Buy these ASX ETFs for passive income in 2025

These ETFs could be used to generate passive income next year.

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You don't just have to buy individual ASX dividend shares to generate passive income from the Australian share market.

That's because there are exchange-traded funds (ETFs) out there that offer income investors the ability to buy large groups of dividend shares with a single click of the button. This can make building a passive income portfolio much easier.

But which ASX income ETFs could be good options for investors in 2025? Let's take a look at three:

a man wearing casual clothes fans a selection of Australian banknotes over his chin with an excited, widemouthed expression on his face.

Image source: Getty Images

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The first ASX income ETF that could be a top option for investors is the Vanguard Australian Shares High Yield ETF.

Vanguard notes that this fund seeks to track the return of the FTSE Australia High Dividend Yield Index before taking into account fees, expenses and tax. It provides low-cost exposure to ASX shares that have higher forecast dividends relative to other ASX-listed companies.

The fund manager notes that security diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. This means it is less exposed to the performance fluctuations of individual securities.

At present, the ETF has 65 holdings. This includes companies such as ANZ Group Holdings Ltd (ASX: ANZ), BHP Group Ltd ASX: BHP), National Australia Bank Ltd (ASX: NAB), Telstra Group Ltd (ASX: TLS), and Wesfarmers Ltd (ASX: WES).

The Vanguard Australian Shares High Yield ETF has a trailing dividend yield of 5%.

Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ)

A second ASX income ETF for investors to consider for 2025 is the FTSE RAFI Australia 200 ETF.

BetaShares recently named this ETF as one to buy to counter falling dividend yields. The fund manager highlights that it uses a fundamental indexing strategy which is designed to screen for stocks based on their merits rather than market capitalisation.

It screens for sales, cash flow, dividends, and book value, then ranks and invests in these companies accordingly. This means that investors are left holding a group of stocks with healthier balance sheets and a greater capacity to pay dividends.

The Betashares FTSE RAFI Australia 200 ETF currently trades with a trailing dividend yield of 4.6%.

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

A third and final ASX income ETF to look at for next year is the BetaShares S&P 500 Yield Maximiser.

This fund gives investors access to the top 500 companies listed on Wall Street. This includes many of the largest companies in the world such as Apple (NASDAQ: AAPL), Exxon Mobil (NYSE: XOM), and Walmart (NYSE: WMT).

BetaShares points out that UMAX aims to generate attractive quarterly income and reduce the volatility of portfolio returns by implementing an equity income investment strategy. This strategy means it has been able to provide investors with significantly better dividend yields than you would get by just investing in the 500 companies individually.

For example, its units currently trade with a trailing 4.5% distribution yield.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Walmart, and Wesfarmers. The Motley Fool Australia has positions in and has recommended BetaShares S&P 500 Yield Maximiser Fund and Telstra Group. The Motley Fool Australia has recommended Apple, Vanguard Australian Shares High Yield ETF, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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