Investing in exchange-traded funds (ETFs) can be a lucrative way to generate passive income. Many ETFs are designed to hold income-generating assets like dividend-paying stocks or bonds, making them an attractive option for investors looking to build a steady income stream without the need for active management. In this article, we will explore three ETFs that provide above-average income streams for investors.
The first ETF on our list is the Schwab U.S. Dividend Equity ETF (SCHD). This passively managed fund aims to track the Dow Jones U.S. Dividend 100 Index, which consists of 100 high-yielding dividend stocks with a track record of consistent dividend payments. Some of the fund’s top holdings include Texas Instruments, Bristol-Meyers Squibb, Lockheed Martin, PepsiCo, and Verizon. These companies offer strong financial metrics and attractive dividend yields, making them ideal for income-focused investors.
The Schwab U.S. Dividend Equity ETF boasts a high dividend yield, with a 3.8% yield over the last 30 days and a 3.3% yield over the last 12 months. This is significantly higher than the S&P 500’s 1.4% dividend yield, making it a compelling option for investors seeking above-average income. Additionally, the fund charges a low expense ratio of 0.06%, allowing investors to keep more of the dividend income generated by the fund’s holdings.
Next up is the SPDR Portfolio High Yield Bond ETF, which provides investors with exposure to high-yield debt, also known as junk bonds. While junk bonds carry higher default risk than investment-grade bonds, they offer higher yields, making them attractive for income-seeking investors. This ETF tracks the ICE BofA US High Yield Index and holds over 1,900 bonds, providing diversified exposure to the high-yield bond market.
The SPDR Portfolio High Yield Bond ETF offers a monthly distribution of income to investors, with an annualized yield of 8% on its last distribution payment and a 7.7% yield over the past year. The fund also charges a low expense ratio of 0.05%, enabling investors to retain more of the income generated by the bonds in the portfolio.
Lastly, the JPMorgan Nasdaq Equity Premium Income ETF is an actively managed fund that aims to provide investors with monthly income while offering exposure to the Nasdaq-100 Index with less volatility. The fund utilizes a dual strategy, holding an underlying equity portfolio selected based on data science and fundamental research, and implementing a disciplined options overlay strategy by writing out-of-the-money call options on the Nasdaq-100 Index to generate options premium income.
The JPMorgan Nasdaq Equity Premium Income ETF has delivered a 9.2% annualized yield over the past month and a 10.8% yield over the past year. With a competitive expense ratio of 0.35%, investors can benefit from a significant income stream while keeping costs low.
In conclusion, ETFs like the Schwab U.S. Dividend Equity ETF, SPDR Portfolio High Yield Bond ETF, and JPMorgan Nasdaq Equity Premium Income ETF offer investors excellent opportunities to generate passive income. With high dividend yields, diversified holdings, and low expense ratios, these ETFs are ideal for investors looking to start building new income streams this month.
