Building a steady income stream from ASX investments is a common goal for many Australians.
While most ASX shares and exchange traded funds (ETFs) pay dividends a couple of times a year, a small number are structured to provide income on a monthly basis.
Here are two ASX ETFs that follow this approach and could be worth considering if you're an income investor:
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Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
The first ASX ETF to consider is the Betashares S&P Australian Shares High Yield ETF.
This ETF provides exposure to a portfolio of 50 Australian shares with high forecast dividend yields. It also applies screening to reduce the risk of including companies with unsustainable payouts.
Its holdings include companies such as mining giant BHP Group Ltd (ASX: BHP) and big four banks Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).
The Betashares S&P Australian Shares High Yield ETF distributes income monthly, which sets it apart from many other Australian equity ETFs. This structure can provide a more regular cash flow for investors.
Furthermore, its broad exposure to dividend-paying ASX shares provides diversification, which is never a bad thing.
Betashares S&P 500 Yield Maximiser Complex ETF (ASX: UMAX)
Another ASX ETF to consider is the Betashares S&P 500 Yield Maximiser Complex ETF.
This ETF is very different to the Betashares S&P Australian Shares High Yield ETF. It focuses on generating income from a portfolio linked to the S&P 500 index.
However, instead of relying on dividends, it uses an options-based strategy, typically selling call options over the underlying portfolio to generate income. The premiums received from these options form a key part of the fund's monthly distributions.
This ultimately means that the income generated is expected to significantly exceed the dividend yield of the underlying share portfolio over the medium term. For example, at present, it trades with an above-average dividend yield of 6.6%. This is significantly greater than the average dividend yield of the S&P 500 index.
Its underlying exposure includes major US stocks such as iPhone maker Apple (NASDAQ: AAPL), software giant Microsoft Corporation (NASDAQ: MSFT), and ecommerce and cloud leader Amazon.com (NASDAQ: AMZN).
It is worth noting that unlike the Betashares S&P Australian Shares High Yield ETF, which could generate capital gains as well as income, the Betashares S&P 500 Yield Maximiser Complex ETF's strategies may limit some capital growth.
