3 excellent ASX ETFs for passive income

The good news for investors is that passive income does not have to come only from picking individual dividend shares.

ASX exchange traded funds (ETFs) can also be used to build an income stream, while spreading money across a portfolio of different holdings.

That can make them a handy option for investors who want dividends, but do not want to rely on one or two companies doing all the work.

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

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The Vanguard Australian Shares High Yield ETF could be a simple option for investors wanting passive income from Australian shares.

This fund focuses on shares listed on the local market that are expected to provide higher dividend yields than the broader Australian share market.

That naturally gives it exposure to some of the ASX’s more mature, cash-generating businesses. These may include companies from sectors such as financials, resources, telecommunications, consumer staples, and infrastructure.

Among its holdings are giants such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Group Ltd (ASX: TLS).

Betashares Global Royalties ETF (ASX: ROYL)

The Betashares Global Royalties ETF offers a very different type of income exposure.

Rather than focusing on traditional dividend shares, this fund invests in companies that earn royalty income.

That can include royalties linked to areas such as music, intellectual property, pharmaceuticals, mining, energy, and other assets.

Royalty companies can earn a share of revenue from an asset without always carrying the same operating burden as the company producing, selling, or managing that asset directly.

This does not make them risk-free, but it can create attractive cash flow characteristics.

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

A third ASX ETF to consider for passive income in September is the Betashares S&P 500 Yield Maximiser Complex ETF.

This fund gives investors exposure to a portfolio of US shares based on the S&P 500, while using an income-focused options strategy. This means it is able to produce more income than the underlying share portfolio would normally pay on its own.

That could be attractive for investors who want exposure to the US market but would also like regular distributions.

The trade-off is that this strategy can limit some of the upside when US shares rise strongly.

But for income-focused investors, UMAX could still be a useful option. It provides exposure to leading US companies while aiming to turn that portfolio into a stronger income generator.

The post 3 excellent ASX ETFs for passive income appeared first on The Motley Fool Australia.

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• 3 ASX ETFs that are a perfect compliment to your superannuation
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• Could a September rate hike hurt your superannuation returns?
• VGS vs VHY: Which Vanguard ETF comes out on top?

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 no position in any of the stocks mentioned. 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 BHP Group 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.