In these times of market volatility, some investors might want an investment that offers some level of stability and reliability, such as a fund that regularly pays out income.
Monthly dividend ETFs are one option. But although these funds offer monthly income streams from a single investment, they do have some potential downsides.
What is a monthly dividend ETF?
A monthly dividend ETF, as its name implies, is an exchange-traded fund that pays out dividends every month. Different monthly dividend ETFs invest in different kinds of assets and use different strategies to achieve this.
Some, like the JPMorgan Equity Premium Income ETF (JEPI), actively trade stocks to generate capital gains that can be paid out to shareholders monthly. Others, like the iShares Preferred and Income Securities ETF (PFF), invest in dividend-paying stocks such as preferred stock. Then there are monthly dividend ETFs that generate their monthly dividend payments from bonds, such as the State Street SPDR Portfolio High Yield Bond ETF (SPHY), or from other types of debt securities such as collateralized loan obligations, as in the case of the Janus Henderson AAA CLO ETF (JAAA).
Top 7 monthly dividend ETFs by yield
Below is a list of the top 7 high-dividend ETFs (defined here as a yield of 3% or higher) that pay dividends monthly, in order of dividend yield. To weed out overly-expensive or less-established funds, we’ve filtered this list for ETFs that have existed for at least 5 years, have at least $10 billion in assets, and have expense ratios under 0.5%.
JPMorgan Equity Premium Income ETF (JEPI)
State Street SPDR Portfolio High Yield Bond ETF (SPHY)
iShares Broad USD High Yield Corporate Bond ETF (USHY)
iShares Trust iShares Preferred and Income Securities ETF (PFF)
iShares iBoxx USD High Yield Corporate Bond ETF (HYG)
Janus Henderson AAA CLO ETF (JAAA)
iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB)
Sources: VettaFi and Finviz. Data is current as of Feb. 10, 2026, and is intended for informational purposes only, not for trading purposes.
Pros of monthly dividend ETFs
Monthly income: For retirees, or investors in search of passive income, monthly dividend ETFs may be a useful way to generate cash from your portfolio without needing to sell any investments. A $50,000 investment in the highest-yielding monthly income ETF listed above, the JPMorgan Equity Premium Income ETF, would pay out about $337 per month on average — not a fortune, but enough to cushion your budget somewhat.
Diversification: Suppose your portfolio consists mostly of growth stocks, which tend to increase in price when times are good, but can be volatile when times are bad. In that case, buying monthly dividend ETFs may reduce the overall risk of your portfolio by adding investments that don’t have particularly volatile prices, but instead provide income that can compound your returns.
Potentially more reliable payouts than monthly dividend stocks: ETFs are diversified across many income-producing assets, which means that a monthly dividend fund may have less risk of a large dividend cut than an individual dividend stock (especially the small group of dividend stocks that pay out monthly).
Cons of monthly dividend ETFs
Underperforming the S&P 500: Even though all of the funds above have higher yields than the S&P 500, none of them are beating it in terms of total return over the last year, due to less price appreciation. This is often an issue with dividend stocks in general: They may generate cash payments, but they tend to be more “boring” than growth stocks when it comes to price action.
Tax consequences: Many stocks and ETFs make you money by increasing in price, not by paying an income. That means that you won’t owe taxes on them until you sell them. With dividend stocks or funds, particularly monthly dividend ETFs, it’s different — their payments count as taxable income, unless you’re holding them in a tax-advantaged account such as an IRA.
Lower yields than monthly dividend stocks: Although monthly dividend funds may have less risk of a dividend cut than individual monthly dividend stocks, the highest-yielding fund listed above has about half the yield of the highest-yielding stock on our monthly dividend stocks page.
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Neither the author nor editor owned positions in the aforementioned investments at the time of publication.
