectors. Over 30 years, even modest contributions could compound significantly. For example, a $2,000 investment in SCHD in 2011 would have grown to over $5,000 by 2023, with dividends reinvested.

The key advantages of these ETFs are their low fees (especially SCHD and VYM) and dividend resilience—all three have maintained payouts through recessions, including the 2008 crisis and the pandemic.

In a world of market volatility, these ETFs offer stability. By holding them forever, investors can tap into a strategy that prioritizes dividends, compounding, and time—all with minimal maintenance. The data is clear: dividend ETFs are a timeless tool for building wealth.