When I think about passive income investing, I’m not looking for complexity. I want dependable cash flow, broad diversification, and something I can realistically hold through different market conditions without constantly tinkering.
For ASX investors focused on income in 2026, I think exchange-traded funds (ETFs) remain one of the cleanest ways to achieve that.
In particular, there are two high-yield ASX ETFs that stand out to me as sensible building blocks for a long-term income portfolio.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
Betashares S&P Australian Shares High Yield ETF is one of the more interesting income ETFs on the ASX, in my view, because it goes a step further than simply chasing the highest headline yields.
The fund holds 50 high-yielding Australian shares, but importantly, it applies screens designed to avoid dividend traps. That means it looks to exclude companies paying dividends that appear unsustainable or come with excessive volatility. For income investors, that distinction really matters.
Another feature I like is the monthly income profile. The Betashares S&P Australian Shares High Yield ETF pays monthly distributions, which can be particularly appealing to investors seeking regular cash flow to supplement wages or retirement income. The most recent monthly distribution was 11.91 cents per share. Annualised, that comes to roughly $1.43 per share. Against a share price of around $32.16, that implies a yield in the region of 4.4%.
The underlying portfolio is exactly what you would expect from a high-yield Australian strategy. Major banks, large resource companies, and infrastructure names feature prominently. BHP Group Ltd (ASX: BHP), the big four banks, Wesfarmers Ltd (ASX: WES), Telstra Group Ltd (ASX: TLS), Transurban Group (ASX: TCL), and Woodside Energy Group Ltd (ASX: WDS) all sit near the top of the holdings list. That gives the fund a very familiar, blue-chip income profile.
For investors looking to maximise income while still owning quality Australian businesses, I think the HYLD ETF makes a strong case.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF takes a slightly different approach but still lands in a very similar place for passive-income-focused investors.
The VHY ETF tracks the FTSE Australia High Dividend Yield Index and provides exposure to ASX shares with higher forecast dividends than the broader market. It deliberately caps industry and single-company exposure, which helps prevent the portfolio from becoming overly concentrated in any one area.
One thing I appreciate about the Betashares S&P Australian Shares High Yield ETF is its simplicity. It does not attempt to time dividends or apply complex overlays. Instead, it offers low-cost exposure to a diversified group of high-yield Australian shares, backed by Vanguard’s long-standing index approach.
The ETF currently trades on a trailing yield of around 4.25%. While it doesn’t offer monthly distributions like the HYLD ETF, it still provides a steady income stream that many long-term investors value. Its largest holdings include BHP, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Macquarie Group Ltd (ASX: MQG), and Rio Tinto Ltd (ASX: RIO), which reflects the reality of where much of Australia’s dividend income comes from.
For investors who prefer a more traditional, low-cost index structure with a clear income tilt, this ETF is a very solid option.
Foolish Takeaway
High-yield passive income doesn’t need to be complicated.
For 2026, I think both Betashares S&P Australian Shares High Yield ETF and Vanguard Australian Shares High Yield ETF offer sensible, diversified ways to generate income from the ASX.
They won’t eliminate volatility, and distributions can move around year to year, but for investors focused on long-term cash flow rather than short-term price moves, they tick a lot of boxes.
The post Here are my 2 favourite ASX ETFs to buy for high-yield passive income in 2026 appeared first on The Motley Fool Australia.
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More reading
- 3 ASX ETFs for passive income in 2026
- How to build a bullet-proof monthly passive income portfolio with just $20,000
- 3 ASX ETFs for global growth and income
- 5 ASX ETFs to buy for passive income
- 3 high yield ASX ETFs perfect for income investors
Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia, Transurban Group, and Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group, Transurban Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group, Telstra Group, and Transurban Group. The Motley Fool Australia has recommended BHP Group, Vanguard Australian Shares High Yield ETF, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.