3 High-Yield Dividend ETFs to Buy to Generate Passive Income

Dividend stocks can be a great way to get income without sacrificing the potential for long-term growth, but choosing individual dividend stocks isn't the best option for everyone. Fortunately, there are some excellent exchange-traded funds (ETFs) with dividend yields that are significantly higher than the typical S&P 500 company's, and they can be a great choice for investors who want to create an income stream on autopilot.

Here are three high-dividend ETFs that long-term investors, as well as those seeking current income, might want to take a closer look at.

A great all-around dividend ETF

If you're looking for a solid high-dividend ETF full of quality stocks, it's tough to make a case against the Vanguard High Dividend Yield ETF (NYSEMKT: VYM) . With a rock-bottom 0.06% expense ratio, this fund tracks an index of stocks that pay above-average dividend yields, specifically excluding real estate investment trusts, or REITs .

As of this writing, the Vanguard High Dividend Yield ETF has 556 stocks in its portfolio. Top holdings include JPMorgan Chase (NYSE: JPM) , Broadcom (NASDAQ: AVGO) , ExxonMobil (NYSE: XOM) , and Procter & Gamble (NYSE: PG) , just to give you a sense of what you'd be investing in.

With a 3% yield as of this writing, the Vanguard High Dividend Yield ETF isn't the highest- yielding dividend ETF in the market. But it's a great combination of income and long-term growth potential that could be a good fit for long-term investors.

A beaten-down sector at a discount

Real estate has been one of the worst-performing sectors over the past couple of years. Since real estate investment trusts, or REITs, are extremely sensitive to rising interest rates, that's not a surprise. Rising rates tend to put pressure on income-focused stocks, and since most REITs rely on borrowed money for growth, this makes the cost of capital less attractive as well.

However, REITs are largely doing just fine, business-wise. And the Vanguard Real Estate ETF (NYSEMKT: VNQ) can be a great way to invest in them. The ETF tracks an index of about 160 real estate stocks, and its top holdings include Prologis (NYSE: PLD) , American Tower (NYSE: AMT) , and data center giant Equinix (NASDAQ: EQIX) , just to name a few. As of this writing, the Vanguard Real Estate ETF has a 4.3% dividend yield, and if rates start to come down later this year as many expect, it could be a positive catalyst for the ETF's share price.

An even higher yield from top-quality companies

If you're looking for a high yield from top-notch businesses, the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) could be a good fit for you. This low-cost index fund invests in the 80 highest-yielding companies in the S&P 500. The key differences between this ETF and the Vanguard High Dividend Yield ETF are:

• The SPDR ETF focuses on the highest-yielding stocks in the benchmark index, not just those that have above-average yields.
• The SPDR ETF, by definition, only invests in large-cap companies, while the Vanguard ETF includes stocks that aren't components of the S&P 500.
• The SPDR ETF doesn't exclude REITs, while the Vanguard ETF specifically does. If a REIT is an S&P 500 component, it can be included in this fund's index. In fact, the largest holding of the ETF is real estate investment trust Iron Mountain (NYSE: IRM) , and real estate makes up 28% of the ETF's assets.

Because of these differences, this is a much higher-yielding ETF. As of this writing, the SPDR Portfolio S&P 500 High Dividend ETF has a 4.6% yield.

Which is best for you?

There's no perfect favorite here. All three of these are rock-solid dividend stock ETFs with above-average yields and long-term upside potential. The best choice for you depends on your specific income needs and personal investment goals.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Matt Frankel has positions in Iron Mountain, Prologis, and Vanguard Real Estate ETF and has the following options: short October 2024 $90 calls on Iron Mountain. The Motley Fool has positions in and recommends American Tower, Equinix, Iron Mountain, JPMorgan Chase, Prologis, Vanguard Real Estate ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $180 calls on American Tower, long January 2026 $90 calls on Prologis, and short January 2026 $185 calls on American Tower. The Motley Fool has a disclosure policy .