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2 exotic ETFs to buy for dividend income

Exchange traded funds (ETFs) are not really thought of as the most effective way to procure income from shares – that honour has traditionally gone to individual shares like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).

However, I think that these days, ETFs can be an income investor’s best friend. Having high-yield as well as high diversification all in one share is a more risk-averse strategy of chasing good returns, in my view.

So here are 2 exotic ASX ETFs that I think any income investor should at least consider for their portfolio today.

SPDR S&P/ASX 200 Listed Property Fund (ASX: SLF)

This ETF follows the S&P/ASX 200 A-REIT Index (ASX: XPJ), which in turn tracks the biggest REITs (Real Estate Investment Trusts) on the market. REITs are companies that primarily own land and property assets, and pass on their rental incomes as dividends to their owners. This naturally makes REITs very desirable investments to own if you’re an income-focused investor.

SLF tracks 20 ASX REITs, which include big names like Goodman Group (ASX: GMG), Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP). It offers a tailing yield of 4.61% on current prices, which I think makes it a great option to consider, especially if your dividend portfolio is currently heavy on the big banks.

iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD)

The name really says it all on this one. IHD tracks a list of approximately 50 ASX dividend-paying companies that “offer high dividend yields while meeting diversification, stability and tradability requirements”, according to iShares.

Amongst these 50 stocks, we have Wesfarmers Ltd (ASX: WES), Woodside Petroleum Ltd (ASX: WPL), AGL Energy Ltd (ASX: AGL) and Commonwealth Bank, so I think this ETF covers most bases on the diversification front. This ETF is basically an ‘all-stars’ team of the best dividend stocks, so it might be a good option for a core/backbone stock for your portfolio. IHD currently has a trailing yield of 6.45% on current prices.

Foolish takeaway

I think these 2 ETFs would play a lucrative role in any income-focused portfolio. Having a wide range of different assets is always a good way to go, and it’s my belief that these 2 ETFs are an easy way to achieve this.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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