An 8% average yield from income stocks? Consider these 3 ETFs for passive income

Exchange-traded funds (ETFs) can be great ways to harness the power of income stocks. In most cases, they provide instant diversification across dozens (if not hundreds) of dividend-paying companies. The result can be a more stable stream of passive income over time.

Three particular UK ETFs have grabbed my attention of late. These are:

• Global X SuperDividend ETF (LSE:SDIP) — 9.5% dividend yield
• iShares World Equity High Income UCITS ETF (LSE:WINC) — 9.7% dividend yield
• L&G UK Quality Dividends Equal Weight UCITS ETF (LSE:LDUK) — 4.9% dividend yield

Want to know what makes them top dividend funds? Read on.

Global superstar

Global X SuperDividend “invests in up to 100 of the highest dividend yielding equity securities in the world“, which it reviews four times a year. The result is an ultra-diversified portfolio whose returns aren’t reliant on favourable economic or interest rate conditions in one or two territories.

The fund’s largest represented sector is financial services, representing 29% of holdings. Meanwhile, its most represented country is the US (33%).

Unlike some ETFs, this fund is focused solely on equities. This leaves it more sensitive to stock market movements, but on the plus side, this allocation can also mean better capital growth alongside healthy dividends.

One final thing: this GlobalX product pays dividends 12 times a year, giving investors access to their income sooner than many other funds.

500+ holdings

iShares World Equity High Income is another ETF that’s well diversified by region. In total, it holds 508 different global shares, with its largest represented industry being information technology (28%).

This can have drawbacks during downturns when tech spending can fall. But on the flip side, it can mean excellent dividend growth during good times. What’s more, no one stock makes up more than 4.8% of the portfolio today (Nvidia), which spreads out the risk.

What I also like about this fund is it holds cash as well as US government bonds. The result? It can mean more predictable dividends and lower volatility than ETFs that just hold stocks.

UK income stocks

L&G UK Quality Dividends Equal Weight focuses on the world’s most dividend-friendly place in the world. London’s rich culture of paying dividends means this ETF delivers larger and more reliable shareholder payouts than most other funds.

But it does this with a twist. By selecting income stocks that have the same starting weight, it spreads its portfolio more evenly across companies, preventing bigger firms dominating its holdings. It currently owns shares in 42 different companies.

Financial services providers are especially well represented, accounting for 60% of the ETF’s capital. On one hand, this means less sector diversification than certain other funds. However, it also means greater exposure to an industry that has historically generated strong cash flows that have underpinned large and growing dividends.

Should you invest £5,000 in Legal & General Ucits ETF Plc – L&g Uk Quality Dividends Equal Weight Ucits ETF right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Ucits ETF Plc – L&g Uk Quality Dividends Equal Weight Ucits ETF made the list?

Royston Wild does not hold any positions in the companies mentioned.