The two most important potential benefits of securities investing are capital appreciation and current income. Capital appreciation usually occurs when the inherent value of a security increases and its market value rises accordingly. Current income comes in the form of regular dividend payments.
Significant capital appreciation can happen very quickly — it’s not unheard of for a stock, mutual fund or exchange-traded fund (ETF) to rocket up 10% more in just a few trading days — but it usually happens over an extended period that sometimes covers several market cycles. Income, on the other hand, is generally paid out quarterly, but some securities make monthly distributions.
[Sign up for stock news with our Invested newsletter.]
Many investors list current income as their primary investment objective. They can be called dividend investors or income investors, and include retirees and others who depend on dividends as a primary source of income. For a variety of reasons, many dividend investors prefer monthly income over quarterly payments.
The foremost reason for preferring monthly dividends is that, due to the time value of money, it’s always better to collect your money sooner rather than later. In practical terms, a dividend doesn’t benefit an investor until it’s paid, and once it is paid, it can’t be rescinded. This is especially important in a fast-moving bull market when it’s critical to get cash invested — or reinvested — as quickly as possible to not miss out on gains, or in an inflationary period where the buying power of cash is falling quickly.
Monthly dividend ETFs often include preferred stock funds, real estate investment trust (REIT) funds, equity funds, leveraged income funds, bank loan funds and preferred stock funds.
Not every ETF on this list is suitable for every investor — it’s important to do your own research and seek professional advice if appropriate — but these high-quality monthly dividend ETFs are worth considering:
| Dividend ETF | Expense Ratio | Forward Annual Dividend Yield |
| Fidelity Total Bond ETF (ticker: FBND) | 0.36% | 4.7% |
| iShares TIPS Bond ETF (TIP) | 0.18% | 2.9% |
| Invesco Preferred ETF (PGX) | 0.51% | 6.2% |
| Invesco Senior Loan ETF (BKLN) | 0.65% | 8.1% |
| SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) | 0.14% | 4.7% |
| SPDR Bloomberg High Yield Bond ETF (JNK) | 0.40% | 6.6% |
| Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) | 0.30% | 3.4% |
Fidelity Total Bond ETF (FBND)
Boston-based Fidelity Investments is one of the oldest and largest asset managers in the world. The firm has over $5 trillion in assets under management. The $18.5 billion bond ETF, FBND, is one of Fidelity’s premier monthly dividend bond ETFs.
FBND is not a strict replication index fund, but it does use the Bloomberg U.S. Universal Bond Index as a benchmark, and the portfolio managers strive for the same level of interest rate risk as the benchmark.
It achieves that objective by investing a minimum of 80% of the fund’s assets in bonds from within the index, along with repurchase agreements that correspond to them. It enhances the fund’s yield by purchasing lower-quality bonds with the remaining 20% of capital, but it does so in a way that does not adversely affect the overall credit quality of the ETF in relation to the index.
As of June 17, the fund’s yield stood at 4.7%. FBND’s expense ratio comes in at 0.36%, or $36 per year for every $10,000 invested.
iShares TIPS Bond ETF (TIP)
TIP is a $14 billion Treasury inflation-protected securities, or TIPS, monthly income bond index fund in the iShares family of ETFs owned by BlackRock Inc. (BLK), the largest asset management firm in the world.
The fund’s objective is to mirror the performance of the ICE U.S. Treasury Inflation Linked Bond Index. That benchmark includes roughly 50 individual TIPS with a wide range of maturities, from one-year-remaining maturity to more than 15 years remaining.
TIPS are similar to traditional Treasury bonds in that they are backed by the full faith and credit of the U.S. government. They differ because their principal is frequently adjusted up or down based on the rate of inflation, or, if prices are falling, deflation. The adjustments guarantee that an investor’s purchasing power is preserved even over inflationary economic cycles.
TIP is the right fund for conservative investors who are worried that higher inflation might reemerge.
The fund currently yields 2.9%. With an expense ratio of just 0.18%, TIP can be considered a low-cost fund.
Invesco Preferred ETF (PGX)
The ICE BofAML Core Plus Fixed Rate Preferred Securities Index is a preferred stock benchmark that includes about 260 fixed-rate preferred stocks. PGX is a $3.9 billion ETF that seeks to replicate the performance of that index. This fund can be considered a single security stand-in for the U.S. fixed-rate preferred stock universe.
