2 rewarding ASX ETFs I'd buy to build a second income

There are a few different ETFs that can provide good dividends. Here are two.

| More on:
ETF written on cubes sitting on piles of coins.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Individual ASX dividend shares can be a great source of passive income. A second income can be created from ASX-listed exchange-traded funds (ETFs).

Many ETFs are focused on global shares, which typically come with a low dividend yield. Investors can certainly look at the Vanguard Australian Shares Index ETF (ASX: VAS) for dividends, but there are two other ASX ETFs I want to talk about.

Betashares FTSE 100 ETF (ASX: F100)

This ASX-listed ETF gives investors access to the UK share market – it owns 100 of the largest businesses listed in London.

There are a number of appealing businesses in the portfolio, which have relatively low valuations and reasonably generous dividend payout ratios. This combination usually leads to an attractive dividend yield.

I think it offers more diversification than ASX blue-chip shares, which are mainly focused on ASX bank shares and ASX mining shares.

The biggest positions include Shell, Astrazeneca, HSBC, Unilever, BP, GSK, Relx, Diageo, Rio Tinto and Glencore.

The F100 ETF's portfolio has been a solid performer – in the three years to February 2024 it has delivered an average return per annum of almost 12%.

At the end of February 2024, the ASX ETF had a 12-month distribution yield of 3.3%. That's a solid starting point for a second income, in my opinion.

It has an annual management fee of 0.45%, which I think is quite reasonable for an international-based portfolio.

VanEck Morningstar Australian Moat Income ETF (ASX: DVDY)

There are plenty of appealing ASX dividend shares beyond the large ASX bank shares and ASX iron ore shares.

The idea of this ASX ETF is that it focuses on quality companies with a high dividend yield, based on its economic moat (or competitive advantages). These businesses have also been judged to have good balance sheets.  

There are a total of 25 holdings within this portfolio, with the biggest five currently being Wesfarmers Ltd (ASX: WES), Carsales.com Ltd (ASX: CAR), ARB Corporation Ltd (ASX: ARB), Pinnacle Investment Management Group Ltd (ASX: PNI) and Macquarie Group Ltd (ASX: MQG).

The DVDY ETF has a 12-month distribution yield of 4.5% and the fund has an annual management fee of 0.35%. I believe this portfolio is a strong choice for a potential second income, combined with good diversification.

I like the names in the ASX ETF's portfolio – they are largely equal-weighted, with the biggest position currently being Wesfarmers at 4.69% and the smallest being Woolworths Group Ltd (ASX: WOW) with a weighting of 3.34%.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Pinnacle Investment Management Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation, Macquarie Group, Pinnacle Investment Management Group, and Wesfarmers. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended AstraZeneca Plc, Diageo Plc, GSK, HSBC Holdings, RELX, and Unilever Plc. The Motley Fool Australia has positions in and has recommended Macquarie Group, Pinnacle Investment Management Group, and Wesfarmers. The Motley Fool Australia has recommended ARB Corporation and Car Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

A man with a wide, eager smile on his face holds up three fingers.
ETFs

3 reasons why the iShares S&P 500 ETF (IVV) is a great long-term buy

I think this fund offers lots of what investors should look for.

Read more »

green etf represented by letters E,T and F sitting on green grass
ETFs

How have these thematic ASX ETFs performed in 2025?

Has thematic investing been a viable strategy this year?

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
ETFs

This fantastic ASX ETF could win big from the AI boom over the next decade

Want to invest in AI? This could be an easy way to do it.

Read more »

A smiling woman holds a Facebook like sign above her head.
ETFs

The ultimate ASX ETFs to buy right now

Let's see what sort of stocks these funds are invested in.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
ETFs

Overinvested in Vanguard Australian Shares Index ETF (VAS)? Here are two alternative ASX ETFs

The VAS ETF isn’t the only fund on the ASX worth buying.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP
ETFs

How to grow your wealth the easy way with ASX ETFs

Is this the easiest way for investors to build a nice nest egg? Let's find out.

Read more »

Oil rig worker standing with a clipboard.
ETFs

Up 18% in June, is the Betashares Crude Oil Index ETF a good oil price play?

ASX investor interest in the OOO ETF has risen amid surging oil prices due to the Israel-Iran conflict.

Read more »

Man holding Australian dollar notes, symbolising dividends.
ETFs

Buy these ASX ETFs for passive income

Want an easy way to generate income from the share market? Check out these funds.

Read more »