The iShares S&P 500 ETF (ASX: IVV) is one of the most popular and effective investments because it offers low-cost exposure to the S&P 500. It also provides investors with passive income.
The exchange-traded fund (ETF) is highly diversified because it tracks the S&P 500, an index of 500 of the largest companies listed in the US.
Investors can utilise different share markets to build a passive income stream. The IVV ETF is certainly an option to consider. Let's see what it would take to generate $1,000 of annual passive income from the ASX ETF.
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Passive income from the IVV ETF
ETFs act as conduits for investors. They pass through the dividend income they receive to the investor.
The ETF portfolios have a significant influence on how much dividend income is generated.
If the portfolio is invested in high-yielding stocks, then the ETF itself will likely have a high dividend yield. But, the reverse is also true – if the holdings have a low dividend yield then the ASX ETF will also have low dividend yield.
At the end of August 2026, the IVV ETF reportedly had a dividend yield of 1.04%. That's certainly not a high yield, but it's better than nothing.
With a yield that low, an investor would need a sizeable investment to unlock $1,000 of dividend income.
To generate $1,000 of passive income at a dividend yield of 1.04%, we're talking about requiring a $96,000 investment.
I think it's clear you wouldn't buy the IVV ETF with the thought of generating dividends. The dividend income is a bonus when it comes to owning units of this fund.
Why it can still be a great investment
Just because it doesn't have a high dividend yield doesn't mean it's not a great investment.
The IVV ETF may be the most effective way to get exposure to a portfolio of high-quality US shares. But, we should think of these stocks as global businesses, not just US businesses – they give exposure to the global economy.
The iShares S&P 500 ETF's top holdings include Nvidia, Apple, Microsoft, Alphabet, Amazon.com, Broadcom, Meta Platfoms, Micron Technology and Tesla.
If we're going to invest in global blue-chips, the above names are the sorts of stocks I'd want to own.
In my view, it's unsurprising that the strongest and biggest businesses manage to compound their earnings at a good pace. The IVV ETF has returned an average of 12.96% over the last five years.
I think the fund gives excellent investment exposure, for an extremely low cost of just 0.04%.
So, I wouldn't buy the IVV ETF for passive income, but it's an excellent investment for low-cost wealth-building.
