3 High-Yield Dividend ETFs to Buy to Generate Passive Income

The Federal Reserve appears pleased with the progress it is making in the fight against inflation. In fact, the central bank is expected to cut interest rates further after cutting short-term interest rates by 0.5% at its meeting last month.

For income-oriented investors, this means lower returns on future bond purchases and savings accounts. However, you can find exchange-traded funds (ETFs) that focus on investing in stocks that pay high dividend yields.

Here are three options for those seeking high returns from stock ETFs:

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1. iShares Core High Dividend ETF

that iShares Core High Dividend ETF (HDV -0.46%) Consists of “high quality” U.S. dividend stocks. The ETF invests in 75 companies with strong financial characteristics. In other words, it is a company with financial soundness that can withstand adverse situations such as an economic downturn.

The ETF has the largest exposure to the energy sector, at about 27%. These stocks can have highly volatile results depending on oil and natural gas prices, but they are followed by Healthcare at 18.3%, Consumer Staples at 18.2%, and Utilities at 11.2%. These three sectors tend to show stable results regardless of economic conditions.

With only 75 holdings, certain individual stocks make up a large portion of the fund. This means it could have a disproportionate impact on ETFs and their returns. ExxonMobilWith a proportion of 10.3%, it is the largest among individual stock holdings. The second largest company is another energy company. chevronThe proportion is 6.6%. two healthcare companies; Johnson & Johnson and AbbVieThis leads to weightings of 6.4% and 6% respectively.

The iShares Core High Dividend ETF tracks: Morningstar Dividend Yield Concentration Index. Because it is a passive investment, the operating ratio is low at 0.08%. The ETF’s 30-day return after expenses was 3.6%. In contrast, SPDR S&P 500 ETF Trust Based on this, you get a return of 1.2%.

2. Invesco S&P SmallCap High Dividend Low Volatility ETF

While investors often consider small-cap stocks to be more volatile and have lower dividends than large-cap stocks, there are ETFs that seek to minimize risk and maximize dividends. that Invesco S&P SmallCap High Dividend Low Volatility ETF (XSHD -0.40%) Invest more than 90% of your funds in stocks. S&P SmallCap 600 Low Volatility High Dividend Index. The basic index consists of 60 stocks. S&P SmallCap 600 Index It is a stock with a higher dividend yield and lower volatility than the entire small-cap index last year.

There are 58 stocks in the portfolio. Nearly a quarter of its assets are invested in the financial sector. Consumer staples, utilities, and real estate followed at 13.2%, 13.1%, and 12.6%. The four sectors combined account for 63.6% of assets.

The Invesco S&P SmallCap High Dividend Low Volatility ETF has returned a generous 6.5% over the past 30 days. The ETF’s expense ratio is 0.3%.

3. iShares International Select Dividend ETF

Investors looking to invest in stocks outside the U.S. will find the following: iShares International Select Dividend ETF (IDV -0.71%) It fits the bill. ETFs invest in large companies in developed markets.

The 99 stocks include companies such as: British American Tobacco, total energyand Vodafone Group. The ETF has the largest exposure to the financial sector (31.4%), followed by utilities (16.7%) and telecommunications (11.7%).

The iShares International Select Dividend ETF tracks: Dow Jones EPAC Select Dividend Indexowns high-dividend stocks in Europe, the Pacific, Asia and Canada. The iShares ETF has a relatively high expense ratio of 0.49%. However, if this amount is subtracted, the dividend yield is 5.9%.