ETFs
3 High-Yield Dividend ETFs to Buy to Generate Passive Income
Passivity is often not considered a positive quality. When used to describe an individual, it implies that the person sits back and lets things happen to them, often bad things.
But passive income is a whole different story. An investor with good passive income sources sits back and lets good things happen, including letting the money flow in on a regular basis.
What are the best sources of passive income? I think exchange traded funds (ETFs) are a smart place to look. Here are three high-yielding dividend ETFs to buy to generate passive income (listed alphabetically).
1. Investco S&P SmallCap High Dividend Low Volatility ETF
THE Invesco S&P SmallCap High Dividend Low Volatility ETF (NYSEMKT: XSHD) managed by Invesco The SEC’s 30-day yield is a very high 7.72%. This yield actually reflects net investment income per share less expenses for the previous 30 days, divided by the current maximum offering price. The U.S. Securities and Exchange Commission (SEC) developed it to help investors compare funds.
As the ETF’s name suggests, it focuses on small-cap stocks with high dividend yields but relatively low volatility over the past 12 months. The Invesco ETF holds 57 stocks. Its top holdings include Highwoods Properties, Organon, Armor Residential REIT, Two Harbors Investment CompanyAnd Ellington Financial.
Income investors will likely appreciate the fact that the Investco S&P SmallCap High Dividend Low Volatility ETF pays monthly distributions. They may also appreciate the fund’s manageable annual nature. expense ratio by 0.3%.
Why not love it? Despite its high income, the fund has not always performed very well. Since its inception in December 2016, the average annual return of this Investco ETF is -1.17%.
2. JPMorgan Equity Premium Income ETF
THE JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) managed by JPMorgan Chase is not too far behind ETF Invest in terms of generating passive income. The 30-day SEC yield of this fund stood at 7.55% as of May 31, 2024.
This ETF uses a proprietary process to select less volatile stocks that may or may not pay dividends. It is sold out of the money S&P 500 Index call options to generate income. Like the Investco ETF, the JPMorgan ETF pays monthly distributions.
The JPMorgan Equity Premium Income ETF currently holds 133 stocks. Its top holdings include Microsoft), Amazon, Progressive, Meta-platformsAnd Trane Technologies.
This ETF has an annual expense ratio of 0.35%. Its performance has been solid with an average annual return of 12.57% since its inception in May 2020. Perhaps the biggest drawback to the JPMorgan Equity Premium Income ETF is that it hasn’t been around very long.
The story continues
3. SPDR Portfolio S&P 500 High Dividend ETF
THE SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) is managed by State StreetIt offers a 30-day SEC yield of 4.68%.
Its name reveals the ETF’s focus. The SPDR ETF invests in stocks in the S&P 500 index with high dividend yields. The fund holds 75 stocks, with top holdings including Iron Mountain, Public sector group of companies, Williams Companies, International documentAnd Hasbro.
One of the great things about this ETF is its low cost. The fund’s annual expense ratio is just 0.07%. The SPDR ETF has also had relatively good performance in the past, with an average annual return of nearly 8.6% since its inception in October 2015.
Unlike the Invesco and JPMorgan ETFs, the SPDR Portfolio S&P 500 High Dividend ETF pays quarterly distributions instead of monthly. However, the fund’s combination of healthy yields, low cost, and history of positive returns could make it a good choice for investors looking for passive income.
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Randi Zuckerberg, former head of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, JPMorgan Equity Premium Income ETF, Meta Platforms and Williams Companies. The Motley Fool has positions in and recommends Amazon, Iron Mountain, JPMorgan Chase and Meta Platforms. The Motley Fool recommends Hasbro and Progressive. 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