Designing a Global Dividend ETF Portfolio for Retirement Income (Part 3)
- John Macy
- Jul 15
- 6 min read
Written by John Macy, Financial Coach, MBA, Retirement Income Certified Professional® (RICP)
Introduction
In Part 1 of this series, we compared the leading U.S. dividend ETFs. In Part 2, we evaluated the top international dividend ETFs. Rather than trying to identify a single "best" fund, we used a consistent, multi-factor methodology to narrow the field to several outstanding candidates.
This final article brings everything together. Instead of asking which ETF is best, we'll answer a more practical question:
How can investors combine multiple dividend ETFs into a high-quality, globally-diversified retirement income portfolio?
A thoughtfully designed dividend ETF portfolio can provide:
attractive current income
growing dividend payments over time
competitive long-term total returns
lower portfolio volatility
broad diversification across industries and countries
reduced dependence on any single investment strategy
The goal is not simply to maximize dividend yield. Instead, our objective is to balance income, growth, diversification, and risk to create a portfolio capable of supporting retirement over many decades.
Why Own More Than One Dividend ETF? Why Not Simply Buy "The Best" ETF?
Many investors assume they need to find one "perfect" dividend ETF. In reality, different ETFs excel in different areas.
Some emphasize current income.
Others prioritize dividend growth.
Some focus on quality companies.
Others provide exceptional diversification.
Although SCHD earned the highest overall score in our U.S. analysis, no single ETF excelled in every category. DGRO offers stronger dividend growth, VYM provides broader diversification, LVHI reduces international (and portfolio) volatility, and VYMI expands geographic exposure. Combining complementary ETFs creates a portfolio that is more diversified and resilient than relying on any single fund alone.
Building the Portfolio
Our model portfolio was designed around the same factors used throughout this series.
We emphasized the following factors:
High Priority
Current dividend yield
Dividend growth
Sharpe ratio
Downside volatility
Secondary Priority
Total return
Expense ratio
Sector diversification
Geographic diversification
Currency diversification
Beta
No single ETF scored highest across every category, making diversification among several high-quality funds preferable to concentrating in only one.
ETFs Considered
In this article we considered and analyzed 20 dividend-focused ETFs, 10 U.S. dividend ETFs and 10 international dividend ETFs.
The U.S. dividend ETFs were analyzed in Part 1 of this series. The International dividend ETFs were analyzed in Part 2 of this series. Since we will not revisit all of the data points for each of the ETFs in this article, readers are encouraged to read those previous articles to understand the data and background behind each of the 20 ETFs mentioned in this third article.
The Model Portfolio: Why Each ETF Earned Its Place
After evaluating the strengths and weaknesses of every fund, six ETFs stood out as providing the best overall combination of income, dividend growth, diversification, and risk-adjusted returns.
SCHD (25%) – Core U.S. Dividend Holding
SCHD serves as the foundation of the portfolio because it combines an attractive current yield with excellent dividend growth, strong risk-adjusted returns, and a disciplined quality screen. It provides the portfolio's primary source of U.S. dividend income while helping avoid many of the classic yield traps associated with simply chasing high dividends.
DGRO (20%) – Dividend Growth Engine
DGRO complements SCHD by emphasizing companies with faster dividend growth and stronger long-term earnings growth. Its greater exposure to technology and other growth-oriented sectors increases the portfolio's long-term appreciation potential while maintaining a strong dividend-growth profile.
VYM (15%) – Broad U.S. Diversification
VYM adds exposure to hundreds of additional dividend-paying companies at one of the industry's lowest expense ratios. It broadens sector diversification and reduces reliance on the more concentrated strategies employed by SCHD and DGRO.
LVHI (15%) – International Income Anchor
LVHI was selected because of its unusual combination of attractive dividend income and historically lower volatility. Its emphasis on both yield and risk management makes it particularly well suited for retirees seeking smoother portfolio performance.
DIVI (10%) – International Quality Allocation
DIVI strengthens the international allocation by emphasizing financially healthy companies capable of sustaining and growing dividends. It complements LVHI by focusing more heavily on dividend quality than simply maximizing yield.
VYMI (15%) – Global Diversification
VYMI provides broad exposure to developed and emerging markets while maintaining a very low expense ratio. It improves geographic diversification and reduces dependence on any single country or region.
