Investors buy ASX exchange-traded funds (ETFs) for a range of different reasons. Some like the easy diversification that ETFs can provide. Others like their passive, hands-off nature. But most investors who buy ETFs probably don't do so for the purposes of maximising their dividend income.
After all, the ASX is home to so many individual shares that are famous for paying out fat, fully franked dividends that investors often don't look any further. Why experiment when you can just own BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), or Telstra Group Ltd (ASX: TLS)?
Well, to answer that rhetorical question, the dividend yields from these famous income payers are currently at the lowest levels investors have seen for many years. Just take CBA. It would have been unthinkable even a few years ago, for CBA to trade at well under a 3% dividend yield. Yet here we are at 2.74% today.
Considering this, it might be a good opportunity to turn to ASX ETFs if you are seeking to up your passive income stream from ASX shares.
Two ASX ETFs to buy for easy dividend income today
If I were in this boat, there would be two ASX ETFs that I would consider buying today for a diversified dividend income boost.
First up is the Vanguard MSCI Index Australian Small Companies Index ETF (ASX: VSO). This index fund holds around 170 ASX shares that lie outside the largest 100 stocks on our market. Instead of BHP and CBA, VSO holds stocks like JB Hi-Fi Ltd (ASX: JBH) and Seek Ltd (ASX: SEK) as its most significant investments.
As an index fund, this ETF's dividend distribution payments tend to fluctuate quite a lot from year to year. But even so, investors often get showered with income. As a case in point, VSO investors have enjoyed a total of $5.37 per unit in dividend distributions over the past 12 months. That works out to be a trailing yield of over 7.7%.
Again, investors shouldn't expect that every year. But even so, this index fund could be worth a look for income seekers today.
Another ASX ETF worth checking out is the Vanguard Australian Shares High Yield ETF (ASX: VHY).
This fund holds around 75 individual ASX stocks, all selected based on their dividend history and potential. These stocks include the usual suspects listed above, as well as names like Macquarie Group Ltd (ASX: MQG), Transurban Group (ASX: TCL), and Woodside Energy Group Ltd (ASX: WDS).
As you might expect, this ASX ETF has the ability to pass on some of the best dividends the ASX has to offer. Its last four quarterly dividend distributions came to a total of $6.51 per unit, giving VHY a trailing yield of 8.68% at current pricing. Again, investors shouldn't expect that kind of windfall every year. But there is a lot of income potential here nonetheless.
