Exchange-traded funds (ETFs) have become popular investment options for those looking to generate passive income. These funds typically hold a diversified portfolio of income-generating investments, allowing investors to earn a steady stream of income without the need for active management. In this article, we will explore three top ETFs that are great options for generating passive income: the Schwab U.S. Dividend Equity ETF, JPMorgan Equity Premium Income ETF, and Vanguard Real Estate ETF.
The Schwab U.S. Dividend Equity ETF (SCHD) is an ETF that tracks the Dow Jones U.S. Dividend 100 Index. This index consists of 100 high-yielding stocks that have a history of consistently paying dividends and strong financial metrics. The fund’s holdings include companies with exceptional dividend records, such as Pfizer, which has increased its dividend for 16 consecutive years and currently offers a dividend yield of 6.5%. With a distribution yield of 3.6%, the SCHD ETF provides investors with a higher income stream compared to the S&P 500.
The JPMorgan Equity Premium Income ETF (JEPI) has a unique dual mandate of distributing income to investors monthly while providing exposure to the equity market with lower volatility. The fund achieves this through a defensive equity portfolio and a disciplined options overlay strategy, which involves writing out-of-the-money call options on the S&P 500 index to generate income. JEPI has generated an income yield of 8% based on its recent payment, making it an attractive option for investors seeking high income potential.
The Vanguard Real Estate ETF (VNQ) offers investors a passive way to generate income from real estate by holding a diversified portfolio of real estate investment trusts (REITs). These REITs own income-generating properties such as office buildings, apartment complexes, and warehouses. The fund’s top holding, Prologis, has a dividend yield of 3.5% and has consistently increased its dividend payments over the years. With a current income yield of 3.5%, the VNQ ETF provides investors with a steady income stream from the commercial real estate sector.
Overall, ETFs can be an excellent option for investors looking to generate passive income. The SCHD, JEPI, and VNQ ETFs offer attractive income streams and the potential for income growth in the future. By investing in these top ETFs, investors can build a diversified portfolio of income-generating investments and watch their passive income flow into their brokerage accounts.
