ASX ETFs give investors diversification in just one trade. Some funds are designed to track the performance of a specific sector, theme, or index.
This can range from international indexes like the S&P 500 Index (SP: .INX), to niche themes like ESG or Artificial Intelligence.
However, some funds are designed to bring investors market-beating dividend yields.
Investors may choose these funds to focus on generating passive income rather than capital gain.
So, let's compare three that share this objective.
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Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
This is one of the newest ASX ETFs on the market, listing less than one month ago. Looking at the basics, it is made up of 50 holdings with a management fee of 0.25% per annum.
According to Betashares, the theory behind the fund is to improve on traditional high-dividend strategies by aiming to screen out potential 'dividend traps' such as companies projected to pay unsustainably high dividend yields, as well as companies that exhibit high levels of volatility relative to their forecast dividend payout.
Its four largest holdings by percentage are:
- Westpac Banking Corp (ASX: WBC) 10.9%
- National Australia Bank Ltd (ASX: NAB) 10.3%
- ANZ Group Holdings Ltd (ASX: ANZ) 10.2%
- BHP Group Ltd (ASX: BHP) 9.7%
According to the fund, it currently trades on a 12-month trailing dividend yield of 4.5%. Investors are paid dividends monthly.
Therefore, after fees, a $10,000 investment generates approximately $425 in yearly passive income.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
This ASX ETF is made up of 75 holdings, and it comes with a management fee of 0.25% per annum.
The index has risen approximately 46% over the past five years, bringing solid growth alongside consistent yields.
The theory behind this fund is to invest in ASX stocks that have higher forecast dividends relative to other ASX-listed companies. 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.
Additionally, Australian Real Estate Investment Trusts (REITS) are excluded from the index.
Its largest holdings by weight are:
- BHP Group Ltd (ASX: BHP) 9.8%
- Commonwealth Bank of Australia (ASX: CBA) 9.6%
- National Australia Bank Ltd (ASX: NAB) 6.7%
- Westpac Banking Corp (ASX: WBC) 6.5%
Its current equity yield is 4.7%, paid quarterly. Therefore, an investor would be paid approximately $445 per year after fees from a $10,000 investment.
Russell Investments High Dividend Australian Shares ETF (ASX: RDV)
This fund is made up of 50 holdings. Additionally, it has a management cost of 0.34% per annum.
The theory behind this fund is choosing Australian blue-chip companies with a bias towards those that have a high expected dividend yield but also meet other characteristics, including: a history of paying dividends; dividend growth, and consistent earnings.
Notably, it has risen 46.23% in the last 5 years.
Its four largest holdings by percentage are:
- Commonwealth Bank of Australia (ASX: CBA) 8.2%
- BHP Group Ltd (ASX: BHP) 5.3%
- National Australia Bank Ltd (ASX: NAB) 5.2%
- Westpac Banking Corp (ASX: WBC) 5%
Based on an announcement in June, it has a yield (with franking) of 4.05% per annum.
Therefore, a hypothetical $10,000 investment in RDV would receive about $371 per year on a grossed-up basis after fees.
