Generating passive income can bring financial freedom. If you can collect enough income from passive sources to cover your living expenses, you won't have to worry about working anymore to pay the bills. That can lift a huge weight from your shoulders.
The problem is that it often takes a lot of money to make a lot of passive income. So, it's important to maximize the passive income your investments produce, as it can help you reach your financial freedom goal sooner. One way to do that is to invest in higher-yielding assets, like high-yield dividend stocks. The Global X SuperDividend ETF (SDIV +0.19%) makes it easy to maximize your yield and generate more income.
A super-high-yielding ETF
Global X SuperDividend ETF is an exchange-traded fund (ETF) focused on stocks with the highest dividend yields. It invests in 100 of the world's highest-yielding equity securities.
The ETF's distribution yield over the last 12 months is an eye-popping 10.9%. For comparison, the dividend yield on the S&P 500 is currently around a 20-year low of 1.2%. To put this into perspective, a $10,000 investment in this fund would have produced $1,090 of passive income over the past year (compared to only about $120 for a similar investment in an S&P 500 index fund).
With this ETF making distributions each month, investors collect roughly $90 every 30 days or so. That frequency is worth highlighting since most of our bills are due monthly. So, this ETF can enable investors to match their income with their monthly expenses.
Going wherever there's yield
The fund offers global exposure to high-yielding dividend stocks. Currently, about a third of its holdings are U.S.-listed stocks, followed by Hong Kong (15%) and Britain (8%). That global exposure adds diversification and lowers interest rate risk.
The fund also offers some diversification across various sectors. It currently apportions the highest weighting to energy (24.1%), financial services (20.9%), materials (19.4%), and real estate investment trusts, or REITs (14.3%). Some of its top holdings include:
- Kinetic Holdings (KNTK +0.34%): The fund has a 1.6% allocation to this U.S. pipeline company. It currently has a 5.1% dividend yield. Kinetic Holdings recently increased its already high-yielding dividend by 4%, fueled by acquisitions and organic growth initiatives. The company plans to continue increasing its high-yielding payout in the future as it expands its midstream network.
- Gladstone Commercial (GOOD +1.21%): The ETF has a 1.3% allocation to this U.S.-listed diversified REIT. Gladstone pays a monthly dividend that currently yields 7%. The company primarily owns office and industrial properties. It has been focusing on acquiring industrial real estate because the headwinds facing the office sector forced the REIT to reduce its dividend at the end of 2022.
- Brandywine Realty Trust (BDN +4.44%): The fund has a 1.3% allocation to this U.S.-listed office REIT. The REIT has a 10.8% dividend yield, even after a dividend cut in late 2023 due to the office sector's headwinds. Brandywine has been working to overcome those challenges by investing in high-value opportunities in key markets like Austin while selling off non-core properties.
NYSE: BDN
Key Data Points
The high yield comes with a higher risk profile
High-yield dividend stocks offer the potential to earn a high income stream. However, their dividend yields are often high for a reason. These companies are at a higher risk of reducing their dividends if they face financial setbacks. That's exactly what has happened to Gladstone Commercial and Brandywine Realty in recent years. Headwinds facing their office property portfolios forced the REITs to reduce their dividends.
Because of that, investors in the Global X SuperDividend ETF need to keep risk in mind. While the portfolio's diversification will help mute some risk, it owns a basket of generally higher-risk dividend stocks. If there's a severe recession, these companies will likely be among the first to cut their dividends, which could impact the fund's distributions.
The potential to collect a lot of income each month
The Global X SuperDividend ETF is an enticing option for those seeking to maximize the amount of passive income they make each month. However, it is a higher-risk investment, which investors need to think about. If you're looking for bankable income, you might want to consider a lower-risk alternative. On the other hand, if you want to maximize your income, this ETF certainly has that potential.