Model Global Dividend ETF Portfolio
ETF | Allocation |
SCHD | 25% |
DGRO | 20% |
VYM | 15% |
LVHI | 15% |
DIVI | 10% |
VYMI | 15% |
Overall Allocation
U.S. Dividend ETFs: 60%
International Dividend ETFs: 40%
We selected a 60% U.S. / 40% international allocation because it provides meaningful global diversification while recognizing that many retirees receive much of their retirement income and spend most of their retirement expenses in U.S. dollars. Investors with different objectives may reasonably choose different allocations.
Together, these funds create exposure to thousands of companies spanning dozens of countries and virtually every major industry.
A Simpler Four-Fund AlternativeNote that an investor seeking a somewhat simpler portfolio could easily develop a diversified portfolio with just four funds: SCHD and DGRO for U.S. dividend ETFs and LVHI and DIVI for international dividend ETFs. |
What This Portfolio Doesn't Try to Do
No investment portfolio can maximize every objective simultaneously. This portfolio intentionally sacrifices a small amount of current yield in exchange for:
stronger dividend growth
better risk-adjusted returns
broader diversification
lower volatility
greater long-term resilience
The objective is not to outperform the S&P 500 every year. Instead, the goal is to build a more resilient income-producing portfolio capable of supporting spending throughout retirement.
Who Might Want a Different Allocation?
Although this model portfolio provides a useful starting point, individual investors may reasonably adjust the allocations depending on their objectives.
For example:
Investors seeking maximum current income may allocate more toward LVHI or VYMI and less toward DGRO.
Younger investors emphasizing long-term growth may increase DGRO and IGRO while reducing higher-yield funds.
Investors uncomfortable with currency fluctuations may choose a smaller international allocation.
Investors already owning substantial international equities elsewhere may emphasize U.S. dividend ETFs.
The "right" portfolio depends on the investor—not on a universal formula.
Beyond Dividend ETFs
Dividend ETFs can form an excellent equity-income foundation, but they should not represent an entire retirement portfolio.
A comprehensive retirement strategy will often include:
Treasury Inflation-Protected Securities (TIPS) -- provide high-quality inflation protection
High-quality bonds -- reduce volatility and provide liquidity for rebalancing
Cash reserves -- help fund spending during bear markets
Managed futures and other diversifying assets (e.g., commodities, precious metals, real estate) -- may help cushion prolonged equity bear markets
Guaranteed income sources such as Social Security and pensions -- provide a stable income floor regardless of market conditions. Read our complete guide to building a retirement income floor.
These additional assets help manage inflation, sequence-of-returns risk, and spending needs during prolonged market downturns.
Rebalancing the Portfolio
Once a diversified dividend portfolio has been established, periodic rebalancing helps maintain the desired allocation and manage risk. Rather than chasing recent winners, investors may wish to rebalance annually or when allocations drift materially from their targets. Rebalancing naturally encourages buying assets that have become relatively inexpensive while trimming those that have appreciated the most.
Final Takeaways
Rather than searching endlessly for the single best dividend ETF, investors may be better served by combining several complementary funds into a globally diversified portfolio.
The six ETFs highlighted here represent different investment philosophies, geographic regions, and sources of return. Together, they provide a balanced framework emphasizing income, dividend growth, quality, diversification, and long-term resilience.
Of course, every investor's retirement goals, tax situation, spending needs, and risk tolerance are unique. The model portfolio presented here should therefore be viewed as a starting point for further research rather than a one-size-fits-all solution.
Throughout this three-part series, we've shown that successful dividend investing is about much more than finding the highest yield. A resilient retirement income portfolio balances current income, dividend growth, diversification, and risk management. By combining complementary U.S. and international dividend ETFs, investors can build a portfolio designed to generate sustainable income through a wide variety of market environments.
If you'd like help designing a retirement income portfolio tailored to your specific goals, I'd be happy to help. At Flourishing Path Financial, I work with individuals and couples to build diversified retirement portfolios that balance income, growth, taxes, and risk. Learn more about my retirement coaching services or schedule a complimentary introductory meeting by visiting Flourishing Path Financial at www.flourishingpathfinancial.com/book-online.
Author: John Macy, MBA, RICP®
John Macy is a professional financial coach and the founder of FlourishingPath Financial Coaching. With over six years of experience as a financial coach, John helps pre-retirees and retirees design resilient portfolios and income streams for their next act. Read his full story here.
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