Exchange-traded funds (ETFs) have become increasingly popular among income investors due to their ability to provide diversification and generate reliable income. While there are numerous options available, there are a few high-yield dividend ETFs that stand out from the rest. In this article, we will explore three top high-yield dividend ETFs that income investors should consider adding to their portfolios.
1. JPMorgan Equity Premium Income ETF:
The JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) is a standout choice for income investors looking for a high yield. With a 30-day SEC yield of 7.52%, this ETF offers a substantial monthly distribution that can provide a steady stream of income. The fund achieves its high yield by writing out-of-the-money S&P 500 index call options, which helps boost its distributions.
Despite owning a diverse portfolio of 132 stocks, many of the holdings in the JPMorgan Equity Premium Income ETF do not offer high dividend yields. However, the fund has managed to deliver an average annual return of over 12.2% since its inception. While the ETF has only been around since May 2020, it presents an attractive option for more aggressive income investors seeking high yields.
2. SPDR Portfolio S&P 500 High Dividend ETF:
For investors who prefer a more traditional approach, the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) tracks the S&P 500 High Dividend Index, which includes the top 80 companies in the S&P 500 with the highest dividend yields. With a 30-day SEC yield of 4.52%, this ETF offers a solid income stream for investors.
Since its inception in October 2015, the SPDR Portfolio S&P 500 High Dividend ETF has delivered an average annual return of nearly 8.2%. The fund’s low annual expense ratio of 0.07% makes it a cost-effective option for income investors seeking exposure to high-dividend-yielding stocks.
3. Invesco High Yield Equity Dividend Achievers ETF:
The Invesco High Yield Equity Dividend Achievers ETF (NASDAQ: PEY) stands out for its combination of high yield and growing distribution. This ETF tracks the NASDAQ US Dividend Achievers 50 Index, which includes 50 stocks selected based on their dividend yield and consistency in dividend growth. With a 30-day SEC yield of 4.29%, the fund offers a reliable income stream for investors.
While the Invesco High Yield Equity Dividend Achievers ETF has delivered an average annual return of 5.83% since its inception in December 2004, its dividend payout has more than doubled over the last 10 years. Despite a slightly higher expense ratio of 0.52%, this ETF could be an attractive option for income investors seeking growing passive income.
In conclusion, high-yield dividend ETFs can be a valuable addition to an income investor’s portfolio, providing diversification and reliable income. The JPMorgan Equity Premium Income ETF, SPDR Portfolio S&P 500 High Dividend ETF, and Invesco High Yield Equity Dividend Achievers ETF are three top choices for investors looking to generate passive income. Each of these ETFs offers a unique approach to high-yield investing, making them worth considering for income-focused investors.
