Many income-seeking investors may be focused on individual ASX dividend shares. ASX-listed exchange-traded funds (ETFs) could be a useful addition to a portfolio.
An ETF's dividend yield is dictated by the payments from their underlying holdings. If the businesses inside the ETF collectively have good dividend yields, then the ETF's yield should also be appealing too.
There aren't many ASX ETFs paying dividend yields above 5%, but below are four that do have relatively high yields.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The concept of this fund is that it provides low-cost exposure to companies on the ASX with higher forecast dividend yields than other ASX shares.
Diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% in any one company.
It has a total of 71 holdings, with significant positions in companies like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES) and Westpac Banking Corp (ASX: WBC). It gives a lot of exposure to the ASX's blue-chip shares.
According to the latest Vanguard monthly update, the VHY ETF has an annual management fee of 0.25% and a grossed-up dividend yield of 6.5%.
Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX)
This fund owns 20 of the largest ASX blue-chip shares, providing quarterly income to investors. It also employs a 'covered call' strategy to enhance dividend income and "partly offset potential losses in falling markets" according to Betashares.
Four companies in the YMAX ETF portfolio have a weighting of at least 7%: BHP (15.4%), CBA (13.6%), CSL Ltd (ASX: CSL) (9.5%), and NAB (7.4%).
This fund has a higher management fee of 0.76% than the VHY ETF, though it also has an even higher grossed-up dividend yield of 9.8%.
Betashares Martin Currie Equity Income Fund (ASX: EINC)
This ASX ETF invests in an actively managed portfolio focused on ASX shares with good income attributes. It aims to provide a stronger dividend yield than the S&P/ASX 200 Index (ASX: XJO) and grow income faster than the rate of inflation.
The fund, managed by Martin Currie, selects "quality Australian companies paying attractive income, and with the potential for long-term income growth."
It currently has names like APA Group (ASX: APA), Medibank Private Ltd (ASX: MPL), Telstra Group Ltd (ASX: TLS) and Atlas Arteria Group (ASX: ALX) in the portfolio.
Australian Bank Senior Floating Rate Bond ETF (ASX: QPON)
This ASX ETF invests in a portfolio of some of the largest and most liquid senior floating rate bonds issued by ASX bank shares. In other words, it invests in some of the safest bonds Aussie banks have issued, with their yield linked to interest rates.
If the RBA interest rate increases, the income yield rises. However, if the RBA interest rate falls, so does the income payment.
The income is paid monthly and, according to Betashares, is "expected to exceed the income paid on cash and short-dated term deposits."
The biggest eight bond positions all have a weighting of more than 8%, and those large positions are bonds from ANZ, Westpac, NAB and CBA.
According to BetaShares, the current 'all-in' yield is 5.1%. This ETF has an annual management fee of 0.22%.
