These funds are full of solid dividend stocks that can generate recurring income for years.
If you’re a long-term investor looking for quality investments that provide consistent cash flow, exchange-traded funds (ETFs) are an excellent choice. Their inherent diversification helps minimize risk over time, and there are numerous funds specifically focused on dividends.
Vanguard funds stand out due to their low fees, making them ideal for buy-and-hold strategies. Two noteworthy options for generating strong cash flow are the Vanguard Dividend Appreciation ETF (VIG -0.98%) and the Vanguard High Dividend Yield ETF (VYM -1.05%).
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1. Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF offers a modest dividend yield of 1.6%, slightly above the S&P 500 average of 1.2%. However, its emphasis on dividend growth makes it particularly appealing for long-term investors. By holding onto this ETF, you can benefit from increasing dividend payments, allowing your recurring income to grow over time.
With a low expense ratio of just 0.05%, this fund is a smart choice for long-term investing, as even minor fees can accumulate significantly over the years. In return for these modest costs, you gain exposure to over 330 quality dividend stocks.
Currently, the top three holdings in the ETF are Broadcom, Microsoft, and JPMorgan Chase. Broadcom, the largest holding, comprises about 6% of the portfolio, while the majority of the other holdings are smaller positions, providing essential diversification for long-term investing and risk mitigation.
As of 2025, the fund has generated total returns (including dividends) of 11%, just shy of the S&P 500’s 14%. In a down market, the Dividend Appreciation ETF may outperform the index, and its dividend growth can enhance your returns over time, allowing you to earn more on your initial investment.
2. Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF currently boasts a yield of around 2.5%, more than double the S&P 500 average. This fund focuses on high-yielding stocks rather than just dividend growth, resulting in a broader range of holdings—579 as of August 31. Its expense ratio is also competitive at 0.06%.
There is some overlap with the other Vanguard fund, as Broadcom and JPMorgan Chase are also top holdings here. However, instead of Microsoft, ExxonMobil, with a yield of 3.5%, is among the top three holdings.
Investing in high-yielding stocks can carry more risk, as dividends may be cut or suspended if a company’s financial health falters. Nevertheless, the extensive diversification within this ETF mitigates risk for investors. Even if some payouts are not secure, the fund can still maintain a high yield, as no single stock (aside from Broadcom and JPMorgan Chase) constitutes more than 3% of the portfolio.
This year, the ETF’s performance has mirrored that of the Vanguard Dividend Appreciation Index, with both funds achieving over 11% returns when factoring in their payouts.
Both of these ETFs represent excellent long-term investments, capable of generating substantial recurring dividend income over the years.
JPMorgan Chase is an advertising partner of Motley Fool Money. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Microsoft, Vanguard Dividend Appreciation ETF, and Vanguard Whitehall Funds – Vanguard High Dividend Yield ETF. 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.
