According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved. The more passive income can help cover rising costs, such as mortgages, insurance, taxes, and other expenses, the easier it is for investors to set aside money for future needs as they prepare for retirement. Dependable, recurring dividends, especially those paid monthly, are a recipe for success.
Our 24/7 Wall St. passive income stock research database is a reliable source of the best investment ideas. We have identified four ultra-high-yield exchange-traded funds (ETFs) that can be purchased for just $25,000 each, totaling $100,000, yet have the potential to generate $1,025 in passive income every month. This passive income portfolio is best suited for individuals with a higher risk tolerance. However, using ETFs with many more holdings and assets than individual companies offers a far wider range of broad diversification.
Why do we cover ultra-high-yield ETFs?
While they are not suited for everybody, those trying to build strong passive income streams can do exceptionally well with some of these ETFs in their portfolios. Paired with more conservative blue-chip dividend ETFs or individual stocks, investors can use a barbell approach to generate substantial passive income.
Invesco KBW High Dividend Yield Financial Portfolio ETF
While focused on the financial sector, this may be a home run, as many on Wall Street are bullish on financials for the rest of 2026 and next year. Invesco KBW High Dividend Yield Financial Portfolio ETF (NASDAQ: KBWD) is based on the KBW Nasdaq Financial Sector Dividend Yield Index. The fund generally will invest at least 90% of its total assets in the securities of publicly listed financial companies in the United States with competitive dividend yields, which comprise the index.
Keefe Bruyette & Woods compiles, maintains, and calculates the index, which is a modified-dividend yield-weighted index of companies principally engaged in the business of providing financial services and products, as determined by the Index provider. The fund and the index are rebalanced and reconstituted quarterly.
Trading at just over 10 times forward earnings, with a price/book ratio of 1.21, this is a stellar buy for passive income-starved investors. It is worth noting that the fund’s expenses are higher than those of many funds, reflecting its specialized investment strategy. Toss in a 13.53% yield paid monthly, and investors have great total return potential.
$25,000 will buy 1,915 shares, which pay $0.1434 per share per month, for a total of $274.
Global X NASDAQ 100 Covered Call ETF
Covered call ETFs have become one of the top income ideas across Wall Street over the past few years, and this one offers a hefty 11.5% dividend. Global X NASDAQ 100 Covered Call ETF (NASDAQ: QYLD) seeks to provide investment results that will generally correspond to the price and yield performance of the CBOE NASDAQ-100 BuyWrite Index. The fund will invest at least 80% of its total assets in common stocks included in the Index. It employs a replication strategy to track the index and has made monthly distributions for 12 consecutive years.
The Global X S&P 500 Covered Call ETF (NYSEARCA: XYLD) follows a “covered call” or “buy-write” strategy, in which the fund buys the stocks in the S&P 500 Index and “writes” or “sells” corresponding call options on the same index. This is a strategy that tends to work well in up or down markets. If the individual stock trades higher and is called away, the fund retains the option premium and any capital gain realized on the underlying shares. If the market trades lower, the fund keeps the option premium and rewrites the option for a different month and strike price.
$25,000 will purchase 1,465 shares, which pay $0.1789 every 30 days, for a total of $262.
JPMorgan Nasdaq Equity Premium Income ETF
This immensely popular JPMorgan fund offers a higher yield with more exposure to technology. JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ) is up nicely since its inception and pays a substantial 10.5% monthly dividend. This is an excellent option for those looking for a technology-based portfolio. The fund seeks to achieve this objective by:
- Creating an actively managed portfolio of equity securities comprised significantly of those included in the fund’s primary benchmark, the Nasdaq-100 Index
- Through equity-linked notes (ELNs), selling call options with exposure to the Benchmark. It is non-diversified
$25,000 will buy 425 shares, which pay $0.5586 per share each month for a total of $237.40.
Neos S&P 500(R) High Income ETF
This is another top ETF that utilizes the buy/write strategy, and it has done so in a highly effective manner, offering a substantial 11.98% dividend yield. Neos S&P 500 High Income ETF (CBOE: SPYI) is an actively-managed ETF that seeks to achieve its investment objective by investing in a portfolio of stocks that make up the S&P 500 Index and a call options strategy, which consists of a mix of written (sold) call options and long (bought) call options on the index.
Under certain circumstances, the call options strategy may include transactions with covered call options. The fund seeks to generate high income from the premiums earned from the SPX call options as well as the dividends received from the fund’s equity holdings.
The SPX call options aim to generate a net credit, meaning that the premium received from selling the call options will exceed the cost of buying the long, out-of-the-money SPX call options. The SPX options strategy is intended to generate high monthly income in a tax-efficient manner, with the potential for upside participation when the underlying equity index appreciates.
$25,000 will purchase 480 shares, which will pay $0.5247 per share per month, for a total of $252.
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