High yield dividend funds are an attractive way to invest. You get something that can be very stable payments from a diverse collection of securities. The best high yield exchange trade funds (ETFs) can continue to grow year by year and are a great way to generate passive income.
Below are some of the highest high-yield ETFs for passive income, including yield and costs.
Top High Yield Funds for Income Investment
Below are some of the best high yield ETFs to consider in your portfolio.
| Fund (symbol) | yield | Expense rate |
|---|---|---|
| SPDR Portfolio High High Bond ETF (SPHY) | 7.7% | 0.05% |
| Global X MLP ETF (MLPA) | 7.5% | 0.45% |
| SPDR Bloomberg Short-Term High Yield Bonds ETF (SJNK) | 7.4% | 0.40% |
| iShares High Hight Systematic Bond ETF (HYDB) | 7.0% | 0.35% |
| Enhanced fidelity Hi-Hide ETF (FDHY) | 6.7% | 0.35% |
| iShares Ibonds 2025 Term High High & Income etf (IBHE) | 6.3% | 0.35% |
| iShares Fallen Angels USD Bond ETF (FALN) | 6.3% | 0.25% |
| Source: morningstar.com. Data as of June 9, 2025 |
The above funds include funds that meet the following criteria:
- Distribution of at least 6%
- No leverage or reverse funding
- Expense rate below 0.5%
- Total return rate over the past three years
High-Yield ETFS: What do you know before investing?
If you are considering generating passive income, owning a high-yield dividend ETF can be attractive. It’s not as easy as waking up to find dividends on your account. But you still need to know what you’re investing in and how it works.
High-yield ETFs only invest in securities that pay distributions, but depending on the type of fund, they may invest in stocks, bonds, or preferred stocks to generate income. The fund’s strategy lists the types of securities it invests in and the general approach it takes.
When you choose a fund, your investment in it generally follows that particular approach. For example, when you buy a high-yield bond ETF, your investment becomes a bond, and the price of the fund reacts like a bond (i.e. it rises as interest rates fall, and vice versa).
Some funds may be invested in all asset classes (e.g. stocks, bonds, preferred stocks), while other asset classes (e.g. stocks, bonds, preferred stocks) are more selective. Some strategies are limited to specific industries, while others may employ a broadly diversified approach to purchase across industries or to buy the size of the company.
How to invest in high-yield ETFs
Looking at the fund’s high yields alone, you may be tempted to buy based solely on that factor, especially compared to the yields on savings accounts and CDs. However, before purchasing an ETF, there are many things to consider.
- What does the fund invest in? It is important to understand what the fund invests in. This will help you know the potential risks of investing in it. Is it a bond fund and therefore exposed to rising interest rates? Is it a stock fund and therefore more likely to be more volatile than a bond fund? A widely diversified portfolio offers less risk than a narrow industrial fund.
- How much is the dividend? Funds with large dividends may not provide significant capital gains over time. But if you’re trying to generate income today, it may be worth the trade-off. On the other hand, it may make sense to go with a low but growing dividend. The best dividend ETFs balance today’s high yields with tomorrow’s growth.
- How sustainable is the dividend? Large dividends (consideration: 8% or more) may indicate unsustainable. If dividends are unsustainable, the price of the fund can drop over time. In other words, you will be a net loser to your investment. Some funds use optional strategies to juice payments, but these strategies are always unavailable and are not profitable. Therefore, the distribution may decrease. Similarly, funds to use debt to increase payments often need to cut payments. This means that the price of the fund will drop.
- What are your long-term track record? You want to see how the fund has been done over time and how longer the track record is, the better. Also note that funds have a dividend that is much larger than the fund’s average annual performance. That means you are receiving compensation, but the value of the fund is declining. So you’re losing money overall.
- What is the expense ratio? I would also like to look at the fund’s expense ratio. It is the percentage of investment in the fund you pay as a fee. There are many ways to get a lower fee when you pay this fee, regardless of the fund’s performance.
Conclusion
If you are looking exclusively for the best high-revenue ETFs, you need to be particularly careful to find sustainable payments. It is worth setting aside today at a slightly smaller yield due to the potential security and growth of the fund over the long term.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors recommend that past investment products performance is not a guarantee of future price increases.