3 High-Yield Dividend ETFs to Buy to Generate Passive Income

There are many ways to generate passive income these days. Investing in exchange-traded funds (ETFs) might be the most passive way to generate passive income. You don’t need to manage them like a portfolio of stocks or rental properties. Because of this, you can simply sit back and collect the income.

SPDR S&P 500 High Dividend Portfolio ETFs (SPYD 0.14%), JPMorgan Equity Premium Income ETF (JEEP 0.34%)and SPDR Portfolio High Yield Bond ETF (SPHY) they are high yield Dividend ETFs for those who seek passive income. Here’s why income investors should take a closer look at these ETFs.

Focused on the best high yielding dividend stocks

The SPDR Portfolio S&P 500 High Dividend ETF owns 80 of the top high yielding dividend stocks in S&P 500 index. So it gives investors a snapshot diversified portfolio of income stocks. The fund has the following sectoral allocations:

• Real estate: 24.2%
• Utilities: 17.9%
• Financial: 16.2%
• Consumer products: 11.9%
• Healthcare: 7.6%
• Materials: 6.3%
• Energy: 4.9%
• Communications: 3.8%
• Discretionary consumption: 3.4%
• Industrial industry: 2.6%
• Information Technology: 1.3%

The fund also has a very balanced allocation across its main holdings. Its highest position (Kellanova) has a weighting of 1.6%, while its top 10 holdings comprise less than 14% of the fund’s assets.

The fund currently has a dividend yield of around 4.3%, much higher than the S&P 500 (recently around 1.4%). For perspective, every $1,000 invested in this ETF would produce about $43 in passive income each year at this rate, compared to about $14 in an S&P 500 index fund.

The SPDR Portfolio S&P 500 High Dividend ETF makes quarterly distribution payments that fluctuate based on the dividends paid by companies in the fund. Meanwhile, the fund is low ETF Expense Report of 0.07%, allowing investors to keep more of the income that their holdings generate. Overall, this ETF is best for investors looking to generate dividend income and growth potential by owning shares of high-quality companies that should grow their earnings and dividend payments.

Income from option premiums

The JPMorgan Equity Premium Income ETF aims to provide monthly distributable income and equity market exposure with lower volatility. He has a twofold strategy to achieve his audacious goal:

• Defensive Stock Portfolio: The fund holds a portfolio of high-quality stocks selected based on fundamental research and its own risk-adjusted stock ratings. It has over 100 holdings in various sectors.
• Overlapping disciplined options: The ETF sells the out-of-the-money S&P 500 index call options to generate income to distribute to investors every month.

Writing call options can be a profitable passive income strategy. This fund has delivered a rolling dividend yield of 7.6% over the past 12 months and an annualized yield of 6.9% based on its payouts over the past 30 days. This income yield is on par with what investors could earn from the high yield junk bonds (7.9%). However, income from options can be volatile (premiums tend to increase during periods of volatility), causing monthly distribution payments to vary.

This fund allows investors to earn income that rivals high-yield bonds with additional growth potential from its equity portfolio. This makes it ideal for those looking for a profitable monthly income stream and potential for equity growth with less volatility than the broader market. However, investors pay a higher fee to own this ETF at 0.35%.

One person’s junk is another person’s passive income stream

The SPDR Portfolio High Yield Bond ETF focuses on junk or sub-investment grade bonds credit ratings. High-yield bonds tend to have a higher risk of default than investment-grade bonds. Because of this, they offer a higher income yield.

This ETF helps reduce default risk by holding more than 1,900 bonds. It also provides additional diversification across sectors and issuers.

The fund has returned 7.7% based on its payouts over the past 30 days. It is distributed income every monthwhich varies with the interest income paid by the bonds in its portfolio. The fund has a very low expense ratio (0.05%), allowing investors to keep most of the income that junk bonds produce.

This ETF is best for investors looking for a reasonable stream of fixed income and i am comfortable with higher risks associated with junk bonds.

Three great ways to generate passive income

the SPDR S&P 500 High Dividend ETF, the JPMorgan Equity Premium Income ETF and the SPDR portfolio portfolio The High Yield Bond ETF offers high dividend yields. This allows investors to generate more income for every dollar they invest. Add the benefits of diversificationand these ETFs are great options for those who want to sit back and start collecting passive income.