Exchange-traded funds (ETFs) don’t just provide investors with access to growth stocks or indices. They can also be used to generate income.
For example, listed below are two ASX ETFs that provide investors with access to groups of dividend shares.
Here’s why they could be top options for income investors in the new financial year:
Betashares Australian Top 20 Equity Yield Maximiser Fund (ASX: YMAX)
The first ASX ETF for income investors to look in FY 2025 is the Betashares Australian Top 20 Equity Yield Maximiser Fund.
It aims to generate attractive quarterly income and reduce the volatility of portfolio returns by implementing an equity income investment strategy over a portfolio of the 20 largest blue-chip shares listed on the Australian share market. It does this using something called a covered call strategy.
The fund manager recently recommended the ETF as an option to counter falling dividend yields. It said:
YMAX is an investment option for those seeking quarterly distributions and reduced portfolio volatility. [â¦] Betashares’ range of Yield Maximiser funds use a covered call strategy to offer additional income over and above dividends generated by the portfolio. This approach takes a two-pronged strategy: earning dividends from the underlying stocks and generating income from writing call options on those shares. A covered call strategy performs well in a neutral or gradually rising market, allowing call options to generate income without stocks being called away too often, as has been seen in recent months.
It currently trades with a trailing 12-month dividend yield of 7.8%.
Vanguard Australian Shares High Yield ETFÂ (ASX: VHY)
Another ASX ETF for income investors to look at in FY 2025 is the Vanguard Australian Shares High Yield ETF.
This ETF doesn’t use a covered call strategy. It just focuses on loading up with ASX dividend shares that brokers are forecasting to provide big dividend yields.
But this doesn’t just mean you buy banks and miner. The fund is designed to provide investors with a diverse group of approximately 70 shares and limits how much it invests in any particular industry or company.
At present, you will find companies such as BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), Commonwealth Bank of Australia (ASX: CBA), and Transurban Group (ASX: TCL) among its holdings.
The Vanguard Australian Shares High Yield ETF currently trades with a trailing dividend yield of 5%.
The post Buy these top ASX ETFs for income in FY 2025 appeared first on The Motley Fool Australia.
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More reading
- Top high-yield ASX shares to buy in July 2024
- Which Australian shares ASX ETFs have dished out the best returns over 3 years?
- Why it’s a big day for ASX ETFs
- Is the Vanguard Australian Shares High Yield ETF (VHY) a good long-term buy?
- Want the latest Vanguard Australian Shares Index ETF dividend? Here’s what to do
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF. 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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