1 High-Yield Dividend ETF to Buy to Generate Passive Income

Experienced dividend investors know that while U.S. stocks loom large, the country is far from the only game in Payout Town. In fact, some emerging markets are dividend stalwarts in their own right.

So in the hunt for high-yield dividend exchange-traded funds (ETFs), it's not surprising that upon stripping out fixed income and options-based funds, some emerging markets ETFs turn up. One example is the iShares Emerging Markets Dividend ETF (NYSEMKT: DVYE). The $1 billion ETF, which turns 14 years old next February, doesn't grab a lot of attention.

But that relative anonymity belies impressive income-generating capabilities, which are confirmed by a trailing 12-month yield of 9.55%. That simply obliterates what investors find with standard domestic and developed market indexes and funds. This iShares ETF features other fine points.

To DVYE for dividends and diversification

Obviously, the Emerging Markets Dividend ETF grabs attention with that sizable yield. But it's also useful to investors in other ways, including diversification.

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Let's be honest. Prior to this year, ex-US stocks and international ETFs were left in the dust by domestic equivalents for a multi-year stretch -- one extended by the remarkable runs notched by U.S.-based mega-cap technology equities. That gave investors little reason to venture away from the cozy confines of the good old U.S. of A.

The problem with that scenario is that it leaves market participants underexposed to international stocks when that asset class turns for the better, as has happened in 2025. By some estimates, a well-balanced portfolio for American investors would be two-thirds allocated to domestic equities. In reality, market participants are devoting significantly higher percentages of their portfolios to U.S. stocks. The iShares Emerging Markets Dividend ETF efficiently adds geographic diversification to any portfolio.

Not only does this ETF broaden portfolios' geographic horizons, it comes with another perk: reduced volatility. Stocks hailing from developing economies often subject shareholders to bumpier rides than developed market peers, making it difficult for some investors to stay engaged over the long term.

To the credit of this iShares ETF, its three-year annualized volatility is slightly below that of the MSCI Emerging Markets Index. Over that time, this ETF easily outpaced that benchmark, meaning it produced superior risk-adjusted returns. Fun fact: The ETF was slightly less volatile than the S&P 500 over that period, too -- something that's apt to surprise plenty of investors.

The iShares ETF also sports an expense ratio of 0.50%, which is reasonable for a fund of this kind.

More reasons to consider this high-yield dividend ETF

Investing in emerging markets isn't easy. For some investors, the task is more difficult due to lack of information and, in some larger developing nations, high populations of fundamentally flawed "junk" stocks. This iShares ETF allays those concerns because, as some experts note, dividends in emerging markets are signs of quality and value.

The fund offers another perk when it comes to dividend dependability. Many of the largest members of its 126-stock lineup are companies in which governments are among the largest shareholders. That makes those firms state-owned enterprises (SOEs). Some of those corporations often hail from slower growth sectors, such as energy and financial services. But the positive trade-off is that with the government looming large, these companies are incentivized to maintain, if not grow, their payouts.

Finally, this high-yield dividend ETF is worthy of closer examination in the current environment because it's commanding weak dollar tailwinds. Its nearly 26% year-to-date gain confirms as much. The depressed greenback is often a boon for developing economies, particularly those that sell bonds denominated in dollars.

This time around, the slumping U.S. currency is even more meaningful because it can provide some relief from U.S. tariffs. That's something to consider with this ETF because its two largest country weights by far are Brazil and China -- two targets of the White House's tariff gambits.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.