For income-focused investors, exchange-traded funds (ETFs) can offer an attractive combination of diversification, simplicity, and dependable distributions.
If your goal is to generate a consistent passive income stream, there are a number of ASX ETFs worth considering. Let's take a closer look at three top picks for income investors. They are as follows:
Betashares Global Royalties ETF (ASX: ROYL)
Royalties may not be the first thing that comes to mind when thinking about income investing, but that's exactly what makes this fund from Betashares stand out. The Betashares Global Royalties ETF offers exposure to global companies that earn a substantial portion of their revenue from royalties, royalty-related income, and intellectual property rights.
These businesses span multiple sectors, including mining, energy, music, pharmaceuticals, and technology. By owning royalty streams instead of running operations, they usually generate high gross margins and steady cash flows.
Importantly for income investors, this ASX ETF delivers monthly distributions. As a result, for those seeking a defensive, diversified income stream with low correlation to traditional equity markets, Betashares Global Royalties ETF presents a unique and innovative solution. It currently trades with a 3% dividend yield and was recently tipped as one to buy by the team at Betashares.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
If you prefer to a more traditional option, then the Vanguard Australian Shares High Yield ETF could be the one. This ASX ETF tracks an index of locally-listed shares that are forecast to deliver above-average dividends. Its portfolio spans sectors such as banking, resources, and consumer staples.
The Vanguard Australian Shares High Yield ETF maintains diversification rules to avoid overexposure to individual sectors or companies and does not include A-REITs (real estate investment trusts).
As of now, it offers a healthy trailing dividend yield of approximately 5%, making it particularly appealing for retirees or anyone seeking quarterly income distributions from well-established Australian shares.
Betashares Australian Cash Plus Fund (ASX: MMKT)
While the above ASX ETFs rely on equities, the Betashares Australian Cash Plus Fund provides income from the defensive end of a portfolio.
Designed for those seeking a yield premium over standard bank deposits, the Betashares Australian Cash Plus Fund invests in a range of high-quality money market instruments, including bank deposits, government securities, and other institutional-grade short-term debt.
The fund currently offers a trailing dividend yield of 4.4% and pays distributions monthly. It could be especially useful for conservative investors or those looking to park funds while still earning a competitive return without equity market risk. It was recently named by Betashares as an ASX ETF to buy to overcome falling interest rates.
