It’s difficult to be enthusiastic about the financial markets in 2025. As of the close on April 16, the broad-market S&P 500 was down 10.3% year to date, and the tech-heavy Nasdaq composite has fared even worse, with a decline of 15.5% for the same period. There’s good historical evidence that the markets will eventually resume their upward trek, but the timing of the turnaround remains in question.
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Does that mean investors should sit on the sidelines and wait this market out? That’s probably not a good idea. According to recent remarks by Federal Reserve Chair Jerome Powell, President Donald Trump’s proposed tariff regime was larger than the economy expected and could lead to larger-than-expected consequences. Powell was talking about inflation, and his words were a warning that we may again see the insidious effects of rising prices on our spending power.
In other words, smart investors should take steps right now to mitigate the effects of possible rising inflation by buying securities that can hedge against that outcome. But what, exactly, should you buy?
When bull markets stall and the economic picture is uncertain, many investors turn to monthly dividend exchange-traded funds, or ETFs. Monthly dividends can make an excellent hedge against inflation and can effectively mitigate — though not eliminate — some of the worst effects of a market downturn. And ETFs are some of the most convenient and cost-effective ways to secure a dependable monthly dividend income.
You might think a list of the best monthly dividend ETFs would include only bond funds; that’s not the case here. While bond funds are a natural choice for current income, many categories of income-generating securities have associated monthly dividend ETFs. They include business development companies (BDCs), real estate investment trusts (REITs), master limited partnerships (MLPs) and preferred stock ETFs. Not every ETF on this list will be right for every investor, but researching the funds on this list is a good place for any income investor to start:
| ETF | Forward Dividend Yield* |
| iShares 0-3 Month Treasury Bond ETF (ticker: SGOV) | 4.9% |
| FT Energy Income Partners Enhanced Income ETF (EIPI) | 7.9% |
| SPDR Bloomberg 1-10 Year TIPS ETF (TIPX) | 3.5% |
| Invesco Preferred ETF (PGX) | 6.1% |
| Invesco KBW Premium Yield Equity REIT ETF (KBWY) | 9.3% |
| iShares iBoxx $ High Yield Corporate Bond ETF (HYG) | 5.9% |
| iShares Floating Rate Bond ETF (FLOT) | 5.6% |
*As of April 16 close.
iShares 0-3 Month Treasury Bond ETF (SGOV)
Choppy, unpredictable markets often prompt an investment phenomenon Wall Street calls a “flight to safety,” or sometimes a “flight to quality.” The trend is characterized by nervous investors selling or avoiding risky securities and buying assets perceived as safer and more secure.
There are few asset classes safer than short-term Treasury bonds with remaining maturities of three months or less. Treasury bond interest and principal are guaranteed by the U.S. government, and short-term bonds don’t fluctuate nearly as much as long-term bonds do.
SGOV is a $39 billion index ETF that tracks the ICE 0-3 Month U.S. Treasury Securities Index, which, as its name implies, owns U.S. Treasury securities with 90 days or less to maturity.
To the surprise of many interest rate watchers, short-term rates have not fallen much as inflation has subsided. The result is higher rates than expected on high-quality, short-term bond ETFs like SGOV.
This fund has a low expense ratio of 0.09% and boasts a current yield of 4.9%.
FT Energy Income Partners Enhanced Income ETF (EIPI)
EIPI is an actively managed ETF with over $954 million in net assets. The fund invests in dividend-paying energy stocks and in units of high-income energy MLPs.
Energy is a high-cash-flow industry. The markets, the economy and oil prices will all go up and down, but energy demand continues to grow. That’s what makes EIPI a dependable monthly dividend ETF in today’s unpredictable stock market.
EIPI holds energy giants like Exxon Mobil Corp. (XOM) and Shell PLC (SHEL), but also invests in many energy-focused MLPs from the downstream (exploration and production), midstream (transportation, storage and processing), and upstream (refining and distribution) segments of the energy industry. The primary businesses of most companies in the fund are oil and natural gas, but EIPI gives investors significant exposure to renewable energy as well.
The fund’s expense ratio of 1.11% reflects its active management style. EIPI has a current yield of 7.9%.
SPDR Bloomberg 1-10 Year TIPS ETF (TIPX)
In remarks made on April 16, Powell let the markets know that he’s a little bit worried about the possible reemergence of high inflation. If you share Powell’s concerns, you may want to consider allocating some capital to TIPX.
