Top Income Investments for 2025
Top Income Investments for 2025
Balancing a portfolio with growth and income investments is essential for investors with an eye on long-term financial goals.
Growth stocks, like tech-sector names and many small caps, add risk to a portfolio. Income instruments, such as dividend stocks or fixed-income assets, generate reliable cash flow and can help mitigate stocks' volatility.
Many investors turn to exchange-traded funds, or ETFs, to get some built-in diversification, rather than trying to choose individual stocks or bonds.
If you're considering a basket of income producers, keep in mind factors such as taxation and portfolio composition.
"Not all income streams are created equal," says Dale Hershman, principal at Sick Advisory Services in Boca Raton, Florida.
For example, he says, if income from an ETF is derived mainly from qualified equity dividends, the taxation rate could be anywhere between zero and 23%. However, if the income is derived from bonds or other interest-bearing investments, it's typically taxed as ordinary income at your marginal tax rate, which could be as high as 37%.
"Likewise, ETFs that deal with REITs (real estate investment trusts) often feature certain taxation quirks that will place their taxation rate somewhere between the long-term capital gains rate and your regular income tax rate," Hershman says.
Here's a look at several popular income ETFs that could double as some of the top income investments to buy for 2025. They're meant to reflect a variety of structures and strategies:
ETF 30-day SEC yield Expense ratio
VanEck Mortgage REIT Income ETF (ticker: MORT) 13.1% 0.43%
Global X SuperDividend ETF (SDIV) 10.1% 0.58%
Invesco CEF Income Composite ETF (PCEF) 9.4% 3.08%
WisdomTree U.S. High Dividend Fund (DHS) 3.7% 0.38%
SPDR Bloomberg High Yield Bond ETF (JNK) 7.2% 0.40%
Dimensional Global Credit ETF (DGCB) 4.8% 0.20%
Dimensional Core Fixed Income ETF (DFCF) 4.8% 0.17%
Growth stocks, like tech-sector names and many small caps, add risk to a portfolio. Income instruments, such as dividend stocks or fixed-income assets, generate reliable cash flow and can help mitigate stocks' volatility.
Many investors turn to exchange-traded funds, or ETFs, to get some built-in diversification, rather than trying to choose individual stocks or bonds.
If you're considering a basket of income producers, keep in mind factors such as taxation and portfolio composition.
"Not all income streams are created equal," says Dale Hershman, principal at Sick Advisory Services in Boca Raton, Florida.
For example, he says, if income from an ETF is derived mainly from qualified equity dividends, the taxation rate could be anywhere between zero and 23%. However, if the income is derived from bonds or other interest-bearing investments, it's typically taxed as ordinary income at your marginal tax rate, which could be as high as 37%.
"Likewise, ETFs that deal with REITs (real estate investment trusts) often feature certain taxation quirks that will place their taxation rate somewhere between the long-term capital gains rate and your regular income tax rate," Hershman says.
Here's a look at several popular income ETFs that could double as some of the top income investments to buy for 2025. They're meant to reflect a variety of structures and strategies:
ETF 30-day SEC yield Expense ratio
VanEck Mortgage REIT Income ETF (ticker: MORT) 13.1% 0.43%
Global X SuperDividend ETF (SDIV) 10.1% 0.58%
Invesco CEF Income Composite ETF (PCEF) 9.4% 3.08%
WisdomTree U.S. High Dividend Fund (DHS) 3.7% 0.38%
SPDR Bloomberg High Yield Bond ETF (JNK) 7.2% 0.40%
Dimensional Global Credit ETF (DGCB) 4.8% 0.20%
Dimensional Core Fixed Income ETF (DFCF) 4.8% 0.17%
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VanEck Mortgage REIT Income ETF (MORT)
This ETF, with $290 million in assets under management, or AUM, tracks the performance of a U.S. mortgage REIT index. Its 30-day SEC yield is 13.1%. This can be an attractive feature for income-focused investors, as it suggests a high level of cash flow relative to the investment amount. It's a concentrated ETF, with only 26 holdings.
"However, total return, which incorporates income and price change, should be the focus for investors since that is what will impact the bottom line," says David Rath, partner and chief investment officer at Continuum Wealth Advisors in Saratoga Springs, New York.
"Over the last 12 months, this fund has just about broken even," Rath adds. "Future performance will be driven by the health of the mortgage market and the general level of interest rates."
This ETF, with $290 million in assets under management, or AUM, tracks the performance of a U.S. mortgage REIT index. Its 30-day SEC yield is 13.1%. This can be an attractive feature for income-focused investors, as it suggests a high level of cash flow relative to the investment amount. It's a concentrated ETF, with only 26 holdings.
"However, total return, which incorporates income and price change, should be the focus for investors since that is what will impact the bottom line," says David Rath, partner and chief investment officer at Continuum Wealth Advisors in Saratoga Springs, New York.
"Over the last 12 months, this fund has just about broken even," Rath adds. "Future performance will be driven by the health of the mortgage market and the general level of interest rates."
