ETFs are very passive investments.
Exchange-traded funds (ETFs) make it super easy to be a passive investor. They offer instant, built-in diversification, meaning you don't need to actively construct and manage a portfolio.
These characteristics make ETFs ideal for those seeking to generate passive income. Two great dividend ETFs for passive income are JPMorgan Nasdaq Equity Premium Income ETF (JEPQ 0.41%) and Schwab U.S. Dividend Equity ETF (SCHD 0.72%). The ETFs offer high-yielding dividends, making them ideal for passive income production.
A premium income stream
JPMorgan Nasdaq Equity Premium Income ETF aims to provide investors with a monthly income stream and equity upside exposure to the Nasdaq-100 with less volatility. The ETF primarily generates income by writing out-of-the-money call options on the Nasdaq-100. Selling call options generates options premium income, which the fund distributes to investors each month.
This lucrative strategy has enabled the fund to generate a higher income yield than other asset classes:
Data source: JPMorgan.
The ETF's distribution payments vary from month to month based on the options premium income it generates, which tend to fluctuate with market volatility. The fund also earns dividend income by holding stocks in the Nasdaq-100, like Nvidia and Intel.
That stock portfolio provides investors with equity upside. The fund uses data science and fundamental research to construct a portfolio that should deliver strong returns. That approach enabled the ETF to outperform the Nasdaq-100 in the first quarter, as a higher weighting to Nvidia and a lower weighing of Intel bolstered its returns.
This actively managed fund charges a very reasonable ETF expense ratio of 0.35%. It's ideal for those who are seeking a higher income stream and are OK with payments that can vary significantly each month.
Focused on high-quality, high-yielding dividend stocks
Schwab U.S. Dividend Equity Fund tracks the Dow Jones U.S. Dividend 100 Index. That index aims to follow the performance of 100 top high-yielding dividend stocks that have consistently paid dividends and have strong financials compared to their peers. The fund collects these dividends and distributes them to investors each quarter. Its last dividend payment had an annualized dividend yield approaching 3.5%, significantly higher than the 1.3% dividend yield of an S&P 500 index fund.
While the fund holds around 100 dividend stocks, the top 10 comprised nearly 40% of its assets:
Dividend Stock | Fund Weighting | Current Yield | Dividend History |
---|
Texas Instruments | 4.1% | 2.6% | 20 consecutive annual increases |
Bristol-Myers Squibb | 4% | 5.7% | 15 consecutive annual increases |
Lockheed Martin | 4% | 2.7% | 21 consecutive annual increases |
PepsiCo | 4% | 3% | 52 consecutive annual increases |
Verizon | 4% | 6.7% | 17 consecutive annual increases |
Cisco Systems | 3.9% | 3.4% | 12 consecutive annual increases |
Chevron | 3.9% | 4.1% | 37 consecutive annual increases |
BlackRock | 3.9% | 2.6% | 15 consecutive annual increases |
Pfizer | 3.9% | 5.8% | 31 consecutive annual increases |
Amgen | 3.9% | 2.9% | 12 consecutive annual increases |
Data source: Company press releases and Koyfin.
The fund has a fairly diversified portfolio of dividend stocks. Its top holdings pay dividends with above-average yields. They also have long records of increasing their payouts.
This passively managed ETF provides access to these high-quality, high-yielding dividend stocks at a low cost (0.06% ETF expense ratio). Because of that, investors keep more of the steadily rising income this fund generates.
High-quality, high-yielding ETFs
JPMorgan Nasdaq Equity Premium Income ETF and Schwab U.S. Dividend Equity ETF are great vehicles for generating passive income. They offer higher-yielding payouts that will provide their investors with more income for every dollar they invest. That enables investors to sit back and watch the income flow into their accounts.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Matt DiLallo has positions in Bristol Myers Squibb, Chevron, Intel, J.p. Morgan Exchange-Traded Fund Trust - JPMorgan Nasdaq Equity Premium Income ETF, JPMorgan Chase, and Verizon Communications and has the following options: long January 2025 $30 calls on Intel, short January 2025 $30 puts on Intel, and short June 2024 $50 calls on Intel. The Motley Fool has positions in and recommends Bristol Myers Squibb, Chevron, JPMorgan Chase, Nvidia, Pfizer, and Texas Instruments. The Motley Fool recommends Amgen, Intel, Lockheed Martin, and Verizon Communications and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
FAQs
A high dividend yield ETF is an exchange-traded fund that focuses on investing in a portfolio of stocks or other income-generating securities with relatively above-average dividend yields. These ETFs aim to provide investors with a steady stream of income, making them popular among income-seeking investors.
What are the three stocks for passive income? ›
Here are three stocks to buy now and hold forever.
- AbbVie. AbbVie (NYSE: ABBV) is one of the biggest biopharmaceutical companies in the world with its market cap hovering around $345 billion. ...
- Brookfield Infrastructure. ...
- Verizon Communications.
What is the best dividend ETF? ›
7 Best High-Dividend ETFs to Buy Right Now
High-Dividend ETF | Expense Ratio | Trailing-12-Month (TTM) Dividend Yield* |
---|
Franklin Income Focus ETF (INCM) | 0.38% | 5.4% |
Invesco High Yield Equity Dividend Achievers ETF (PEY) | 0.53% | 4.7% |
Global X Alternative Income ETF (ALTY) | 0.50% | 7.0% |
Virtus Private Credit ETF (VPC) | 9.72% | 10.3% |
3 more rowsSep 6, 2024
What are the best dividend stocks to buy? ›
3 Best Dividend Stocks, According to Analysts, 9/12/2024
How do high yield dividend ETFs work? ›
A high dividend yield ETF is an exchange-traded fund that focuses on investing in a portfolio of stocks or other income-generating securities with relatively above-average dividend yields. These ETFs aim to provide investors with a steady stream of income, making them popular among income-seeking investors.
