Vanguard is renowned for its diverse exchange-traded funds (ETF) lineup, each tailored to different investment objectives and risk profiles.
Focusing on ETFs that prioritise dividends can be particularly appealing for passive income seekers. Investing in Vanguard ASX ETFs can be a practical way to generate passive income through distributions while enjoying the diversification benefit.
Let's explore the current distribution yields of popular ETFs and other relevant factors.
7 ASX ETFs with above 3% distribution yields
Investors should check the latest dividend yield data to determine which Vanguard ASX ETF currently yields the highest passive income. This information is regularly updated and can be found on Vanguard's official site or through your brokerage platform.
The Vanguard Australian Shares High Yield ETF (ASX: VHY) truly lives up to its name by offering the highest yield of 5.86%. As my colleague Tristan highlighted, the VHY ETF also achieves diversification by capping the proportion to any one industry to 40% of the ETF.
Investors may also want to consider other Vanguard ASX ETFs that offer yields higher than 3%. Here's a list of ETFs that could be excellent options for generating passive income.
| Name | Yield | Fees |
| Vanguard Australian Shares High Yield ETF (ASX: VHY) | 5.86% | 0.25% |
| Vanguard MSCI Australian Large Companies Index ETF (ASX: VLC) | 3.82% | 0.20% |
| Vanguard Australian Shares ETF (ASX: VAS) | 3.60% | 0.07% |
| Vanguard Diversified High Growth Index ETF (ASX: VDHG) | 3.49% | 0.27% |
| Vanguard MSCI Index International Shares ETF (ASX: VGS) | 3.53% | 0.18% |
| Vanguard Ethically Conscious Australian Shares ETF (ASX: VETH) | 3.26% | 0.16% |
| Vanguard Australian Corporate Fixed Interest Index ETF (ASX: VACF) | 3.07% | 0.20% |
These ETFs can offer exposure to specific investment sectors or regions without sacrificing income flow.
Other considerations
When choosing an ETF based on yield, it's essential to consider other factors such as risk tolerance, expense ratios, and diversification.
Evaluating your risk tolerance involves understanding whether the ETF's risk profile aligns with your investment goals. For example, ETFs focused on high-growth companies or international shares may have higher volatility, which may or may not suit your financial objectives.
Expense ratios are another critical consideration. Comparing the expense ratios of different ETFs is important, as lower expenses can contribute to higher net returns. In the table above, I have provided this information under the 'fees' column for easy comparison.
Diversification is also key when selecting an ETF. Ensure that the ETF aligns with your overall portfolio diversification strategy. A well-diversified ETF can help mitigate risk and provide more stable returns over time, enhancing your passive income potential.
