Gone are the days of painstakingly screening for the highest-yielding stocks, or selling shares periodically to fund your income needs. Today’s new breed of exchange-traded funds, or ETFs, offers income investors unprecedented versatility, diversification and exposure.
Some of these ETFs are relatively straightforward, holding baskets of alternative income-producing assets such as preferred stocks, real estate investment trusts (REITs), and high-yield “junk” bonds.
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Others employ more complex financial engineering, like selling call and put options on various indexes or individual stocks, to generate their high yields.
If your goal is high yield, combining a few of these ETFs can help you build a diversified portfolio tailored to income generation. But in order to understand how much income you could get, you’ll also need to understand a crucial metric: the distribution yield, also known as the distribution rate.
This is calculated by taking the ETF’s most recent distribution, annualizing it, and dividing the result by the ETF’s net asset value, or NAV. The final figure is then multiplied by 100 to express it as a percentage.
You don’t need to do the math yourself, though. Most ETF providers publish this metric directly on their websites, and you can also find it through third-party data providers like Morningstar. These resources make it easy to quickly compare the yield potential of different ETFs.
But be cautious — most high-yield ETFs come with capped upside price appreciation. A high yield is rarely a free lunch. In most cases, you’re trading long-term returns for immediate income. Yields can fluctuate based on market conditions, too, so don’t take them as a guarantee.
Additionally, the tax efficiency of these assets can vary, so prioritizing them for a tax-advantaged account, such as a Roth IRA, is often a smart move.
With that in mind, here are seven of the best high-yield ETFs for income investors in 2025:
| ETF | Distribution rate | Expense ratio |
| VanEck CLO ETF (ticker: CLOI) | 9.0% | 0.40% |
| Roundhill Small Cap 0DTE Covered Call Strategy ETF (RDTE) | 74.5% | 0.95% |
| Roundhill Bitcoin Covered Call Strategy ETF (YBTC) | 25.2% | 0.95% |
| YieldMax Magnificent 7 Fund of Option Income ETFs (YMAG) | 84.2% | 1.28% |
| Simplify Volatility Premium ETF (SVOL) | 14.9% | 0.72% |
| Invesco QQQ Income Advantage ETF (QQA) | 10.3% | 0%* |
| Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA) | 9.3% | 0%* |
*Until June 30, 2025, when it is set to revert to 0.29%.
VanEck CLO ETF (CLOI)
More exotic fixed-income securities like collateralized loan obligations, or CLOs, are gaining popularity. CLOs are pools of private loans bundled into a security. They pay yields that typically exceed those of corporate bonds, have higher recovery rates in the rare event of default and possess floating interest rates, which make them more resilient to rate hikes — a key weakness of traditional bonds.
ETFs like CLOI can provide access to a diversified portfolio of these instruments. This ETF does not track a benchmark index. Instead, its advisor, PineBridge, actively manages the portfolio at a reasonable 0.4% expense ratio. A little over 69% of the ETF is rated investment-grade with a minimum rating of “BBB,” with most holdings rated “A” and higher. CLOI currently pays a 9% distribution yield.
Roundhill Small Cap 0DTE Covered Call Strategy ETF (RDTE)
Covered-call strategies evolved in recent years with the launch of ETFs that sell zero-day-to-expiry (0DTE) options. For example, RDTE provides overnight exposure to the Russell 2000 Index, while selling a short-term out-of-the-money call option on the same index every morning. This approach benefits from the rapid time decay of 0DTE options, which can allow for enhanced premium collection and income.
“RDTE capitalizes on small-cap stocks’ propensity for greater volatility relative to large caps, presenting an opportunity to pursue both income generation and capital appreciation,” explains Thomas DiFazio, ETF strategist at Roundhill Investments. Because the Russell 2000 is a volatile index, RDTE — which has only been trading since September 2024 — has been able to generate a 74.5% distribution yield. It is also one of the few ETFs to pay weekly distributions.
