7 Dividend ETFs Built to Survive a Recession - and Pay You Through It

"Although recessions are normal parts of the business cycle, anyone who has lived through one can tell you it could be financially devastating. These are periods associated with economic decline, rise in unemployment, reduced wages, business failures and a contraction in financial markets. This can be crippling to investors, especially those near or in retirement. To defend their portfolios from the impacts of economic events such as recessions, many investors have relied on dividend ETFs."

"But not all dividend ETFs are created equal. The ones that may hold resilient during a recession invest in high-quality companies with strong financials such as cash flow and low debt. They also have track records of consistent dividend payouts and are generally associated with low volatility. Many are largely invested in defensive sectors, which are known to generally remain stable under various market cycles."

"The Vanguard High Dividend Yield ETF (VYM) invests in more than 500 large value companies believed to deliver higher-than-average yields. This could give investors a sense of confidence that this well-diversified ETF contains stocks of mature and stable companies with strong financials. Among its top holdings are firms in the financials, technology and industrials sectors. VYM has generated an impressive five-year return of more than 64% and offers a yield of around 2.44%. It also stands out for its low expense ratio of 0.06%."

Recessions bring economic decline, higher unemployment, lower wages, business failures and contracting financial markets, which can severely harm investors, especially those near retirement. Dividend ETFs can help defend portfolios by focusing on companies that pay regular dividends. The most resilient dividend ETFs emphasize high-quality firms with strong cash flow, low debt, consistent dividend histories and low volatility, and often overweight defensive sectors such as consumer staples and healthcare. Examples of resilient ETFs include Vanguard High Dividend Yield ETF (VYM), which holds over 500 large value companies, and Schwab U.S. Dividend Equity ETF (SCHD), which screens for financial strength and sustainable payouts.

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