Exchange-traded funds (ETFs) might be an income investor’s best friend. They offer much-needed diversification. And some of them generate solid, reliable revenue.
While there are many alternatives to choose from, I think a handful of ETFs particularly stand out. Here are three high-yielding dividend ETFs to buy to generate passive income (ordered by diminishing returns).
1. JPMorgan Equity Premium Income ETF
Two things immediately stand out with the JPMorgan Equity Premium Income ETF (NYSEMKT: DONOR). The first is the fund’s juicy 30-day SEC yield of 7.52%. Second, the ETF pays a monthly distribution – something income investors should particularly appreciate.
Another intriguing fact about the JPMorgan Equity Premium Income ETF is not as obvious. Although his yields are high and he owns many stocks (132 as of May 15, 2024), many of these stocks do not offer high dividend yields or even pay dividends at all. So how can the ETF deliver such a high return? He writes out of money S&P500 hint purchase options to boost its distributions.
The JPMorgan Equity Premium Income ETF’s 0.35% annual expense ratio seems reasonable given the solid distribution you’ll receive. The fund could also generate attractive returns. Since its inception, its average annual return has exceeded 12.2%.
Perhaps the biggest downside to this ETF is that it hasn’t been around very long. JPMorgan Chase launched the fund in May 2020. Despite this relatively short period of activity, I think the JPMorgan Equity Premium Income ETF is an excellent choice for more aggressive income investors.
2. SPDR Portfolio S&P 500 High Dividend ETF
If you don’t like the idea of ​​an options-oriented ETF, the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT:SPYD) might be more to your liking. This fund, managed by State Streetattempts to track the S&P 500 High Dividend Index, which includes the top 80 S&P 500 companies with the highest dividend yields.
Top holdings in the SPDR Portfolio S&P 500 High Dividend ETF currently include Public service company group, Hasbro, Iron Mountain, Citi GroupAnd Dominion Energy. Its 30-day SEC yield is 4.52%.
Since its inception in October 2015, the ETF has generated an average annual return of nearly 8.2%. It might be able to continue providing relatively good total returns given that the average stock in the fund is reasonably priced with a forward price-to-earnings ratio of less than 15.1.
Few income investors will complain about the costs associated with the SPDR Portfolio S&P 500 High Dividend ETF. Its annual expense ratio is 0.07%.
3. Invesco High Yield Equity Dividend Achievers ETF
What’s better than a high-yielding dividend ETF? One that also has a growing distribution. This is exactly what Invesco High Yield Equity Dividend Achievers ETF (NASDAQ:PEY) gives you.
This fund attempts to track the NASDAQ US Dividend Achievers 50 Index. The index includes 50 stocks selected primarily based on their dividend yield and consistency of growth. Top holdings of the Invesco High Yield Equity Dividend Achievers ETF currently include Altria Group, First interstate banking system, Universal Corp/VA, 3MAnd Truist Financial.
The ETF pays a 30-day SEC yield of 4.29%. Its dividend distribution has more than doubled over the last 10 years.
Perhaps the biggest downside to the Invesco High Yield Equity Dividend Achievers ETF is its mediocre overall performance. The fund has generated an average annual return of just 5.83% since its inception in December 2004. Its expense ratio of 0.52% is also higher than other funds on our list. Still, this ETF could be an attractive option for income investors looking for growing passive income.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Iron Mountain, JPMorgan Chase and Truist Financial. The Motley Fool recommends 3M, Dominion Energy and Hasbro. The Motley Fool has a disclosure policy.
3 High Yield Dividend ETFs to Buy to Generate Passive Income was originally published by The Motley Fool
