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Three Dividend ETFs Worth Considering for Passive Income

Analyst Team trader
Updated 1 Jul 2024

The amount of capital flowing in to ETFs has picked up pace in recent years, with a whole range of different assets and specialisms. US mutual funds and ETFs saw an inflow of $58 billion in in May, and the choice available is also growing. The recent launch of Bitcoin spot ETFs garnered a lot of media attention, and were followed by an influx of capital, but income investors have a different set of goals.

For investors in search of a steady stream of passive income, high dividend yield exchange-traded funds (ETFs) may offer an attractive option. ETFs combine the best features of stocks and mutual funds, allowing investors to acquire a diversified portfolio with the potential for solid dividend yields and growth.

These funds specialize in a range of sectors from preferred stocks to real estate, and even sustainable ETFs. Funds can track various indexes, and depending on your needs, provide income through dividends or share price appreciation.

Those looking to learn how to trade ETFs will find the process is not as difficult as it might seem. The learning journey is slightly different from that of direct stocks, but the process once you are settled on the right choices is broadly similar.

Among the high-yield dividend ETFs worthy of consideration, the iShares Preferred & Income Securities ETF stands out with a substantial yield of 6.33%. Over the past decade, this ETF has also delivered a 3.41% average annual return. This fund primarily focuses on preferred stocks, which are known for delivering higher income streams than common stocks.

Another option is the Schwab US Dividend Equity ETF, which boasts a yield of 3.83% and an impressive 10.69% average annual return over the last ten years. This ETF targets high-yielding US stocks, making it a solid choice for investors seeking income and long-term capital appreciation.

Real estate investments can also provide passive income, which is where the Vanguard Real Estate ETF comes into play. With a yield of 3.82% and an average annual return of 5.16% over the past ten years, this fund invests in real estate investment trusts (REITs) known for providing high dividends.

The Vanguard High Dividend Yield ETF, featuring a yield of 2.80% and an average annual return of 9.35% over the last decade, invests in companies with high dividend yields. There are various other ETFS from Vanguard that give access to a whole range of markets.

While ETFs can be a source of steady passive income, it's crucial for investors to carry out thorough research or seek professional advice before investing. We also have a more comprehensive overview on the best performing dividend ETFs that can provide more insights; including some notable UK funds, aswell as those in the US and European markets.

High-yield dividend ETFs offer an accessible way to generate passive income while diversifying an investment portfolio. By focusing on ETFs with a history of stable dividends and potential for growth, you can position yourself to benefit from both regular income and capital appreciation over the long term. However, due diligence and consideration of expert analysis are key ingredients to making informed investment decisions.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.