Most of the stocks in the fund have a credit rating of BBB- or better by S&P or Baa3 or better by Moody’s. There are, however, some lower-credit-quality names in the portfolio, but in the opinion of the portfolio managers and the index administrator, the inclusion of those stocks does not present undue risk when the relatively high dividend yield is considered.
[Read: 15 Best Dividend Stocks to Buy Now]
As the name of the fund implies, there are no floating-rate or adjustable-rate securities in the fund. Investors should be aware that fixed-rate preferred stocks will be more interest-rate sensitive than the alternative.
The fund’s current yield sits at 6.2%, and it has an expense ratio of 0.51%.
Invesco Senior Loan ETF (BKLN)
This fund invests in a unique type of security called bank loans. Bank loans are pools of collateralized bonds bought almost exclusively by institutional investors such as insurance companies, pension funds and ETFs. They are created by Wall Street investment bankers who buy business loans from commercial banks and bundle them into investable securities.
BKLN replicates the performance of the Morningstar LSTA U.S. Leveraged Loan 100 Index. The index was designed to be a reliable representation of the large, leveraged bank loan bond universe. The word “leveraged” in the name of the benchmark means that the included loans are made to companies with fairly large debt levels. This is done to enhance yield and does not indicate that BKLN buys securities on margin or buys highly leveraged derivative securities.
BKLN features a yield of just over 8% and a reasonable expense ratio of 0.65%.
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
Conservative investors looking for monthly income from Treasury bills — short-term, zero-coupon government bonds with maturities of 90 days or less — may want to look at BIL. This fund is a U.S. government debt index fund that closely tracks the Bloomberg 1-3 Month U.S. Treasury Bill Index.
The fund has net assets of $44 billion and a low expense ratio of just 0.14%. The objective of the fund is to match the performance of the benchmark after expenses are subtracted. The current yield for BIL is 4.7%.
The interest rate environment — even in the T-bill market — has been unpredictable, or, as some might say, erratic. For this reason, BIL should not be considered a substitute for a deposit account or a money market fund. Still, this is a conservative fund with a healthy dividend yield.
SPDR Bloomberg High Yield Bond ETF (JNK)
JNK invests in a type of security Wall Street calls “junk bonds.” While it’s true that this fund is not suitable for very conservative monthly income investors, it’s also not as aggressive as some investors think. On Wall Street, the term “junk bond” applies to any bond with a less-than-investment-grade credit rating. They are more volatile than higher-quality bonds, but the trade-off is that they have an appreciably higher yield.
JNK has net assets of $7.2 billion and an expense ratio of 0.4%. The fund mirrors the Bloomberg High Yield Very Liquid Index. It invests in higher-yielding, lower-credit-quality, dollar-denominated bonds issued by U.S. corporations.
The liquidity of the issues in the portfolio is an important consideration. Savvy junk bond investors want to invest in securities they know they can sell if something goes wrong in the economy, or if a better opportunity presents itself.
The current yield of this fund is 6.6%.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
SPHD is an equity fund that seeks to provide investors with a healthy dividend yield and a reasonable level of volatility. The fund has $3.2 billion in net assets, an expense ratio of 0.3% and a current dividend yield of 3.4%. The objective of the fund is to track the performance of the S&P 500 Low Volatility High Dividend Index.
The fund, per its benchmark, has a simple methodology. It owns the 50 highest-yielding stocks in the S&P 500, but instead of weighting the holdings by market cap, it weights them by volatility. In simple terms, stocks with lower documented volatility receive bigger capital allocations. The intended result is a high-quality stock fund with a decent yield and lower overall volatility. In today’s unpredictable market, SPHD may be just what many investors are looking for.
Index integrity is achieved by rebalancing and reconstituting twice a year in January and July. The frequent rebalancing means very little tracking error after expenses are subtracted.
More from U.S. News
7 Best Cheap Stocks Under $20 to Buy Today
11 Top Stocks to Buy in all 11 Sectors
The 5 Best Robotaxi Stocks That Aren’t Tesla
The 7 Best Monthly Dividend ETFs to Buy Today originally appeared on usnews.com
Update 06/18/25: This story was published at an earlier date and has been updated with new information.