2 High-Yield ETFs That Are Crushing the S&P 500 This Year

Exchange-traded funds have become a popular investment option for investors seeking to establish a passive income strategy. ETFs have low risk, offer regular distributions, and are highly diversified. It is a straightforward way to enjoy a steady income without worrying about researching and managing stocks regularly. Dividend ETFs offer a reliable cash flow and have become a core part of retirement portfolios. 

ETFs have gained traction this year and I believe they will continue to remain a top investment option throughout the year. When selecting ETFs, look for a sustainable yield, diversification, low costs, and steady growth. The S&P 500 has a dividend yield of 1.25% and this is where the right ETFs can make all the difference. 

If you’re looking for high-yield ETFs, here are two that are crushing the S&P 500. 

JP Morgan Equity Premium ETF

The JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) has become a go-to for passive income investors. It is an actively managed fund handled by the experts at JP Morgan. It yields 7.4% based on the 12-month rolling dividend and has outperformed the fixed-income options and the S&P 500. JEPI is a combination of a call option and equity exposure. It is a covered call ETF that invests in equity-linked notes. It sells call options on an index and earns a premium from it. This allows it to maintain a high yield.

JEPI has an NAV of $56 and has remained flat in 12 months. It invests in:

• Information Technology: 15.7%
• Financials: 13.4%
• Industrials: 13%
• Other: 13%
• Healthcare: 11.3%

Since it is heavily focused on the tech sector, it holds a few of the Magnificent Seven including Nvidia (NASDAQ:NVDA), Meta Platforms Inc. (NASDAQ: META), and Amazon.com Inc. (NASDAQ: AMZN). However, none of the stocks have a weightage over 2%. 

The fund invests in the top S&P 500 stocks that have low risk and can generate steady returns. JEPI has an expense ratio of 0.35% and it has remained resilient during market declines and periods of volatility. It invests in 130 stocks and focuses on elite names that pay steady dividends. 

Some of its top holdings include AbbVie (NYSE:ABBV), Mastercard (NYSE:MA), Southern Co. (NYSE: SO) and Visa (NYSE:V) Several of the stocks have shown capital growth in addition to the steady dividends. The fund identifies and chooses stocks that show strong fundamentals, and stability. This ensures that you hold only the best in the market. 

This ETF performs exceptionally well for investors seeking passive income. It pays monthly dividends and while the payout may fluctuate, it has remained consistent. If you’re an investor seeking steady income with minimal volatility, this ETF is an ideal choice. 

SPDR Portfolio S&P 500 High Dividend ETF

With an attractive yield of 4.59%, SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA: SPYD) is another ETF worth adding to your portfolio. It tracks the total return performance of the S&P 500 High Dividend Index and offers an opportunity for steady dividend income. 

The ETF holds 77 stocks including AbbVie, CVS Health (NYSE:CVS), AT&T (NYSE:T), and Philip Morris International Inc. (NYSE: PM). No stock has a weightage over 2% and the sector holdings include:

• Real estate: 23.08%
• Utilities: 17.86%
• Financials: 15.67%
• Consumer Staples: 14.44%
• Energy: 7.35%

It is not easy to invest in real estate and SPYD offers an opportunity to be a part of the real estate sector without taking on the risk. The ETF has an NAV of $43.45 and is up 7% in 12 months. It is up over 50% in five years. Besides the steady dividend income, this ETF also offers an opportunity for growth. 

Since the ETF holds only 77 stocks, it places high importance on the quality of the companies. It picks the safest stocks in the market that have the potential for high capital appreciation. Additionally, the fund has less tech exposure, making it an ideal choice for investors who already own the Magnificent Seven or are not willing to invest in tech.

SPYD has an expense ratio of only 0.07% and has generated 8.62% returns since inception. The fund is rebalanced each quarter to ensure it holds the best 77 stocks. While risks like dividend cuts exist, SPYD has a highly diversified portfolio of the best stocks which allow it to bounce back in no time. 

With this ETF, you can sleep peacefully at night.

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