Income investors are spoilt for choice on the Australian share market.
As well as having a plethora of ASX dividend shares to choose from, there are also plenty of exchange traded funds (ETFs) out there that could be suitable for income investors.
Especially those that don't enjoy picking stocks and would rather buy a collection of dividend-paying stocks in one fell swoop. Let's look at three top options for passive income:
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Vanguard Australian Shares High Yield ETF (ASX: VHY)
The first ASX ETF that could be a top option for income investors is the Vanguard Australian Shares High Yield ETF. It gives investors access to a group of 66 ASX dividend shares that brokers are forecasting to provide larger than average dividend yields.
But don't worry, this doesn't mean that you will be buying just banks and miners. The fund restricts how much it invests in any one company or industry for diversification purposes.
At present, you will find companies such as ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Telstra Group Ltd (ASX: TLS), and Wesfarmers Ltd (ASX: WES) included in the fund.
The Vanguard Australian Shares High Yield ETF currently trades with a trailing dividend yield of 4.8%.
Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX)
Another ASX ETF that could be a great option for income investors is the Betashares Australian Top 20 Equity Yield Maximiser Fund. This fund aims to generate attractive quarterly income and reduce the volatility of portfolio returns.
This is through a covered call strategy over a portfolio of the 20 largest blue-chip shares listed on the Australian share market.
The team at Betashares recently recommended the ETF as a top option to counter falling dividend yields, noting that the covered call strategy "performs well in a neutral or gradually rising market."
At present, the Betashares Australian Top 20 Equity Yield Maximiser Fund trades with a trailing 12-month dividend yield of 7.6%.
Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ)
A final ASX ETF that could be a top option for income investors (and is being recommended by BetaShares) is the FTSE RAFI Australia 200 ETF.
It uses a fundamental indexing strategy which is designed to screen for stocks based on their merits rather than market capitalisation. Instead of size, the ETF screens ASX companies using sales, cash flow, dividends, and book value. It then ranks and invests in companies accordingly.
This leaves investors holding stocks that have healthier balance sheets, which have a greater capacity to pay dividends.
The Betashares FTSE RAFI Australia 200 ETF currently has a trailing dividend yield of 4.7%.