Roundhill Bitcoin Covered Call Strategy ETF (YBTC)
The launch of spot Bitcoin ETFs like the iShares Bitcoin Trust ETF (IBIT) in January 2024 made it possible for YBTC to exist. This ETF uses IBIT’s options chain to implement a “poor man’s covered call” strategy. By buying a long IBIT call and selling a short IBIT put at the same strike price, YBTC creates a synthetic stock position using less capital. Then, to generate income, the ETF sells covered calls on IBIT.
“YBTC offers exposure to Bitcoin, subject to an upside cap, while offering the potential for income,” DiFazio explains. “Demand for alternative solutions to Bitcoin exposure also influenced YBTC’s transition from a monthly to weekly distribution cadence.” The high volatility of Bitcoin and IBIT results in a very high 25.2% distribution rate for YBTC. The ETF charges a 0.95% expense ratio.
[SEE: Best-Performing ETFs.]
YieldMax Magnificent 7 Fund of Option Income ETFs (YMAG)
Income investors looking for exposure to the “Magnificent Seven” stocks — Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA) and Tesla Inc. (TSLA) — can use YMAG. This ETF does not hold any of the Magnificent Seven stocks directly. Instead, it holds seven other YieldMax single-stock income ETFs.
The ETFs held by YMAG also do not hold stocks. As with YBTC, these YieldMax ETFs combine a short put and a long call to create a synthetic stock position. Then the ETF sells a call to generate income. Because the Magnificent Seven stocks are fairly volatile, YMAG is able to generate an 84.2% distribution rate — but keep in mind this can fluctuate, and the ETF retains the downside risk of its underlying holdings.
Simplify Volatility Premium ETF (SVOL)
The VIX, often called Wall Street’s “fear gauge,” measures expected market volatility over the next 30 days. Because the VIX is mean-reverting — tending to fall back to its average over time — shorting it can generate steady gains. That’s exactly what SVOL does to produce a 14.9% distribution yield and a five-star Morningstar rating, signifying superior risk-adjusted returns compared to its peer category.
The alternative income ETF uses derivatives to deliver returns between 0.2x to 0.3x the inverse of the Cboe Volatility Index (VIX) Short-Term Futures Index. To guard against potential losses during sudden VIX spikes, SVOL also hedges with out-of-the-money VIX call options, which have convexity. This means they gain value exponentially as volatility surges, providing a built-in safety net.
Invesco QQQ Income Advantage ETF (QQA)
Looking to invest in the Nasdaq-100 but with a focus on income over capital appreciation? Consider QQA, which currently pays a 10.3% distribution rate. “The high income comes from a conservatively managed options-based income overlay, without the use of leverage, which also serves to dampen market volatility,” says John Burrello, senior portfolio manager at Invesco.
QQA starts by actively selecting a basket of 33 companies from the Nasdaq-100 Index. Then, the ETF employs equity-linked notes, or ELNs, similar to those used by the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) for exposure to a covered-call strategy on the Nasdaq-100. However, QQA is significantly cheaper, with a 0.29% expense ratio, which has been waived to 0% until June 30, 2025.
Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA)
Worried about concentration risk in regular broad-market index ETFs? For an income-focused alternative, consider RSPA. As suggested by its name, this ETF equally weights an actively selected subset of S&P 500 stocks before deploying a covered-call overlay provided by ELNs. Currently, the ETF is paying a 9.3% distribution yield, with an ex-distribution date usually landing in the second-to-last week of each month.
“RSPA seeks to enable investors to stay invested in a diversified equity portfolio with the addition of high monthly income and a smoother return profile than the broader market,” Burrello says. “It offers a less concentrated portfolio than funds tied to the market-capitalization-weighted S&P 500, which is heavily weighted toward the largest companies.” As with QQA, RSPA’s 0.29% expense ratio is also waived to 0% until June 30, 2025.
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7 High-Yield ETFs for Income Investors originally appeared on usnews.com
Update 01/06/25: This story was previously published at an earlier date and has been updated with new information.
