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3 Dividend ETFs for Long-Term Wealth Building

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  Published in Stocks and Investing on Wednesday, January 7th 2026 at 12:16 GMT by The Motley Fool

Building a Forever Portfolio: A Summary of 3 Dividend ETFs for Long-Term Investors

The Motley Fool article "3 Dividend ETFs to Buy With $100 and Hold Forever" (published January 7, 2026) advocates for a simple yet powerful investment strategy: building a portfolio anchored by consistently paying dividend ETFs. The core thesis is that consistently reinvested dividends, combined with long-term growth, can create substantial wealth over time, even starting with a modest initial investment. The article highlights three specific ETFs – Schwab U.S. Dividend Equity ETF (SCHD), Vanguard High Dividend Yield ETF (VYM), and iShares Core Dividend Growth ETF (DGRO) – as excellent candidates for this "buy and hold forever" approach. This summary will delve into each ETF, their strengths, weaknesses, and the overall rationale behind the Fool’s recommendations, drawing from information in the article and linked resources.

The Power of Dividend Reinvestment

Before diving into the ETFs, the article emphasizes the crucial role of dividend reinvestment. This practice automatically uses dividend payouts to purchase additional shares of the ETF, compounding returns over time. The effect is significantly magnified over decades, turning small initial investments into substantial sums. The article points to historical data demonstrating the impressive long-term returns achievable through dividend reinvestment, framing it as a passive but effective wealth-building technique. This underscores the author’s preference for a “set it and forget it” investment strategy, minimizing the need for active trading and market timing.

1. Schwab U.S. Dividend Equity ETF (SCHD): Quality & Value Focus

SCHD is presented as the standout pick, favored for its focus on quality and value. Unlike some dividend ETFs that prioritize simply high yield, SCHD employs a rigorous screening process. It focuses on companies with a history of consistent dividend payments (at least 10 consecutive years), strong free cash flow generation, and financial stability. The article details SCHD’s methodology, which prioritizes profitability, return on equity, and dividend consistency. This focus, the article argues, helps mitigate risk and ensures dividend sustainability, even during economic downturns.

The ETF boasts a relatively low expense ratio of 0.06%, meaning investors retain a high percentage of their returns. Its current dividend yield (as of the article’s publication) is around 3.5%, offering a decent income stream. The top holdings are dominated by well-established, financially sound companies like Procter & Gamble, Johnson & Johnson, and Coca-Cola. The article highlights that SCHD’s strategy results in a portfolio that's less volatile than the broader market while still offering attractive long-term growth potential. A linked page on Schwab’s website confirms the ETF's methodology and provides a detailed portfolio breakdown.

2. Vanguard High Dividend Yield ETF (VYM): Broad Diversification & Lower Cost

VYM is championed for its broad diversification and extremely low cost. Managed by Vanguard, a leader in low-cost investing, VYM has an expense ratio of just 0.06%. It tracks the FTSE High Dividend Yield Index, meaning it focuses on stocks with above-average dividend yields. While it doesn't have the same stringent quality requirements as SCHD, it offers exposure to a wider range of companies across various sectors.

The article explains that VYM's broader diversification can help reduce portfolio concentration risk. Its top holdings include companies like ExxonMobil, Verizon, and AT&T, providing exposure to different parts of the market. VYM’s yield is typically around 3.8%, slightly higher than SCHD’s. However, the article cautions that the higher yield comes with a potentially increased level of risk, as some of the companies included might be more sensitive to economic fluctuations. The Vanguard website, linked in the article, provides current yield information and details about the underlying index.

3. iShares Core Dividend Growth ETF (DGRO): Growth Potential & Stability

DGRO differentiates itself by focusing on dividend growth. Instead of prioritizing current high yield, DGRO targets companies with a history of consistently increasing their dividend payouts. The article explains that dividend growth stocks often have strong earnings growth potential, suggesting they are well-positioned to continue increasing dividends in the future.

DGRO’s expense ratio is 0.08%, slightly higher than SCHD and VYM but still remarkably low. Its portfolio includes companies like Microsoft, Johnson & Johnson, and UnitedHealth Group – businesses with strong track records of innovation and consistent earnings growth. While DGRO’s current yield (around 2.5%) is lower than the other two ETFs, the article argues that the potential for future dividend increases makes it an attractive long-term investment. A link to the iShares website provides more details on DGRO's methodology and allows investors to analyze its historical dividend growth rate.

Overall Recommendation & Portfolio Construction

The Motley Fool doesn’t recommend choosing just one of these ETFs. Instead, the article suggests building a diversified portfolio that includes all three. This approach leverages the strengths of each ETF: SCHD for quality and value, VYM for broad diversification and low cost, and DGRO for growth potential and dividend consistency.

The article emphasizes the importance of dollar-cost averaging – investing a fixed amount of money at regular intervals – to mitigate the risk of buying at market highs. Starting with just $100 in each ETF is presented as a perfectly viable starting point, demonstrating that even small investments can grow significantly over time with consistent contributions and dividend reinvestment. The overall message is one of long-term patience and the power of compounding – a strategy designed to build wealth “forever.”