As well as providing investors with access to sectors and indices, exchange traded funds (ETFs) can be used by investors seeking a source of income.
For example, the two ETFs listed below provide investors with exposure to large groups of dividend-paying shares through a single investment. Here's why income investors might want to check them out:
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BetaShares S&P 500 Yield Maximiser (ASX: UMAX)
The BetaShares S&P 500 Yield Maximiser is a very interesting ETF. It aims to provide investors with quarterly dividend income that is significantly greater than what you would ordinarily receive by investing in Wall Street's S&P 500 index.
This is because it uses a clever equity income investment strategy over a portfolio of shares comprising the S&P 500 Index to maximise the yield. Hence its name.
Among its holdings are the largest companies listed on Wall Street. This includes dividend-payers such as Apple, Bank of America, Exxon Mobil, and Walmart.
At present, the BetaShares S&P 500 Yield Maximiser's units provide investors with a 7.6% distribution yield.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF is far simpler.
This ETF uses broker research to find the ASX shares that are forecast to provide the biggest dividend yields over the next 12 months. It then buys these shares for investors and brings them together into the ETF.
It is worth noting that it excludes Australian Real Estate Investment Trusts (A-REITS) and maintains a diverse portfolio. This means you're not just buying an ETF filled with banks or coal miners. It restricts the proportion invested in any one industry to 40% and 10% for any single company.
At present, there are 73 ASX shares included in the portfolio. This includes giants such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Corporation Ltd (ASX: TLS).
The Vanguard Australian Shares High Yield ETF currently trades with an estimated forward dividend yield of 5.4%.
