Allocating a $50,000 investment in these three Vanguard ETFs with high yields could potentially yield around $1,900 in passive income annually.
In the realm of investment, passively generating income through high-yield stocks and exchange-traded funds (ETFs) is a strategy that has proven its mettle over time. One such approach involves investing in dividend-paying ETFs, which offer a basket of stocks, providing diversification as well as the potential for consistent income. Legendary investor Warren Buffett, hailed as the greatest of all time, swears by this tactic, citing stocks like Coca-Cola and American Express that have offered substantial dividend growth over decades.
One such ETF to consider is the Vanguard International High Dividend Yield Index Fund ETF, displaying a 4.68% yield. Although the fund's performance in the last five years has been underwhelming, with a return of 11%, it isn't entirely unexpected given the current market favoring U.S. stocks. However, the proposition of higher yields in the future holds promise as the yield curve steepens, causing longer-dated Treasury notes and bonds to yield more than their shorter-duration counterparts.
The Vanguard International High Dividend Yield ETF's top 10 stocks by weighting include players like Toyota Motor, Nestle SA, and HSBC Holdings, to name a few. Out of these, bank stocks make a substantial presence, hinting at potential future growth as the yield curve steepens. With U.S. stocks showing signs of being overpriced, some experts are gearing up to invest in international waters, betting on countries that may soon see economic growth follow their outperformance cycle.
Another attractive choice for dividend-focused investors is the Vanguard Real Estate ETF, offering a 3.77% yield. The ETF largely invests in real estate investment trusts (REITs) that have a proven history of delivering attractive dividend yields. REITs often pay out more than 90% of their income in dividends, making them a popular choice for income-seeking investors. Despite less-than-impressive returns in the last five and ten years, the fund is an excellent choice for investors seeking consistent, passive income in the real estate sector.
Lastly, the Vanguard FTSE All-World Ex-US Small-Cap Index ETF aims to provide investors with exposure to small-cap international stocks. With a 3.4% yield, the fund focuses on efforts to diversify the global market beyond developed markets. With this strategy, you stand to tap into gains as small-cap markets in emerging economies may soon surge, resulting in higher returns.
When choosing among these international high-yield ETFs, it is essential to take into account their recent performance, risk-adjusted returns, and underlying strategies. Utilizing credible sources, such as Morningstar reports, can help you make informed investment decisions to align with your objectives.
Engaging in this investment strategy, an investor might consider allocating a portion of their finance to high-yield ETFs like the Vanguard International High Dividend Yield Index Fund, which offers a potential yield of 4.68%. Alternatively, focusing on dividend-focused ETFs such as the Vanguard Real Estate ETF, with a yield of 3.77%, could provide a steady income stream from the real estate sector.
