There are many exchange-traded funds (ETFS) listed on the ASX. These range from broad-based index funds like the iShares S&P 500 ETF (ASX: IVV) and the Vanguard Australian Shares Index ETF (ASX: VAS) to niche and thematic ETFs like the BetaShares Crude Oil Index Complex ETF (ASX: OOO) and the Global X Hydrogen ETF (ASX: HGEN).
Saying that, if you are looking for an ETF that offers up a dividend yield greater than 4% today, your choices are far more nuanced. In fact, only a handful of funds still offer yields of that size. Even the broad-based index funds, long famed for their fat dividends, aren't in that ballpark. VAS, for example, currently trades on a trailing yield of 3.14% (as of yesterday's closing price).
That's why, if you're an investor who prioritises maximising dividend cash flow above all else, you may wish to consider the VanEck Australian Banks ETF (ASX: MVB) today.
This is a very simple ASX ETF. As its name implies, MVB gives investors access to an underlying portfolio of ASX bank shares. It keeps things simple, with just seven bank stocks in its portfolio at present. As one might expect, the big four are all there, and take up a lot of room.
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Which ASX bank shares are in this dividend ETF?
As it currently stands, Commonwealth Bank of Australia (ASX: CBA) shares are at the top of the pile, taking up about 20% of MVB's portfolio. ANZ Group Holdings Ltd (ASX: ANZ) is next, contributing 19.9%, followed by Westpac Banking Corp (ASX: WBC)'s 18.9%.
National Australia Bank Ltd (ASX: NAB) accounts for a further 17%.
Then we have two of the ASX's smaller bank shares. Bendigo and Adelaide Bank Ltd (ASX: BEN) and Bank of Queensland Ltd (ASX: BOQ) are the smallest holdings in the VanEck Australian Banks ETF.
That's six. So what about number seven? Well, that would be the ASX's 'fifth bank', the millionaire's factory, also more formally known as Macquarie Group Ltd (ASX: MQG). Macquarie, although not a pure bank, is MVB's largest holding, making up 21.4% of the entire portfolio.
As such, the VanEck Australian Banks ETF can be thought of as a 'seven-for-the-price-of-one' investment in the Australian financial sector.
But let's talk dividends.
Over the past 12 months, investors have received four dividend distributions from MVB. These total $2.19 per unit. At the last MVB unit price of $42.52, that gives the VanEck Australian Banks ETF a trailing dividend distribution yield of 5.15%. Those came with an average franking level of 91%.
There's no guarantee buying MVB units today will secure you that kind of yield going forward, of course. No ASX dividend share or ETF can promise that. However, given the high levels of income ASX bank shares tend to pay out, I'd be surprised if this ETF didn't remain a reliable source of income for the foreseeable future.
