According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved. The more passive income can help cover rising costs, such as mortgages, insurance, taxes, and other expenses, the easier it is for investors to set aside money for future needs as they prepare for retirement. Dependable, recurring dividends—especially those paid monthly—are a recipe for success.
Our 24/7 Wall St. passive income stock research database is a reliable source of the best investment ideas. We have identified four ultra-high-yield exchange-traded funds (ETFs) that can be purchased for just $25,000 each, totaling $100,000, yet have the potential to generate $1,000 in passive income every month. This passive income portfolio is best suited for individuals with a higher risk tolerance. However, using ETFs with many more holdings and assets than individual companies offers a far wider range of broad diversification.
Why do we cover ultra-high-yield ETFs?
While not suited for everybody, those trying to build strong passive income streams can do exceptionally well with some of these ETFs in their portfolios. Paired with more conservative blue-chip dividend ETFs or individual stocks, investors can employ a barbell approach to generate substantial passive income streams.
Invesco KBW High Dividend Yield Financial Portfolio ETF
While focused on the financial sector, this may be a home run, as many on Wall Street are bullish on financials for the rest of 2025 and next year. Invesco KBW High Dividend Yield Financial Portfolio ETF (NASDAQ: KBWD) is based on the KBW Nasdaq Financial Sector Dividend Yield Index. The fund generally will invest at least 90% of its total assets in the securities of publicly listed financial companies with competitive dividend yields in the United States, which comprise the index.
Keefe Bruyette & Woods compiles, maintains, and calculates the Index, which is a modified-dividend yield-weighted index of companies principally engaged in the business of providing financial services and products, as determined by the Index provider. The fund and the index are rebalanced and reconstituted quarterly.
Trading at just over 10 times forward earnings, with a price/book ratio of 1.21, this is a stellar buy for passive income-starved investors. It is worth noting that the expenses are higher than those of many funds due to the fund’s specialized investment strategy. Toss in a 13.01% yield paid monthly, and investors have great total return potential.
$25,000 will buy 1,850 shares, which pay $0.14775 each month for a total of $273.
BlackRock Science and Technology Term Trust
With a focus on two red-hot sectors, this fund is a perfect fit for those with a higher risk tolerance, with a monster 12% dividend. BlackRock Science and Technology Term Trust (NYSE: BSTZ) is a diversified, closed-end management investment company. The trust’s investment objective is to provide income and total return through a combination of current income, current gains, and long-term capital appreciation.
The trust seeks to achieve its investment objective by investing, under normal market conditions, approximately 80% of its total assets in equity securities of the United States (U.S.) and non-U.S. science and technology companies in any market capitalization range.
It seeks to pursue this goal primarily by investing in a portfolio of equity securities and also by employing a strategy of writing (selling) call and put options. The Trust invests in various industries, including software, semiconductors and semiconductor equipment, information technology (IT) services, financial services, broadline retail, entertainment, and diversified consumer services. One of our top 24/7 Wall Street writers recently did an in-depth look at this outstanding fund.
$25,000 will purchase 1,135 shares, which pay $0.21821 and deliver $248 per month.
Global X NASDAQ 100 Covered Call ETF
Covered call ETFs have become one of the top income ideas across Wall Street over the last few years, and this one offers a hefty 11.5% dividend. Global X NASDAQ 100 Covered Call ETF (NASDAQ: QYLD) seeks to provide investment results that will generally correspond to the price and yield performance of the CBOE NASDAQ-100 BuyWrite Index. The fund will invest at least 80% of its total assets in common stocks included in the Index. It employs a replication strategy to track the index and has made monthly distributions for 12 years running.
The Global X S&P 500 Covered Call ETF (XYLD) follows a “covered call” or “buy-write” strategy, in which the fund buys the stocks in the S&P 500 Index and “writes” or “sells” corresponding call options on the same index. This is a strategy that tends to work well in up or down markets. If the individual stock trades higher and is called away, the fund retains the option premium and any capital gain realized on the underlying shares. If the market trades lower, the fund keeps the option premium and rewrites the option for a different month and strike price.
$25,000 will purchase 1,485 shares, which pay $0.1704 every 30 days, for a total of $253.
Neos S&P 500(R) High Income ETF
This is another top ETF that utilizes the Buy/Write strategy, and it has done so in a highly effective manner, offering a substantial 13.91% dividend yield. Neos S&P 500 High Income ETF (CBOE: SPYI) is an actively-managed ETF that seeks to achieve its investment objective by investing in a portfolio of stocks that make up the S&P 500 Index and a call options strategy, which consists of a mix of written (sold) call options and long (bought) call options on the S&P 500 index.
Under certain circumstances, the call options strategy may include transactions with covered call options. The fund seeks to generate high income from the premiums earned from the SPX call options as well as the dividends received from the fund’s equity holdings.
The SPX call options aim to generate a net credit, meaning that the premium received from selling the call options will exceed the cost of buying the long, out-of-the-money SPX call options. The SPX options strategy is intended to generate high monthly income in a tax-efficient manner, with the potential for upside participation when the underlying equity index appreciates.
$25,000 will purchase 482 shares, which will pay $0.5196 every month for a total of $251.
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