2 High-Yield ETFs to Supercharge Your Passive Income Strategy Now

Passive income strategies remain a top priority for investors aiming to build financial resilience and diversify their revenue streams. Exchange-traded funds (ETFs) have emerged as a popular vehicle within income-focused portfolios, offering regular distributions, built-in diversification, and low maintenance. Easily traded on major exchanges, ETFs provide a straightforward way to supplement income with liquid, professionally managed assets.

Dividend-focused ETFs, in particular, offer reliable cash flow without the need for active oversight. They serve as strong core holdings for retirement and income strategies. Moreover, these vehicles typically provide greater diversification, lower volatility, and more consistent payouts than individual dividend stocks -- all through a single, simple transaction.

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Investor attention has shifted toward specialized ETFs with innovative income strategies -- especially those delivering higher-than-average yields with controlled risk -- as Treasury yields remain volatile and traditional passive income sources are under pressure from inflation, evolving central bank policies, and global instability.

But which to buy? The most effective dividend ETFs combine four essential traits: a sustainable yield, growth potential, low fees, and broad diversification. Two standout options meet these criteria and offer compelling solutions for investors seeking hands-off, dependable income in a complex market environment.

The international dividend powerhouse

The Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) offers exposure to high-dividend companies outside the United States. This fund tracks the FTSE All-World ex U.S. High Dividend Yield Index, focusing on developed and emerging market companies forecast to pay above-average dividends.

With over 1,500 stock holdings spanning Europe, Asia, and Latin America, the fund provides exceptional geographical diversification. It currently yields around 4.3%, and with an ultra-low 0.17% expense ratio, it remains one of the most cost-effective options in its category. By contrast, similar international dividend funds often charge fees close to 1%, significantly eating into long-term returns.

Another key advantage is valuation. The weighted average price-to-earnings ratio of the stocks held in the fund is just 11.7 -- well below the S&P 500's current average of 20. This discount offers long-term capital appreciation potential, especially if international markets revert toward historical valuation norms.

What's in the fund? Consumer staples, energy, and healthcare make up the largest sector allocations, with top holdings including Nestle, Roche, and Shell. These are well-established dividend payers with consistent records across market cycles, adding reliability to the fund's income stream.

What's the bottom line? With its high yield, broad international exposure, and compelling valuation, this ETF stands out as a dependable income generator with room to grow.

^SPX data by YCharts

The solid income generator

The JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI) has emerged as a dominant force in the income investment space, gathering nearly $39 billion in assets since its 2020 introduction. This actively managed fund implements a sophisticated dual strategy that combines carefully selected low-volatility U.S. equities with a strategic options overlay to deliver substantial monthly income distributions.

Currently yielding approximately 7.4% based on its 12-month rolling dividend, this ETF significantly outperforms traditional equity income approaches and many high-yield fixed-income alternatives. While its 0.35% expense ratio exceeds some passive options, the active management has demonstrated clear value through enhanced income generation and volatility reduction. The fund has shown notable resilience during market declines while maintaining competitive returns in bullish environments.

^SPX data by YCharts

The fund's effectiveness stems from its two-component income approach. First, it employs proprietary research to identify companies exhibiting quality fundamentals, earnings stability, and attractive valuations. Second, it implements an options overlay strategy -- selling out-of-the-money call options on the S&P 500 through equity-linked notes -- to generate supplemental income beyond standard dividends.

It's important to note that while this options strategy significantly enhances income, it inherently limits capital appreciation potential. By selling call options, the fund effectively caps upside participation during strong market rallies in exchange for immediate income. This makes the ETF less suitable for investors primarily seeking growth, but exceptionally attractive for those prioritizing consistent high yields and passive income generation.

The monthly distribution schedule provides particular advantages for income-focused investors planning for regular expenses. Though monthly payments may fluctuate based on options premiums, the fund has maintained consistent income levels, attracting significant investor interest in an environment where reliable income streams have become increasingly valuable.

For investors specifically seeking high current income with moderate volatility -- rather than maximum capital appreciation -- this ETF offers a compelling solution that delivers meaningful cash flow while accepting reasonable limitations on growth potential.

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George Budwell has positions in Vanguard International High Dividend Yield ETF. The Motley Fool recommends Nestlé and Roche Holding AG. The Motley Fool has a disclosure policy.