Generating a reliable passive income from the stock market doesn't have to be complicated.
Instead of trying to pick individual shares and time the market, investors can turn to exchange-traded funds (ETFs). These funds can provide instant diversification and easy exposure to groups of high-quality dividend-paying companies.
For those looking to earn passive income from their ASX investments, here are three ASX ETFs that could be worth considering this month.
Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX)
The Betashares Australian Top 20 Equity Yield Maximiser Fund is designed specifically for income investors seeking higher distributions.
This ASX ETF follows an equity income investment strategy, holding a portfolio of the 20 largest blue-chip stocks on the ASX. To enhance income, it employs a covered call strategy, which generates additional cash flow beyond just dividend payments.
The team at Betashares recently recommended the ETF as a top option to counter falling dividend yields. The fund manager notes that the 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."
With a trailing 12-month dividend yield of 7%, YMAX could be a great option for those seeking a high level of passive income.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
For a diversified approach to high-yield ASX shares, the Vanguard Australian Shares High Yield ETF is another top option. This ASX ETF is built using broker research to select approximately 70 ASX-listed companies with above-average dividend yields.
Importantly, the fund is not overly concentrated in just banks and mining stocks. Instead, it takes a more balanced approach, investing in a broad range of industries. Among its top holdings are blue-chip shares such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Telstra Group Ltd (ASX: TLS), Transurban Group (ASX: TCL), and Wesfarmers Ltd (ASX: WES).
At present, the ETF offers a dividend yield of 5.15%.
BetaShares S&P 500 Yield Maximiser (ASX: UMAX)
Finally, for income investors wanting to diversify their income streams beyond the ASX, the BetaShares S&P 500 Yield Maximiser ETF provides an interesting opportunity.
This ASX ETF follows a similar income-focused strategy to YMAX but applies it to the US market. It holds positions in the top 500 US-listed companies, including global giants such as Apple, Microsoft, and Walmart.
By incorporating a covered call strategy, UMAX seeks to maximise income from these holdings.
At present, the ETF offers a 12-month trailing distribution yield of 4.1%. This could make it an attractive option for those looking to tap into Wall Street's dividend potential while maintaining a strong income focus.