Re: Top Income Investments for 2025
Global X SuperDividend ETF (SDIV)
This ETF is pegged to the Solactive Global SuperDividend Index, which tracks the performance of 100 equally weighted companies that are among the highest dividend-yielding equity securities throughout the world.
SDIV has a whopper of a 30-day SEC yield, at 10.1%. It returned only 1.8% in 2024, though; the low return may be due to its focus on high-dividend stocks, which have generally not performed as well as growth stocks over the past several years, says John Bell, owner and financial planner at Free State Financial Planning in Highland, Maryland.
Bell notes that the fund is overweight real estate and energy compared to its Morningstar category averages. It's underweight in industrials and technology.
"As for performance, it has been very lackluster, as it has been in the lowest quartile over the three-year, five-year and 10-year periods and significantly trailed its peers and category benchmark, both of which have positive returns over the 10-year period," Bell says.
However, the fund is diversified both geographically and across industries, with international exposure, and the fund has consistently made a dividend payment every month since its inception in 2011. Its overweight energy allocation could also benefit from a revival in the sector, which is outperforming other sectors year to date. But because of the risk involved and its past performance, SDIV should occupy only a small segment of your portfolio.
This ETF is pegged to the Solactive Global SuperDividend Index, which tracks the performance of 100 equally weighted companies that are among the highest dividend-yielding equity securities throughout the world.
SDIV has a whopper of a 30-day SEC yield, at 10.1%. It returned only 1.8% in 2024, though; the low return may be due to its focus on high-dividend stocks, which have generally not performed as well as growth stocks over the past several years, says John Bell, owner and financial planner at Free State Financial Planning in Highland, Maryland.
Bell notes that the fund is overweight real estate and energy compared to its Morningstar category averages. It's underweight in industrials and technology.
"As for performance, it has been very lackluster, as it has been in the lowest quartile over the three-year, five-year and 10-year periods and significantly trailed its peers and category benchmark, both of which have positive returns over the 10-year period," Bell says.
However, the fund is diversified both geographically and across industries, with international exposure, and the fund has consistently made a dividend payment every month since its inception in 2011. Its overweight energy allocation could also benefit from a revival in the sector, which is outperforming other sectors year to date. But because of the risk involved and its past performance, SDIV should occupy only a small segment of your portfolio.
Re: Top Income Investments for 2025
Invesco CEF Income Composite ETF (PCEF)
This fund has a high 30-day SEC yield of 9.4%, but investors should take special note of this ETF's structure.
It's a fund of funds, investing in a basket of closed-end funds. In other words, it doesn't invest in individual stocks, bonds or REITs. Its benchmark index tracks taxable investment-grade fixed-income securities, taxable high-yield fixed-income securities and others that use an equity option-writing strategy.
Its expense ratio is unusually high for an ETF at a whopping 3.08%, but that's because its fee includes fees of other funds it owns. It also charges its own distinct management fee, which is included in the total expense ratio.
This ETF returned 16.6% in 2024, but that high expense ratio cut significantly into what went into investors' pockets.
"Essentially, you're not just paying for PCEF, but also for the fees of the underlying closed-end funds," says Gerry Barrasso, United Financial Planning Group in Hauppauge, New York. "For investors that prioritize low costs, this structure is a major drawback," he says.
Nonetheless, PCEF has returned more than 10% annualized over the past 10 years, soundly beating its category and its benchmark index.
This fund has a high 30-day SEC yield of 9.4%, but investors should take special note of this ETF's structure.
It's a fund of funds, investing in a basket of closed-end funds. In other words, it doesn't invest in individual stocks, bonds or REITs. Its benchmark index tracks taxable investment-grade fixed-income securities, taxable high-yield fixed-income securities and others that use an equity option-writing strategy.
Its expense ratio is unusually high for an ETF at a whopping 3.08%, but that's because its fee includes fees of other funds it owns. It also charges its own distinct management fee, which is included in the total expense ratio.
This ETF returned 16.6% in 2024, but that high expense ratio cut significantly into what went into investors' pockets.
"Essentially, you're not just paying for PCEF, but also for the fees of the underlying closed-end funds," says Gerry Barrasso, United Financial Planning Group in Hauppauge, New York. "For investors that prioritize low costs, this structure is a major drawback," he says.
Nonetheless, PCEF has returned more than 10% annualized over the past 10 years, soundly beating its category and its benchmark index.
Re: Top Income Investments for 2025
WisdomTree U.S. High Dividend Fund (DHS)
This ETF has $1.2 billion under management and boasts a relatively low expense ratio of 0.38%. It's benchmarked to an index of domestic companies with high dividend yields.
Top holdings include Exxon Mobil Corp. (XOM), AbbVie Inc. (ABBV) and Altria Group Inc. (MO).
It notched strong performance in the past three-year and one-year periods, ranking in the top quartile of its Morningstar category ("large value"). In 2024, this ETF returned 18%.
"The fund is invested nearly 100% in U.S. equities and has no fixed-income exposure," Bell says. "It is overweighted in consumer defensive and energy while being significantly underweighted in industrials and technology," he adds.