How can I make $1000 a month in passive income? ›
Passive Income: 7 Ways To Make an Extra $1,000 a Month
- Buy US Treasuries. U.S. Treasuries are still paying attractive yields on short-term investments. ...
- Rent Out Your Yard. ...
- Rent Out Your Car. ...
- Rental Real Estate. ...
- Publish an E-Book. ...
- Become an Affiliate. ...
- Sell an Online Course. ...
- Bottom Line.
How to make $100 000 a year in passive income? ›
When thinking about how to invest 100k for passive income, again, REITs are the answer. For example, some REITs pay dividend yields of 5% or more. Some REITs also pay monthly dividends, such as Realty Income Corp., which would generate a monthly income of between $350 and $400.
Which ETF gives the highest return? ›
List of 15 Best ETFs in India
- Nippon India ETF PSU Bank BeES. 207.43%
- Kotak Nifty PSU Bank ETF. 207.20%
- BHARAT 22 ETF. 189.75%
- ICICI Prudential Nifty Midcap 150 Etf. 101.04%
- Mirae Asset NYSE FANG+ ETF. 73.81%
- HDFC Nifty50 Value 20 ETF. 71.93%
- Nippon India ETF Nifty 50 BeES. 54.33%
- Invesco India Gold ETF. 50.43%
What is the highest dividend ETF in the last 10 years? ›
Top 10 ETFs by 10-year Performance
Ticker | Fund | 10-Yr Return |
---|
XSD | SPDR S&P Semiconductor ETF | 21.66% |
IYW | iShares U.S. Technology ETF | 20.56% |
XLK | Technology Select Sector SPDR Fund | 20.48% |
VGT | Vanguard Information Technology ETF | 20.46% |
6 more rows
What is the gold standard for dividend ETF? ›
SCHD is the gold standard of dividend exchange-traded funds. SCHD offers an opportunity to invest outside of the most concentrated sectors of large equity indices at a low cost. In fact, SCHD could be an opportunity to diversify your core holdings of equity funds as major indices become more and more concentrated.
10 Best Dividend Stocks to Buy
- Verizon Communications VZ.
- Chevron CVX.
- Comcast CMCSA.
- Medtronic MDT.
- Dow DOW.
- LyondellBasell Industries LYB.
- Devon Energy DVN.
- Hershey HSY.
What is the cheapest stock with the highest dividend? ›
Low-Priced High Dividend Stock #1: TriplePoint Venture BDC (TPVG) – Dividend Yield of 17.9% TriplePoint Venture Growth BDC Corp specializes in providing capital and guiding companies during their private growth stage, before they eventually IPO to the public markets. On May 1st, 2024, the company posted its Q1 results.
Which stock pays the highest monthly dividend? ›
Top 9 monthly dividend stocks by yield
Symbol | Company name | Forward dividend yield (annual) |
---|
EPR | EPR Properties | 7.56% |
SILA | SILA Realty Trust | 6.84% |
APLE | Apple Hospitality REIT | 6.57% |
MAIN | Main Street Capital Corp. | 5.75% |
5 more rowsAug 1, 2024
What is the best high yield dividend ETF? ›
7 high-dividend ETFs
Ticker | Company | Dividend Yield |
---|
KBWY | Invesco KBW Premium Yield Equity REIT ETF | 7.68% |
XSHD | Invesco S&P SmallCap High Dividend Low Volatility ETF | 7.16% |
DIV | Global X SuperDividend U.S. ETF | 6.14% |
SPYD | SPDR Portfolio S&P 500 High Dividend ETF | 4.07% |
3 more rowsSep 2, 2024
What are the best dividend stocks for passive income? ›
20 high-dividend stocks
Company | Dividend Yield |
---|
CVR Energy Inc (CVI) | 10.14% |
Eagle Bancorp Inc (MD) (EGBN) | 8.76% |
Insteel Industries, Inc. (IIIN) | 8.68% |
Alexander's Inc. (ALX) | 7.98% |
18 more rows
What is the downside of dividend ETF? ›
Cons. No guarantee of future dividends. Stock price declines may offset yield. Dividends are taxed in the year they are distributed to shareholders.
What is the best investment for passive income? ›
You can earn passive income by renting out property, through dividend stocks or a high-yield savings account. This is the opposite of active or earned income, which is generally defined as income received from working at a job or as a contractor.
What are the 5 best stocks to buy now? ›
Sign up for Kiplinger's Free E-Newsletters
Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
---|
UnitedHealth Group (UNH) | 1.27 | Strong Buy |
Nvidia (NVDA) | 1.30 | Strong Buy |
Microsoft (MSFT) | 1.32 | Strong Buy |
Amazon.com (AMZN) | 1.34 | Strong Buy |
15 more rows
What stocks make money fast? ›
Money Making Stocks To Invest In
- Airbnb, Inc. ( NASDAQ:ABNB)
- Novo Nordisk A/S (NYSE:NVO)
- ASML Holding N.V. (NASDAQ:ASML)
- Lockheed Martin Corporation (NYSE:LMT)
- Cisco Systems, Inc. ( NASDAQ:CSCO)
- PDD Holdings Inc. ( NASDAQ:PDD)
- The Home Depot, Inc. ( NYSE:HD)
- Booking Holdings Inc. ( NASDAQ:BKNG)