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For income-focused investors looking to simplify their portfolios, ASX exchange-traded funds (ETFs) can be a good option.
Rather than handpicking individual dividend stocks, investors can access a diversified portfolio of income-generating assets through a single trade.
If you’re looking to build a reliable income stream from the share market, here are three ASX ETFs that could be worth a closer look.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
One of the most popular income-focused ETFs on the ASX, the Vanguard Australian Shares High Yield ETF offers exposure to a carefully selected portfolio of Australian companies with higher forecast dividends.
This ASX ETF tracks the FTSE Australia High Dividend Yield Index, which filters companies based on dividend forecasts and screens out those with poor sustainability. It also excludes A-REITs (real estate investment trusts), adding further diversification compared to other high-yield strategies.
It includes household names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Group Ltd (ASX: TLS). Importantly, diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company.
The Vanguard Australian Shares High Yield ETF pays distributions quarterly and currently has a trailing dividend yield of 4.8%.
Betashares Global Royalties ETF (ASX: ROYL)
Another ASX ETF for income investors to consider is the Betashares Global Royalties ETF. It is designed to provide investors with access to global companies that earn a substantial portion of their revenue from royalties and intellectual property (IP).
This means exposure to businesses that generate income from music rights, mining royalties, pharmaceutical IP, and software licensing — all industries that can deliver high-margin cash flows with relatively low operating risk. Betashares highlights that royalty companies tend to have strong fundamentals, including high return on capital and low capital intensity.
This ETF aims to provide monthly income and currently trades with a 3.5% dividend yield. Betashares recently named it as one to consider buying.
Betashares Australian Cash Plus ETF (ASX: MMKT)
If you’re seeking a low-volatility income solution, the Betashares Australian Cash Plus ETF might be a good option to explore. It offers exposure to a range of high-quality money market securities. This includes bank deposits and short-term corporate paper.
This ASX ETF aims to deliver a return above that of traditional bank cash products, and as of this month, it was offering a trailing dividend yield of approximately 4.7%, paid monthly. It was also recently named as one to consider buying by the team at Betashares.