Buy these top ASX ETFs for passive income

For investors looking to generate regular income from the share market, exchange traded funds (ETFs) can be a simple and effective option.

Rather than relying on a single dividend-paying share, ETFs provide exposure to a basket of income-generating businesses in one investment. This diversification can make income streams more stable and easier to manage over time.

With that in mind, here are three ASX ETFs that could be worth considering for passive income.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The first ASX ETF that income investors may want to look at is the Vanguard Australian Shares High Yield ETF.

This fund focuses on Australian shares that are expected to pay above-average dividend yields. It holds a diversified portfolio of large and mid-sized ASX shares that have strong income profiles.

Its holdings include well-known dividend payers such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), and Telstra Group Ltd (ASX: TLS).

Because many Australian shares pay fully franked dividends, investors can also benefit from franking credits, which can enhance the effective income received.

For investors seeking exposure to a broad collection of local dividend stocks in one trade, the Vanguard Australian Shares High Yield ETF offers a straightforward solution. It currently provides a 4% dividend yield.

Betashares S&P 500 Yield Maximiser ETF (ASX: UMAX)

Another ASX ETF that could appeal to income investors is the Betashares S&P 500 Yield Maximiser ETF.

This fund takes a different approach to generating income. Instead of relying solely on dividends from its holdings, it uses a covered call strategy to boost the income paid to investors.

It holds companies from Wall Street’s S&P 500 index, which means investors gain exposure to global giants such as Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN).

However, by writing call options over these holdings, the ETF collects option premiums that can then be distributed as income. This strategy can lead to higher yields than traditional equity ETFs, though it may limit some upside during strong market rallies.

Another positive is that Betashares changed the payouts from quarterly to monthly this year, meaning more frequent income for investors.

At present, it trades with a dividend yield of 5.7%.

Betashares Global Royalties ETF (ASX: ROYL)

A final ASX ETF that could be worth considering for passive income is the Betashares Global Royalties ETF.

This fund invests in companies that earn revenue from royalties rather than traditional product sales. These businesses often receive payments from intellectual property, natural resources, or infrastructure rights.

The portfolio includes companies such as Franco-Nevada (NYSE: FNV), which collects royalties from gold mining operations, and InterDigital (NASDAQ: IDCC), which earns licensing income from wireless technology patents.

Royalty-based businesses can be appealing because they often have lower operating costs and scalable revenue models. As the underlying industries grow, royalty payments can increase without requiring large capital investments.

This structure can support attractive income streams for investors. For example, it currently offers a 5.6% dividend yield.

The Betashares Global Royalties ETF was recently recommended by analysts at Betashares.

The post Buy these top ASX ETFs for passive income appeared first on The Motley Fool Australia.

More reading

• 3 ASX dividend ETFs that could help you retire at 57
• The easiest way to earn $1,000 a month in ASX dividends
• How to retire early using ASX dividend shares
• How to build a ‘lazy’ passive income portfolio with just 1 ASX ETF
• How to make $25,000 of passive income a year

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 Amazon, Apple, and Microsoft and is short shares of Apple and BetaShares S&P 500 Yield Maximiser Fund. The Motley Fool Australia has positions in and has recommended BetaShares S&P 500 Yield Maximiser Fund and Telstra Group. The Motley Fool Australia has recommended Amazon, Apple, BHP Group, Microsoft, and 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.