Are you searching for a source of income but aren’t sure which shares to buy? Or are you building an income portfolio but don’t feel like you have sufficient funds to maintain a truly diverse portfolio?
Then exchange traded funds (ETFs) could be a great option for you.
There are a number of ETFs that have been set up to give investors exposure to a collection of dividend shares through a single investment.
Three that I think are worth considering are listed below:
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The first ETF to consider for dividends is the Vanguard Australian Shares High Yield ETF. I think this fund is a great option due to the diversity of its holdings and generous yield. It provides investors with exposure to many of the highest yielding shares on the ASX. This includes the big four banks, telcos, and even mining companies such as BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG). At present I estimate that its units offer a FY 2021 dividend yield of 4% to 5%.
Vanguard Australian Shares Index ETF (ASX: VAS)
If you’re looking for even more diversity, then you might want to look at the Vanguard Australian Shares Index ETF. It has been designed to mirror the S&P/ASX 300 index. This means investors will be buying a piece of large companies such as Coles Group Ltd (ASX: COL) and Telstra Corporation Ltd (ASX: TLS). In addition, you’ll be getting exposure to smaller companies like Accent Group Ltd (ASX: AX1) and Dicker Data Ltd (ASX: DDR). At present, I estimate that its units offer a FY 2021 dividend yield of at least 3%.
VanEck Vectors Australian Banks ETF (ASX: MVB)
Finally, I think the banking sector is a great place to look for dividends. But instead of trying to pick the right bank to invest in, I think buying a piece of them all would be a smart move. You can do this with the VanEck Vectors Australian Banks ETF. This ETF gives investors access to Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks, the regional banks, and also Macquarie Group Ltd (ASX: MQG). I estimate that its units currently provide a ~4% partially franked FY 2021 dividend yield.
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More reading
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- Don’t worry about low interest rates, just buy these ASX dividend shares
- Why it makes sense to invest in ASX shares
- Here’s where I would spend $10,000 on ASX shares today
- Are US shares a better investment than the ASX 200?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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