These 3 dividend ETFs are a retiree's best friend

When you're retired, having a steady stream of passive income is essential. Those Social Security checks don't stretch very far on their own. That's why dividend-paying stocks are popular with retired investors. But diversification is essential. Dividend payments aren't guaranteed. A company's board can always suspend dividends when times get tough.

A good solution is to invest in dividend exchange-traded funds (ETFs). Because you're spreading out your investment across many different companies, your income isn't at risk if one company decides not to pay a dividend. Here are three dividend ETFs that could make your retirement a lot more comfortable.

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1. SPDR S&P Dividend ETF

If you're looking for dividend income that will increase over time, check out the SPDR S&P Dividend ETF. The fund's benchmark is the S&P High Yield Dividend Aristocrats Index. It takes the stocks with the highest dividend yield on the S&P 1500 Composite Index, then screens them to focus on those that have increased their dividend for at least 20 years. The focus on increasing dividend payments should appeal to seniors who need income that can keep up with inflation.

Ticker	Security	Last	Change	Change %
SDY	SPDR SERIES TRUST S&P DIVID ETF USD	125.65	+0.65	+0.52%

As of April 15, 2021, the fund had 112 holdings. The largest are ExxonMobil, AT&T, and People's United Financial.

The fund's 12-month yield is 2.68%, nearly double that of the S&P 500 index. The fund's 0.35% expense ratio is pretty average for such funds. For every $1,000 you invest, $3.50 goes toward fees.

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2. Vanguard High Dividend Yield ETF

Another strong choice for retirees seeking dividend income is Vanguard High Dividend Yield ETF. It tracks the FTSE High Dividend Yield Index, an index of just over 400 U.S. stocks that are projected to pay above-average dividends over the next 12 months, leaving out real estate investment trusts (REITs).

Ticker	Security	Last	Change	Change %
VYM	VANGUARD WHITEHALL FUNDS HIGH DIVIDEND YIELD ETF	114.94	+0.16	+0.14%

Stocks in the index aren't screened for risk, but they're weighted by market cap. That eliminates riskier stocks that may have high dividend yields because their share prices have tanked from having outsize influence. The fund's three largest holdings are JPMorgan Chase, Johnson & Johnson, and Procter & Gamble.

The fund's 12-month yield is 2.98%. Plus, it has Vanguard's signature low investing fees, with an ultra-cheap 0.06% expense ratio.

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3. Schwab U.S. Dividend Equity ETF

A final pick for dividend seekers is Schwab U.S. Dividend Equity ETF. The ETF tracks the Dow Jones U.S. Dividend 100 Index, which consists of higher-yielding stocks that have paid a dividend for at least 10 years. It then uses a scoring model to select 100 stocks based on their financial strength.

The index has some diversification requirements built in. No single stock can account for more than 4% of the index, while a single stock market sector can't exceed 25%. The fund's largest holdings are Home Depot, semiconductor manufacturer Texas Instruments, and biotech stock Amgen.

The fund's 12-month yield is an enticing 2.87%. Like Vanguard's High Dividend Yield ETF, it has an expense ratio of just 0.06%.

Whether you choose individual dividend stocks or dividend ETFs, it's important to look beyond the yield. A high-risk company may have an unusually high dividend if its share prices are down. When you're looking for supplemental investment income, focus on the dividend's sustainability, along with its yield.

Ticker	Security	Last	Change	Change %
SCHD	SCHWAB STRATEGIC TRUST US DIVIDEND EQUITY ETF	75.81	0.00	0.00%
SCHW	THE CHARLES SCHWAB CORP.	72.92	+0.42	+0.58%

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This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Robin Hartill, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot, Texas Instruments, and Vanguard High Dividend Yield ETF. The Motley Fool recommends Amgen and Johnson & Johnson. The Motley Fool has a disclosure policy.