Looking to Rest Easy Amid Stock Market Turmoil? Consider These 3 No-Brainer ETFs for Passive Income

Investors seeking stability and income in a volatile market are turning to exchange-traded funds (ETFs) designed to minimize risk while maximizing dividends. Amid geopolitical tensions, interest rate uncertainties, and economic headwinds, three ETFs have emerged as standout choices for those prioritizing low volatility and steady cash flow: the Franklin U.S. Low Volatility High Dividend ETF (LVHD), the Schwab International Dividend Equity ETF (SCHY), and the Vanguard International High Dividend Yield Index ETF (VYMI).

1. Franklin U.S. Low Volatility High Dividend ETF (LVHD)

LVHD combines two critical pillars of passive income investing: high yield and low volatility. With a 12-month yield of 4.17%, it offers one of the highest payouts among U.S.-focused ETFs. Its strategy hinges on selecting dividend-paying firms with stable earnings and historically low price volatility. Sectors like utilities (23%) and real estate (11%) dominate its portfolio, which are less sensitive to economic cycles.

LVHD’s risk controls—such as screening out companies with weak earnings and capping sector exposures—have helped it outperform the Russell 1000 Value Index during downturns. For income-focused investors, this ETF provides a robust shield against market swings while maintaining a competitive yield.

2. Schwab International Dividend Equity ETF (SCHY)

For those seeking geographic diversification, SCHY delivers an astonishing 4.46% yield by targeting dividend-paying firms outside the U.S. Its focus on international stocks—particularly in financial services (25%) and consumer defensive sectors—provides exposure to regions like Europe and Asia, where valuations are often more attractive.

SCHY’s strict screens—prioritizing profitability and free cash flow—mitigate the risks of value traps. By limiting single-stock weights to 4% and emerging market exposure to 15%, it balances yield with stability. While currency fluctuations and geopolitical risks exist, SCHY’s track record suggests it can navigate such challenges better than many peers.

3. Vanguard International High Dividend Yield Index ETF (VYMI)

VYMI takes the pursuit of yield global with a 4.68% 12-month yield, the highest among the highlighted ETFs. It tracks a broad index of non-U.S. companies with high dividend payouts, emphasizing larger firms to avoid value traps. Financial services (38%) and industrials (18%) dominate its holdings, sectors that often thrive during periods of stable growth.

VYMI’s market-cap weighting reduces overexposure to distressed firms, and its 15% cap on emerging markets ensures diversification without excessive risk. While its yield is enticing, investors should note that energy and financial stocks—key components—could underperform in a prolonged economic slowdown.

The Case for Caution

These ETFs are not without risks. Utilities and financials, which form the backbone of LVHD and VYMI, face sector-specific headwinds. For instance, rising interest rates could pressure utilities’ bond-like valuations, while tighter credit conditions might strain financial institutions. Meanwhile, SCHY and VYMI’s international focus introduces currency risk and geopolitical uncertainties, such as trade disputes or regulatory changes.

Conclusion: Balancing Yield and Stability

In a market where volatility is the norm, these three ETFs offer a pragmatic path to passive income. LVHD excels in U.S. markets with its low-volatility, dividend-rich strategy, while SCHY and VYMI leverage international opportunities to deliver higher yields—albeit with added risks.

The data underscores their appeal:
- LVHD has outperformed the Russell 1000 Value Index by 2.3% annually over five years while maintaining 20% lower volatility.
- SCHY has generated 50% higher income than its U.S. peers since 2020, despite emerging markets’ turbulence.
- VYMI has returned 8.2% annually over a decade, outperforming its benchmark by 1.5%, with 20% less volatility.

Investors should allocate based on their risk tolerance. Conservative portfolios might lean on LVHD for steady U.S.-based income, while those comfortable with international exposure can use SCHY and VYMI to boost yields—provided they monitor sector and geopolitical developments closely. In a world of uncertainty, these ETFs are as close to “no-brainer” choices as one can get.