Investing $50,000 in These 3 High-Yield Vanguard ETFs Can Generate Nearly $2,000 of Passive Income Every Year

Investors should never discount the power of buying stocks or exchange-traded funds (ETFs) with strong dividends that can deliver years of steady and growing passive income. ETFs typically offer an added layer of diversity because they purchase a basket of stocks. Warren Buffett, arguably the greatest investor of all time, has said that some of his biggest winners haven’t come from pure stock price appreciation, but stocks that he’s held for 30 years and that have consistently grown their dividends such as Coca-Cola and American Express. Investors can take a page out of Buffett’s book and invest $50,000 evenly in these three Vanguard ETFs, which could generate nearly $2,000 of passive income every year.

Vanguard International High Dividend Yield Index Fund ETF — 4.68% yield

The Vanguard International High Dividend Yield ETF (VYMI -0.04%) seeks to help investors gain exposure to a basket of international stocks with above-average dividend yields. The fund has only returned 11% over the last five years, which is poor compared to the broader market. U.S. stocks have been king in recent years and international stocks have been out of favor, so it’s not overly surprising to see this performance. Here are the top 10 stocks in the Vanguard International High Dividend Yield ETF by weighting.

1. Toyota Motor — 1.75%
2. Nestle SA — 1.63%
3. Roche Holdings — 1.55%
4. Novartis — 1.51%
5. Shell — 1.50%
6. HSBC Holdings — 1.38%
7. Royal Bank of Canada — 1.32%
8. Commonwealth Bank of Australia — 1.23%
9. Siemens AG — 1.12%
10. Unilever — 1.08%

It’s not surprising to see a lot of bank stocks in here, most of which haven’t partaken in the two-year bull market. However, that could soon change with the yield curve steepening as longer-date Treasury notes and bonds yield more than shorter-duration ones. This is when bank stocks tend to perform well. Furthermore, some believe that with U.S. stocks looking expensive it might be time to shift into international waters. Fidelity in a note recently said that while the U.S. economy may grow faster near-term, many international markets are likely to expand more longer-term. Several international economies have struggled but may soon be nearing an inflection point. Since launching, this index fund’s dividend yield has bounced around a bit but grown nicely since inception and more than doubled in yield.

VYMI Dividend Yield data by YCharts

Vanguard Real Estate ETF — 3.77% yield

Real estate stocks and real estate investment trusts (REITs) usually pay nice dividends, so it’s not surprising to see the Vanguard Real Estate ETF (VNQ -1.32%) yielding a healthy 3.77%. The ETF largely invests in REITs that buy many different types of properties. The fund’s purpose is to generate passive income, so it’s not surprising to see that returns have been paltry over the last five and 10 years. REITs pay out more than 90% of their income in dividends. Here are the top 10 holdings in the fund:

1. Vanguard Real Estate II Index Fund Institutional Plus Shares — 13.94%
2. Prologis — 5.84%
3. Equinix — 5.19%
4. American Tower — 5.11%
5. Welltower — 4.55%
6. Digital Realty Trust — 3.46%
7. Simon Property Group — 3.35%
8. Public Storage — 2.81%
9. Realty Income — 2.77%
10. CBRE Group Inc. Class A — 2.40%

There’s been a lot of concern about commercial real estate. First, investors grew very concerned about hotels and retail businesses amid the pandemic because the world began to live more of its life at home. Those concerns eventually dissipated some and shifted to office space, which has struggled since the work-from-home boom began. This ETF’s largest concentration (13.8%) is in retail REITs, while other big categories include healthcare (11.8%), industrials (10.3%), telecom (10.2%), and data centers (10.1%). S&P Global Market Intelligence’s 2025 REIT outlook published in October 2024 notes that healthcare and data center REITs are trading at the highest premium to their net asset values, while hotel, timber, farmland, and office REITs trade at the largest discount. The ETF has traded since 2004 and averaged slightly over a 3% dividend.

VNQ Dividend Yield data by YCharts

Vanguard FTSE All-World Ex-US Small-Cap Index ETF — 3.4% yield

The Vanguard FTSE All-World Ex-US Small-Cap Index ETF (VSS 0.24%) also invests internationally, although this one focuses on small-cap stocks abroad. Nearly 31% of the fund targets small caps in Europe, roughly 30% focuses on small caps internationally, and over 15% targets small caps in North America. Like the other two funds, returns have been minimal, which makes sense given the performance of international and small-cap stocks. Here are the top 10 holdings by weighting:

1. WSP Global — 0.70%
2. RB Global — 0.53%
3. Kinross Gold — 0.36%
4. Emera — 0.35%
5. ARC Resources — 0.35%
6. TFI International — 0.34%
7. Celestica — 0.34%
8. Descartes Systems Group — 0.31%
9. AtkinsRealis Group — 0.30%
10. GFL Environmental — 0.29%

Small-cap international stocks can be more volatile but the fund owns 3,300 stocks in more than 46 countries. Also, if there is rotation into emerging markets and some start to see better economic performance, they could start to perform better as well. The dividend can be a bit choppy but also can accelerate higher.

VSS Dividend Yield data by YCharts