Exchange-traded funds (ETFs) don't just provide investors with access to growth stocks or indices. They can also be used to generate income.
For example, listed below are two ASX ETFs that provide investors with access to groups of dividend shares.
Here's why they could be top options for income investors in the new financial year:
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Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX)
The first ASX ETF for income investors to look in FY 2025 is the Betashares Australian Top 20 Equity Yield Maximiser Fund.
It aims to generate attractive quarterly income and reduce the volatility of portfolio returns by implementing an equity income investment strategy over a portfolio of the 20 largest blue-chip shares listed on the Australian share market. It does this using something called a covered call strategy.
The fund manager recently recommended the ETF as an option to counter falling dividend yields. It said:
YMAX is an investment option for those seeking quarterly distributions and reduced portfolio volatility. […] Betashares' range of Yield Maximiser funds use a covered call strategy to offer additional income over and above dividends generated by the portfolio. This approach takes a two-pronged strategy: earning dividends from the underlying stocks and generating income from writing call options on those shares. A covered call strategy performs well in a neutral or gradually rising market, allowing call options to generate income without stocks being called away too often, as has been seen in recent months.
It currently trades with a trailing 12-month dividend yield of 7.8%.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
Another ASX ETF for income investors to look at in FY 2025 is the Vanguard Australian Shares High Yield ETF.
This ETF doesn't use a covered call strategy. It just focuses on loading up with ASX dividend shares that brokers are forecasting to provide big dividend yields.
But this doesn't just mean you buy banks and miner. The fund is designed to provide investors with a diverse group of approximately 70 shares and limits how much it invests in any particular industry or company.
At present, you will find companies such as BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), Commonwealth Bank of Australia (ASX: CBA), and Transurban Group (ASX: TCL) among its holdings.
The Vanguard Australian Shares High Yield ETF currently trades with a trailing dividend yield of 5%.