TIPX tracks the Bloomberg 1-10 Year U.S. Government Inflation-Linked Bond Index, which is made up of U.S. Treasury inflation-protected securities, or TIPS, with maturities of between one and 10 years. TIPS are a unique government bond designed to protect investors’ purchasing power by adjusting the principal and interest based on the inflation rate. In short, when inflation goes up, the principal and interest of TIPS go up with it.
Of course, all the bonds in the TIPX portfolio are backed by the full faith and credit of the U.S. government. That, and the fact that the fund does not hold any bonds with maturities beyond 10 years, should give investors the peace of mind they want in today’s volatile markets.
The fund’s expense ratio is 0.15%. It has net assets of $1.7 billion and a current yield of 3.5%.
Invesco Preferred ETF (PGX)
PGX tracks the performance of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. That index of more than 260 preferred stocks is considered a fairly accurate representation of the entire universe of U.S. preferred securities.
PGX is well diversified across industry sectors, and holds mostly investment-grade securities with minimum credit ratings of BBB- by S&P or Baa3 by Moody’s. There are some lower credit qualities in the portfolio, but, in general, this ETF is appropriate for investors who want a healthy yield without undue risk.
The index and, by extension, the fund purposefully exclude floating-rate and adjustable-rate securities. Fixed-rate preferred stocks tend to be more sensitive to changes in interest rates, so investors can expect the fund to go down when rates are rising and go up when rates start to fall.
Net assets are $4.2 billion, and the expense ratio of the fund is 0.51%. PGX has a current yield of 6.1%.
Invesco KBW Premium Yield Equity REIT ETF (KBWY)
Historically, investors have been able to count on commercial real estate for dependable income and capital appreciation over the long run. That’s why right now is a good time to consider an investment in KBWY.
KBWY follows the KBW Nasdaq Premium Yield Equity REIT Index, a benchmark administered by the commercial real estate and financial services investment bank Keefe, Bruyette & Woods. The fund invests in domestic small- and mid-cap equity REITs with highly competitive dividend yields.
This ETF is dividend yield-weighted rather than cap-weighted. There are only 28 stocks in the index, but REITs with higher yields will have a greater impact on the dividend and the capital appreciation performance of the fund.
KBWY is a relatively small fund with a relatively high current yield. The fund has net assets of $215 million and a yield of 9.3%. The expense ratio comes in at 0.35%.
iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
HYG is a $15 billion index ETF based on the Markit iBoxx USD Liquid High Yield Index. Although HYG is an index fund, it does not employ a strict replication methodology. Instead, HYG is a rules-based index fund, meaning the portfolio managers follow a stated investment criterion, but do have some leeway as to security selection and sizing.
Investing in a high-yield “junk bond” fund in this market environment may seem counterintuitive, but there are several reasons why an ETF like HYG can be attractive in times like these. First is the fact that historically, high-yield securities have had a low correlation to the stock market. In other words, HYG can enhance a portfolio’s diversification profile and possibly lower overall volatility even though it invests in a volatile and higher-risk asset class. Second is the fact that high-yield bonds can sell at good values during tough economic times. This is due to the perception of higher risk attached to junk bonds. And finally, there is the yield, which is generally higher than dividend-paying stocks or higher-credit-quality bonds.
In short, the investment rationale for HYG is that the elevated risk of owning high-yield bonds may be worth the higher income and the potential for growth.
The current yield for HYG is 5.9%, and the fund’s expense ratio is 0.49%.
iShares Floating Rate Bond ETF (FLOT)
FLOT is the right monthly dividend ETF for investors who don’t know where interest rates are going but, nonetheless, want a respectable yield while avoiding undo volatility.
FLOT is an $8.9 billion ETF designed to mirror the performance of the Bloomberg U.S. Floating Rate Note < 5 Years Index. That unique benchmark is made up of investment-grade, floating-rate corporate bonds with maturities between one month and five years.
Floating-rate bonds are debt securities issued by corporations — usually financials, industrials or public utilities — that have interest rates that periodically reset based on a benchmark rate such as the secured overnight financing rate, or SOFR, plus a fixed-rate spread. Because floating-rate bonds adjust with the interest rate market, they can be significantly less volatile than fixed-rate bonds.
FLOT has a reasonable expense ratio of 0.15% and a current yield of 5.6%.
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The 7 Best Monthly Dividend ETFs to Buy Now originally appeared on usnews.com
Update 04/17/25: This story was published at an earlier date and has been updated with new information.
