2 Nifty Retirement ETFs You're Likely Unaware Of

Kurtis Hemmerling profile picture
Kurtis Hemmerling


  • Retirees may struggle to generate enough income in a low interest rate environment.
  • High yielding stocks and funds often carry higher risk.
  • Two innovative ETFs may assist retirees to make enough income without jumping in the deep end of the risk pool.

Generating enough income in a low interest environment is a real challenge for many retirees. Bond yields are likely not adequate for most. Popular dividend ETFs, such as the SPDR ETF (SDY), likely carry too low a yield at less than 2.5%. You could always target higher yielding funds and stocks…but this often carries higher risk due to higher exposure to value traps. Another problem stems from some of these higher yielding funds being overweight in a small number of sectors. An example of this is the Invesco High Yield Equity Dividend Achievers ETF (PEY) with almost 50% of the fund residing in 2 sectors.

There are two funds, however, that I believe to deliver the promise of slightly higher yields while mitigating much of the above mentioned risks. The two ETFs at the top of my list for retirees are as follows:

  • AAM S&P 500 High Dividend Value ETF (NYSEARCA:SPDV)
  • Cboe Vest S&P 500 Dividend Aristocrats Target Income ETF (BATS:KNG)

What are some of the key reasons why I recommend these 2 particular funds?

AAM S&P 500 High Dividend Value ETF (SPDV)

What SPDV does differently than its peers is to find, not just high dividends, but high sustainable dividends. It does this by including stocks which have a combination of high dividend yield and high free cash flow yield. I believe free cash flow analysis to be one of the most important, yet under-served, aspects to dividend investing.

Free cash flow is the left-over cash which can be used for such things as dividends and buybacks. Due to accounting rules, a company could generate high earnings but have zero cash for dividends. Despite a low payout ratio (which is based on earnings), which many believe to be the hallmark of a sustainable dividend, the dividend could actually be in serious danger of being

This article was written by

Kurtis Hemmerling profile picture
I design sophisticated investment solutions for family offices, RIAs, UHNW individuals, ETF providers and more. I use Portfolio123 which uses FactSet data. The platform is free of look-ahead or survivorship bias and I encourage all DIY enthusiasts to give this platform a try.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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