While exchange-traded funds (ETFs) are well-known for giving investors exposure to Wall Street's tech giants, they can also be used for passive income.
That's because there are a number of ETFs that have been set up to give investors exposure to a large collection of dividend shares.
This makes them an easy option for passive income investors who are not keen on stock picking and want a diverse portfolio.
Two passive income ASX ETFs that could be worth considering are listed below. Let's have a look at them.
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Passive income ASX ETFs to buy
The first ETF to look at is the BetaShares S&P 500 Yield Maximiser (ASX: UMAX).
It gives investors access to the top 500 companies listed on Wall Street but with a covered call strategy.
This means the actively managed fund is expected to earn quarterly income that is significantly greater than the dividend yield of the underlying share portfolio over the medium term.
For example, at present this passive income ASX ETF offers a 12-month distribution yield of 5.9%.
This means that if you had invested $250,000 into this ETF last year, you would have received $14,750 in passive income.
Another ASX ETF for income investors to look at is the Vanguard Australian Shares High Yield ETF (ASX: VHY).
This is a more conventional ETF, which provides investors with low-cost exposure to a diverse group of 70+ ASX shares that have higher forecast dividend yields relative to the market average.
But don't worry, you won't just end up owning banks and miners. There are rules in place to restrict the proportion invested in any one industry to 40% and 10% for any one company.
Among its holdings at present are giants such as BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA), and smaller companies such as Lottery Corporation Ltd (ASX: TLC) and Super Retail Group Ltd (ASX: SUL).
This passive income ASX ETF currently trades with a trailing yield of 5.6%. This means that a $250,000 investment would have yielded $14,000 in income.
