Investing in exchange-traded funds (ETFs) is a popular way to generate passive income without the hassle of managing a portfolio of individual stocks. By purchasing a few diversified funds, investors can sit back and watch their income grow passively. One type of ETF that is particularly attractive for passive income seekers is dividend ETFs, which focus on companies that pay out regular dividends to their shareholders.
There are numerous dividend ETFs available in the market, each with its own unique strategy and focus. Two funds that stand out for their potential to provide a supercharged stream of passive income are the Global X SuperDividend ETF (SDIV) and the Fidelity Yield Enhanced Equity ETF (FYEE).
The Global X SuperDividend ETF (SDIV) takes a straightforward approach by investing in 100 of the highest-yielding dividend stocks globally. While high-yield dividend stocks may carry higher risk due to potential dividend reductions, SDIV’s global strategy helps mitigate risk by increasing diversification across different regions. The fund has a solid track record of paying dividends, with monthly distributions for 13 consecutive years. With a current dividend yield of 10.8%, SDIV offers a substantial income stream compared to the S&P 500’s yield of 1.2%.
On the other hand, the Fidelity Yield Enhanced Equity ETF (FYEE) aims to provide current income while maintaining prospects for capital appreciation. The fund invests in large-cap companies that are members of major indices like the S&P 500 and Russell 1000. Using quantitative analysis, FYEE selects stocks with strong growth potential, profitability, and other factors to outperform the S&P 500. Additionally, the fund employs options strategies, such as selling call options on major market indices and lending securities to short-sellers, to enhance income generation.
FYEE has delivered three quarterly dividend payments since its inception, with an average yield of 7%. This means that a $1,000 investment in FYEE could potentially generate $70 of annual passive income. While these two ETFs offer attractive income opportunities, it’s important to note that they involve higher risk due to their investment strategies. Investors with a high-risk tolerance may consider including these funds in a diversified ETF investment strategy to boost their passive income.
In conclusion, Global X SuperDividend ETF and Fidelity Yield Enhanced Equity ETF are excellent options for investors looking to supercharge their passive income streams. While they come with higher risk, their potential for generating substantial income makes them worth considering for those seeking to enhance their investment portfolio. It’s always advisable to conduct thorough research and consult with a financial advisor before making any investment decisions.
