Did you know there are exchange traded funds (ETFs) out there that allow you to invest in a large number of dividend shares through a single investment? Well, the good news is that there are!
I think these ETFs can be very useful for investors that want to invest for income but don’t necessarily have the required funds to maintain a truly diverse portfolio.
With that in mind, here are two exchange traded funds that I think would be great options for income investors:
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The first option for income investors to consider buying is the Vanguard Australian Shares High Yield ETF. This ETF provides investors with low-cost exposure to 66 companies listed on the ASX that have higher forecast dividends relative to other ASX-listed companies.
It provides diversity to investors by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. Among its holdings you’ll find the likes of BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), JB Hi-Fi Limited (ASX: JBH), National Australia Bank Ltd (ASX: NAB) and the rest of the big four banks. At present I estimate that its units offer a FY 2021 dividend yield of at least 4%.
VanEck Vectors Australian Banks ETF (ASX: MVB)
Although the big four banks are certainly going through some tough times, I believe their shares have been oversold and are attractively priced. If you agree and want to invest in the sector, then you might want to consider the VanEck Vectors Australian Banks ETF. I think this ETF is perfect for investors that want exposure to the sector but aren’t sure which of the banks to buy.
This is because this fund gives investors the opportunity to get a piece of them all through a single investment. It is invested in Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks, the regional banks, and also Macquarie Group Ltd (ASX: MQG). Estimating what dividend yield it will provide in FY 2021 is tricky given the current environment, but I would expect something in the region of 4% to 5%.
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More reading
- ETF provider VanEck to launch 4 new ASX ETFs
- Where to hunt for ASX dividend share income in 2020
- 3 ASX dividend shares offering generous yields
- 2 ASX dividend shares to buy with $5,000 today
- 2 ASX dividend shares with generous yields to buy today
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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