This ETF has $1.2 billion under management and boasts a relatively low expense ratio of 0.38%. It's benchmarked to an index of domestic companies with high dividend yields.
Top holdings include Exxon Mobil Corp. (XOM), AbbVie Inc. (ABBV) and Altria Group Inc. (MO).
It notched strong performance in the past three-year and one-year periods, ranking in the top quartile of its Morningstar category ("large value"). In 2024, this ETF returned 18%.
"The fund is invested nearly 100% in U.S. equities and has no fixed-income exposure," Bell says. "It is overweighted in consumer defensive and energy while being significantly underweighted in industrials and technology," he adds.
Re: Top Income Investments for 2025
SPDR Bloomberg High Yield Bond ETF (JNK)
While fixed income typically provides portfolio stability while mitigating volatility, that's a little different when it comes to high-yield bonds.
"JNK is designed to provide exposure to U.S. high-yield corporate bonds, often called junk bonds, due to their lower credit ratings," says Walter Russell, president of Russell and Associates in New Albany, Ohio.
This ETF invests in speculative-grade bonds, which generally offer higher yields to compensate investors for increased credit and default risks. It holds bonds rated BB or below.
"JNK is popular for income-focused investors willing to accept higher risk for greater return potential," Russell says. "There are market risks with this fund because as interest rates fluctuate, your portfolio will move up and down."
This ETF, he adds, is best suited for investors with a higher risk tolerance looking to diversify their income portfolios.
While fixed income typically provides portfolio stability while mitigating volatility, that's a little different when it comes to high-yield bonds.
"JNK is designed to provide exposure to U.S. high-yield corporate bonds, often called junk bonds, due to their lower credit ratings," says Walter Russell, president of Russell and Associates in New Albany, Ohio.
This ETF invests in speculative-grade bonds, which generally offer higher yields to compensate investors for increased credit and default risks. It holds bonds rated BB or below.
"JNK is popular for income-focused investors willing to accept higher risk for greater return potential," Russell says. "There are market risks with this fund because as interest rates fluctuate, your portfolio will move up and down."
This ETF, he adds, is best suited for investors with a higher risk tolerance looking to diversify their income portfolios.
Re: Top Income Investments for 2025
Dimensional Global Credit ETF (DGCB)
Dimensional Fund Advisors is known for low-cost ETFs and mutual funds. In the past, its funds were only available through investment advisors, but now retail investors can buy shares directly.
The DGCB ETF is fairly new to the market, having launched in November 2023. Its expense ratio is 0.2%, and its 30-day SEC yield is 4.8%.
It's benchmarked to the Bloomberg Global Aggregate Credit Bond Index, and hedged to the U.S. dollar. That reduces the impact of currency fluctuations in a fund comprising bonds issued all around the world.
Its portfolio tilts toward the lower end of the investment-grade bond universe. That combines high credit quality with a dose of higher yield without tremendous risk.
"The fund consists of a smallish cash position and some government bonds with the majority of the investments in corporate bonds," Bell says.
Dimensional Fund Advisors is known for low-cost ETFs and mutual funds. In the past, its funds were only available through investment advisors, but now retail investors can buy shares directly.
The DGCB ETF is fairly new to the market, having launched in November 2023. Its expense ratio is 0.2%, and its 30-day SEC yield is 4.8%.
It's benchmarked to the Bloomberg Global Aggregate Credit Bond Index, and hedged to the U.S. dollar. That reduces the impact of currency fluctuations in a fund comprising bonds issued all around the world.
Its portfolio tilts toward the lower end of the investment-grade bond universe. That combines high credit quality with a dose of higher yield without tremendous risk.
"The fund consists of a smallish cash position and some government bonds with the majority of the investments in corporate bonds," Bell says.
Re: Top Income Investments for 2025
Dimensional Core Fixed Income ETF (DFCF)
The DFCF ETF is also relatively new, making its debut in November 2021. Its expense ratio is a low 0.17%, and its 30-day SEC yield is 4.8%.
It's linked to the Bloomberg U.S. Aggregate Bond Index, which consists of investment-grade corporate bonds, Treasurys and other instruments such as asset-backed securities and mortgage-backed securities.
Bell points out that its three-year return is negative, as it's been a rough environment for bonds in general.
This ETF is well suited for investors seeking a low-risk way to generate income.
"The average credit rating is A+ and it has over 1,500 bond holdings," Bell says. "This could be a good pick as a core bond holding in a diversified portfolio."
The DFCF ETF is also relatively new, making its debut in November 2021. Its expense ratio is a low 0.17%, and its 30-day SEC yield is 4.8%.
It's linked to the Bloomberg U.S. Aggregate Bond Index, which consists of investment-grade corporate bonds, Treasurys and other instruments such as asset-backed securities and mortgage-backed securities.
Bell points out that its three-year return is negative, as it's been a rough environment for bonds in general.
This ETF is well suited for investors seeking a low-risk way to generate income.
"The average credit rating is A+ and it has over 1,500 bond holdings," Bell says. "This could be a good pick as a core bond holding in a diversified portfolio."