The S&P 500 has historically averaged a return of around 10% per year -- making it a powerful tool for growing your wealth over time. But its gains have been much bigger lately, with 2023 and 2024 each notching returns of more than 20%. In 2025, we aren't even through August and the S&P 500 is up 9.7% year to date.
The S&P 500 has been going up faster than its dividend growth rate, which has pushed its average yield down to just 1.2% -- as evidenced by the largest low-cost exchange-traded fund (ETF) that tracks the index -- the Vanguard S&P 500 ETF (VOO -0.54%). For context, the S&P 500 yielded around 2% a decade ago.
Here's why the Vanguard Mega Cap Value ETF (MGV -0.29%), Vanguard Energy ETF (VDE 0.46%), and the JPMorgan Equity Premium Income ETF (JEPI -0.53%) may be better options for income investors right now.
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Betting on the biggest value stocks
The simplest way to achieve diversification and get a higher yield than the S&P 500 is by finding ETFs that don't have so much of their weight in megacap growth stocks.
The Vanguard Mega Cap Value ETF doesn't hold "Ten Titans" growth stocks like Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Broadcom, or Tesla. Instead, many of its top holdings are blue chip dividend payers. By focusing on the largest value stocks, the fund achieves a yield of 2.1%. And its expense ratio of 0.07% is only slightly higher than the 0.03% expense ratio of the Vanguard S&P 500 ETF.
Passive income is just one element of the fund's investment thesis. The ETF has produced a total return of 185% over the last decade, but 120 percentage points of that came from capital gains. All told, this ETF is a good choice for investors who want more passive income, but don't want to focus solely on yield.
A high-yield sector at a great value
The Vanguard Energy ETF tracks the Spliced U.S. Investable Market Energy 25/50 Index, which itself is built to reflect the overall performance of the energy sector. Its holdings are dominated by a handful of companies. ExxonMobil, Chevron, and ConocoPhillips combine to make up 45% of the fund.
It's true that this level of concentration runs counter to the common investing strategy of diversification. But in the case of the energy sector, a heavy focus on integrated majors like ExxonMobil and Chevron makes it a more reliable source for passive income.
Despite the volatility of oil and natural gas prices, ExxonMobil and Chevron have increased their dividends annually for 42 and 38 years, respectively. Their balance sheets have only gotten better in recent years, as both companies prioritize free cash flow generation from oil and natural gas, as well as longer-term investments in renewable energy and low-carbon opportunities.
The Vanguard Energy ETF yields 3.1% and its expense ratio is just 0.09%. The fund also sports a price-to-earnings ratio of just 16.3, making it a great choice for value investors seeking high-yield opportunities.
An ETF that cuts you a check each month
The JPMorgan Equity Premium ETF is an actively managed ETF that seeks to capture a majority of the returns produced by the S&P 500, but with lower volatility. It accomplishes this objective by investing in the S&P 500 and using equity-linked notes and covered call options to generate income.
Without getting too far in the weeds, the fund works by essentially exchanging most of the upside potential of the S&P 500 for monthly passive income. Here's how that works in practice.
At the time of this writing, the Vanguard S&P 500 ETF is $591.57 per share. A Sept. 19, 2025, $600 strike call is roughly $5.60 per share. By holding shares of the Vanguard S&P 500 ETF and then selling the call options, the seller books a guaranteed $5.60 per share gain in exchange for capping their upside potential in that Vanguard S&P 500 ETF holding at $600 per share.
$5.60 divided by the cost basis of $591.57 is roughly a 1% gain -- which may not sound like much. But do that each month for a whole year, and that's a lot of passive income. Which is why the JPMorgan Equity Premium ETF has a 30-day SEC yield of 7.92% and a 0.35% expense ratio to compensate for the active management.
Three ETFs for boosting your passive income
Low-cost S&P 500 funds like the Vanguard S&P 500 ETF are excellent tools for investing in the U.S. stock market, but that doesn't mean they are a good fit for all investors.
The most glaring issues with the S&P 500 today are its elevated valuation and low yield. There are valid reasons why the S&P 500 is relatively expensive. But its low yields may persist for the foreseeable future. So income-oriented investors may want to look elsewhere.
