3 Monthly Dividend ETFs Investors Shouldn’t Wait On

The world of exchange-traded funds (ETFs) is as vast as it is exciting. Investors looking for a way to gain highly diversified exposure to the markets at a very low cost have increasingly gravitated toward such investing vehicles, with some investors now growing concerned that too much concentration exists within these price-insensitive investing vehicles. 

That’s a story for another article. But the reality is that the diversification and upside ETFs have provided for decades is worth considering. For investors looking for meaningful passive income in retirement, finding options that pay monthly dividends is one angle many are playing. Here are three that fit the bill.

Utilities Select Sector SPDR Premium Income Fund (XLUI)

One of the top sectors I continue to believe ought to be top of mind for investors right now is utilities. The Utilities Select SPDR Premium Income Fund (XLUI) is a top option for those who believe that the artificial intelligence and data center rollout we’re seeing will drive significant power demand and usage over time. 

Indeed, as a top picks-and-shovels play on what could be the next biggest economic shift since the Industrial Revolution, those looking to benefit from a game-changing technology are increasingly shifting their focus away from high-performance chips (which use a lot of power) to the companies that provide this power as raw inputs.

There are different tangential bets to make on the AI trade, but I continue to believe that owning a high-quality and diversified portfolio of utilities stocks can provide the stability and growth investors are looking for (with very meaningful yields). Currently sporting a 3.5% dividend yield paid monthly, what’s not to like?

iShares High Yield Muni Active ETF (HIMU)

I’ve become increasingly interested in municipal bonds, for a number of reasons. And one of the top ETFs in this space I think investors looking to capitalize on the tax-advantaged passive income such funds can provide is the iShares High Yield Muni Active ETF (HIMU). 

This ETF provides investors with a monthly passive income stream currently pays a 3.4% dividend yield monthly to investors in tax-advantaged fashion. Indeed, depending on one’s tax bracket, that yield could ultimately turn out to be a much higher figure, as these distributions are tax free in nature. 

Now, municipal bonds aren’t for every investor, particularly those who may find themselves in a low or mid-tier tax bracket (or those with large deductions that result in a tax refund at the end of the year). But for those looking to offset some capital gains, or add some exposure to tax-advantaged funds as part of their bond investing strategy, I think HIMU is a great option to consider. 

This fund isn’t without risk – municipal bonds can indeed fail (unlike the specific vehicles I’m going to discuss next), but the tax advantages HIMU provides are worth it in my view. 

SPDR Portfolio Intermediate Term Treasury ETF (SPTI)

I’d argue that one of the more under appreciated (but important) asset classes many investors have continued to ignore is bonds. Fixed income investing can provide the kind of portfolio stability and a more appropriate risk-adjusted return profile for the average investor over the long-term. Of course, during bull markets, bonds can seriously underperform their equity counterparts, and one could make the case that owning bonds over the past 15 years has largely been a losing trade (by a wide margin).

That said, I think the landscape has shifted significantly on this front. And while I’m looking at municipal bonds, the Treasury exposure the SPDR Portfolio Intermediate Term Treasury ETF (SPTI | SPTI Price Prediction) provides can help provide the kind of balance and steadiness many investors are looking for.

If you’re an investor who believes that interest rates are more likely than not to come down in the months and quarters to come, owning at least a modest allocation of Treasurys can provide meaningful upside while the market potentially moves lower. Personally, I think we’re about to see valuations called into question at some point. I’d like to have some exposure to assets with the ability to rally in such scenarios, and Treasurys are my go-to safe haven asset right now.