2 high-yield ASX dividend ETFs to buy for passive income

These funds are my top picks for ETF income right now.

| More on:
A happy laughing surfer couple surfing together.

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

Investors that are seeking out passive income on the stock market tend to go to dividend shares like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) as their first port of call. However, using ASX dividend exchange-traded funds (ETFs) for income is a viable alternative.

In fact, ASX dividend ETFs might even be a better option for many income investors. Income-focused funds can provide many advantages for any investor, including inherent diversification, protection against a single stock cutting its dividend, and exposure to a mix of high-yield shares and dividend growth stocks, all in one ticker code.

There are more than a few ASX dividend ETFs. So which to choose? Well, here are two quality options that I would consider buying for income today. One offers a high yield upfront, while the other prioritizes dividend growth.

2 ASX ETFs to buy for passive income today

Vanguard Australian Shares High Yield ETF (ASX: VHY)

First up, we have the Vanguard Australian Shares High Yield ETF. This Vanguard fund gives investors access to a portfolio of around 70 ASX dividend shares, all selected for their current yields, as well as their perceived ability to fund growing dividends into the future.

Some of VHY's current top holdings include CBA, BHP, the other three major banks, Macquarie Group Ltd (ASX: MQG) and Woodside Energy Group Ltd (ASX: WDS).

This ASX dividend ETF typically pays out four dividend distributions every year, which usually come with plenty of franking credits attached as well. At current prices, VHY is trading on a trailing dividend yield of 5.17%.

VanEck Morningstar Australian Moat Income ETF (ASX: DVDY)

Our second ASX dividend ETF is an offering from VanEck. DVDY functions a little differently from VHY. Instead of around 70 shares, this ASX dividend ETF holds just 25.

These 25 stocks are first assessed for the presence of an economic moat, a Warren Buffett concept that means an intrinsic competitive advantage a company possesses over its competition. They are also assessed for their past, present, and future dividend payment performance.

The provider argues that the presence of this moat should mean that the company will outperform the market over long periods of time.

Some of this ASX dividend ETF's top positions include Macquarie Group, Brambles Ltd (ASX: BXB), Ansell Ltd (ASX: ANN), Charter Hall Group (ASX: CHC) and Computershare Ltd (ASX: CPU).

DVDY units also pay out quarterly dividend distributions. This fund is currently trading on a trailing dividend yield of 3.26%.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Ansell 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.

More on Dividend Investing

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

Buy these highly rated ASX dividend stocks for 5% to 6% yields

These stocks could be quality picks for income investors according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Dividend Investing

With an almost 7% dividend yield, is this ASX 200 share a buy?

This business offers significant passive income potential.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

These high-yield ASX dividend shares smash term deposits

Analysts think these shares could be top picks for Aussie income investors.

Read more »

children and teacher in childcare education setting
Dividend Investing

1 ASX dividend stock down 30% I'd buy right now

I think this business offers investors both income and potential capital growth.

Read more »

Two funeral workers with a laptop surrounded by cofins.
Dividend Investing

Why I think these 2 ASX dividend shares are ideal for income investors

These stocks offer pleasing income.

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Dividend Investing

3 ASX ETFs to boost passive income

These 3 ASX ETFs offer particularly attractive yields.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Dividend Investing

The easy way to earn $1,000 a month in dividends from the ASX

This is an easy way to generate monthly income from the share market.

Read more »

A retiree relaxing in the pool and giving a thumbs up.
Dividend Investing

An 8 percent dividend stock paying cash every month

Dreams really do come true on the ASX.

Read more »