5 High Yield Dividend ETFs to Buy to Generate Passive Income

One of these ETFs has a dividend yield of over 6%, while another has a five-year average annual return of over 15%.

Who wouldn’t want passive income? By definition, it’s money that comes to you without you having to work for it. You don’t have to work, inherit money from a wealthy relative, or even rob a bank to get this money.

There is many potential sources of passive incomeand not everything will please everyone. For example, you can buy properties and rent them out, but this requires occasional effort and some real estate know-how. Buy a fixed annuity can also set you up to collect monthly payments, but you will usually have to pay a significant amount for this annuity first.

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Five Compelling High Dividend ETFs

So, think high dividends exchange-traded funds (ETFs). They operate much like mutual funds, but they trade like stocks, and some have strong results. dividend yields while offering growth potential. Here are five to take a closer look, plus a bonus.

FNB

Recent performance

Five-year annualized return

Annualized return over 10 years

Source: Morningstar.com, as of June 24, 2024.

*Vanguard does not provide SEC returns. This is the recent “unadjusted effective return” of the ETF.

If the chart above doesn’t sound interesting enough, this might help: Imagine you own – or retire with – a $500,000 portfolio that has an overall average dividend yield of 3.5%. . This is enough to generate $17,500 in passive income every year. If you’re currently earning, say, $80,000 per year, that’s the same as receiving an additional bonus of 22% per year.

Now that you’re more interested in these ETFs, let’s take a brief look at each one.

iShares Preferred and Fixed Income ETFs

This ETF specializes in preferred sharesnot the common stocks that most of us invest in most of the time. Don’t expect preferred stocks to appreciate much, or their dividends to increase much either. They often pay fixed dividends, but they also often offer outsized yields.

Schwab US Dividend Stock ETF

This index fund tracks the Dow Jones US Dividend 100 Index, which consists of high-yielding US stocks that have consistently paid dividends. His biggest titles recently were Texas Instruments, AmgenAnd Lockheed Martin.

Vanguard Real Estate Exchange Traded Fund

Real Estate Investment Trusts (REITs) own many properties and earn income by renting them out. Since owning actual properties can be tricky and expensive, if you want to profit from real estate, you might consider investing in an ETF like this instead. Owning a REIT can be considered “the really lazy way to be a landlord. ” Top holdings of this ETF recently included Prologis, American TowerAnd EquinixThey specialize in warehouses, telecommunications towers and digital infrastructure, among others, respectively.

Vanguard High Dividend Yield ETF

This ETF aims to track the returns of the FTSE High Dividend Yield Index, minus its low fees. It focuses on US stocks from the FTSE Global Equity Index series that have high yields (excluding REITs), and its recent top holdings have included Broadcom, JPMorgan ChaseAnd ExxonMobil.

iShares Core Dividend Growth ETF

This ETF holds stakes in companies that not only pay large dividends, but also have a track record of increasing their payouts. Growing dividends can be particularly powerful portfolio boosters, and this ETF’s top holdings have recently been Apple, Microsoftand ExxonMobil.

Vanguard S&P 500 Exchange Traded Fund

Finally, here is an ETF that pays bonus dividends. The yield on this S&P 500 index fund isn’t huge, but it makes up for that with a solid growth track record. The returns in the table above show how it generally compares to other recommended funds, but don’t expect returns that high in the future. Long-term performance average annual gain of the stock market is closer to 10% than 15%. Investing in the S&P 500 can give you a measure of passive income from dividends alongside stock price appreciation.

There are many other solid ETFs to investigate, many of which offer significant dividend yields. There are also many ETFs and stocks with higher dividend yieldsalthough they can offer lower historical returns and/or more risk as well. So explore some or all of these or a few others, and you should be able to set yourself up for collecting plenty of passive income.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Selena Maranjian holds positions in American Tower, Amgen, Apple and Microsoft. The Motley Fool holds positions in and recommends American Tower, Apple, Equinix, JPMorgan Chase, Microsoft, Prologis, Texas Instruments, Vanguard Real Estate ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Amgen, Broadcom and Lockheed Martin. The Mad Motley has a disclosure policy.

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