Dividend investing has fundamentally changed for ASX investors.
We can no longer blindly rely on the ASX 200 banks and miners to line our pockets with generous payouts.
Cameron Gleeson from Betashares says this is why Australian dividend investors are turning to high-yield ASX ETFs.
Here are three ASX ETFs tailored for dividend investing.
Keen on dividend investing? Here are 3 ASX ETF options
Vanguard Australian Shares High Yield ETF (ASX: VHY)
VHY is the largest ASX ETF for dividend investing on the market. It pays dividends quarterly.
This ETF aims to track the FTSE Australia High Dividend Yield Index before fees.
This entails investments in 75 companies, 73% of which are large caps, with real estate investment trusts (REITs) excluded.
VHY ETF's top holdings are currently BHP Group Ltd (ASX: BHP) shares at 10%, Commonwealth Bank of Australia (ASX: CBA) 9%, National Australia Bank Ltd (ASX: NAB) 7%, Westpac Banking Corp (ASX: WBC) 7%, and ANZ Group Holdings Ltd (ASX: ANZ) at 6%.
Since inception in May 2011, VHY ETF has delivered an average annual net total return of 9.69%.
The annual management fee is 0.25%.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
Betashares launched this dividend-investing-focused ETF in August. It pays dividends monthly.
The HYLD ETF seeks to track the returns of the S&P/ASX 200 High Yield Select Index before fees.
This involves 50 companies. HYLD ETF's top holdings are currently Westpac shares at 11%, ANZ at 11%, NAB at 10%, BHP at 10%, and Wesfarmers Ltd (ASX: WES) at 5%.
Betashares explains HYLD's unique offering:
HYLD seeks 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.
A dividend trap is a share with an unsustainably high dividend yield. It usually occurs because the share price has declined.
Obviously, there is no long-term performance data on HLYD ETF because it's only been trading on the ASX for a few months.
But the index that it tracks (S&P/ASX 200 High Yield Select Index) has delivered an average annual total return of 12.64% over five years.
The management fee is 0.25% per year.
Australian Top 20 Equities Yield Maximiser Complex ETF (ASX: YMAX)
The YMAX ETF pays dividends quarterly while also trying to generate reasonable capital growth.
YMAX doesn't track an index. Instead, it invests in the top 20 ASX shares and sells covered call options on up to 100% of its shares to generate additional income from the option premiums.
YMAX's largest holdings are CBA shares 18%, BHP 13%, NAB 8%, Westpac 8%, and ANZ 7%.
Since inception in November 2012, YMAX ETF has delivered an average annual net total return of 6.52%.
The management fee and expenses are 0.64% of the ETF's net asset value (NAV) per annum.
