If you purchase a 10-year U.S. Treasury bond, you’ll get an annual yield of around 4%. It’s fine if you’re content with that, but with a quick search, you can find exchange traded funds (ETFs) with higher yields than government bonds.
Today’s featured high-yield dividend ETFs can bring you passive income without excessive risk. I rejected any fund that doesn’t provide enough diversification; in addition, we will only include ETFs with high-quality stocks.
Additionally, we will take expense ratios (i.e., annual operating fees deducted from an ETF’s share price) into account. If a fund’s expense ratio is over 1%, that’s too expensive for this list. Now, let’s start off with our first ETF pick that beats bond yields.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
In terms of passive income, holding an index fund that simply tracks the NASDAQ 100 probably won’t help you beat the 4% yield of Treasury bonds. On the other hand, you could potentially outperform bond yields with the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ).
With 108 holdings, the JPMorgan Nasdaq Equity Premium Income ETF has much in common with the NASDAQ 100. For example, the JEPQ ETF’s holdings list includes well-known NASDAQ 100 members like Microsoft (NASDAQ:MSFT | MSFT Price Prediction), Meta Platforms (NASDAQ:META), Apple (NASDAQ:AAPL), and NVIDIA (NASDAQ:NVDA).
There’s a crucial difference here, though. These technology stocks generally don’t offer high dividend yields, while the JPMorgan Nasdaq Equity Premium Income ETF features a stunning 11.42% annual yield.
This is possible because the JEPQ ETF uses options-selling strategies to generate income. It’s complicated, but you don’t need to be an options expert to own the JPMorgan Nasdaq Equity Premium Income ETF.
The fund deducts operating expenses amounting to 0.35% of the share price per year. That’s a fair price when you consider that the JEPQ ETF’s fund managers will do all of the options trading on your behalf.
Not only that, but this fund pays out its distributions on a monthly basis, as opposed to the typical quarterly payments. So, to achieve nearly triple the yield of a 10-year Treasury bond, consider buying the JPMorgan Nasdaq Equity Premium Income ETF.
Global SuperDividend U.S. ETF (SDIV)
Are you in the market for “super” dividends? You’ve come to the right place, as the Global X SuperDividend U.S. ETF (NYSEARCA:SDIV) is bound to outstrip government bonds with its supersized yield.
Let’s conduct a quality check first, though. The Global X SuperDividend U.S. ETF has 108 members on its holdings list, so it’s sufficiently diversified. A few of the SDIV ETF ‘s stock holdings are Western Union (NYSE:WU), Park Hotels & Resorts (NYSE:PK), Global Net Lease (NYSE:GNL), and Invesco Mortgage Capital (NYSE:IVR).
The main theme of the Global X SuperDividend U.S. ETF is that it “accesses 100 of the highest dividend paying equities around the world.” Another great feature of the SDIV ETF is its monthly cash distributions to the shareholders.
Furthermore, you’ll get double the yield of 10-year Treasury bonds because the Global X SuperDividend U.S. ETF sports an 8.8% annual distribution rate. For these reasons, the fund is well worth its 0.58% annual expense ratio and today is a great day to take a close look at the SDIV ETF.
Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA)
Next up is an interesting take on the ever-popular S&P 500 stock index, which is what you’ll get with the Invesco S&P 500 Equal Weight Income Advantage ETF (NYSEARCA:RSPA). What’s different about this monthly-paying fund is that the RSPA ETF assigns an equal weighting to each stock on its holdings list.
The Invesco S&P 500 Equal Weight Income Advantage ETF includes S&P 500 members like Micron Technology (NASDAQ:MU), Moderna (NASDAQ:MRNA), Freeport-McMoRan (NYSE:FCX), and many others. Yet, the RSPA ETF doesn’t assign too much weight to any of these stocks, so there’s more of a balance with this fund.
As you might have surmised by now, the Invesco S&P 500 Equal Weight Income Advantage ETF is another high-yield fund that uses options-selling strategies. As the fund’s website explains, the RSPA ETF utilizes an “active option income overlay for income generation, downside protection and upside participation.”
You’ll want to know, no doubt, that the Invesco S&P 500 Equal Weight Income Advantage ETF carries an annual expense ratio of 0.32%. This will drag on the fund’s share price a little bit, but it pales in comparison to the RSPA ETF’s 9.34% annual distribution rate (i.e., yield).
So again, we’re achieving more than twice the yield of Treasury bonds with the Invesco S&P 500 Equal Weight Income Advantage ETF. Between the monthly payouts, the balanced exposure to hundreds of stocks, and the fabulous yield, you may find it impossible to resist the RSPA ETF.