Best ETFs for Generating Side Income in 2026

How We Chose These ETFs

Selecting the right ETFs for side income investors requires a careful evaluation of multiple factors. We analyzed dozens of funds across the industry and narrowed our recommendations based on the following criteria. Each factor was weighted according to its importance for investors in this specific category, ensuring that our picks are truly optimized for your goals.

1. High current yield — High current yield for immediate income generation
2. Monthly distribution schedules — Monthly distribution schedules for regular cash flow
3. Sustainable payout ratios — Sustainable payout ratios avoiding yield traps
4. Diversified income sources — Diversified income sources across sectors and strategies

We also factored in our proprietary Beginner Suitability Score, which evaluates each fund on a 1-to-10 scale considering expense ratios, volatility (beta), diversification (holdings count), dividend history, and track record length. Funds that score consistently high across these dimensions earned a spot on our list.

1. JPMorgan Equity Premium Income ETF (JEPI) — Best Overall

JPMorgan • Covered Call

JEPI uses a unique strategy combining a portfolio of low-volatility S&P 500 stocks with equity-linked notes that generate income from selling call options on the S&P 500 index. This approach aims to deliver monthly income that far exceeds traditional dividend funds while reducing overall portfolio volatility. It has quickly become one of the most popular income ETFs due to its consistent high monthly distributions.

JPMorgan Equity Premium Income ETF earns its spot as our best overall pick because it delivers on the metrics that matter most for side income investors. With an expense ratio of just 0.35%, you keep more of your returns working for you over time. The fund manages $35.0B in total assets, which speaks to its popularity and ensures strong liquidity with tight bid-ask spreads when you buy or sell shares.

Over the past five years, JEPI has delivered a total return of 8.00%, outperforming many of its peers and rewarding patient, long-term investors. The fund holds 130 individual securities, giving you solid diversification across a meaningful number of positions. Its beta of 0.55 indicates that the fund is significantly less volatile than the broader market, making it a more stable choice for conservative investors.

JEPI currently pays a dividend yield of 7.50%, providing investors with a stream of regular income on top of capital appreciation. Dividends are typically distributed quarterly and can be automatically reinvested through most major brokerages, accelerating the compounding process. With a track record stretching back to 2020, JEPI has a relatively shorter but still notable history that investors should consider alongside its other strengths. Our Beginner Suitability Score rates it 9/10 (Great for Beginners), reflecting its excellent combination of low costs, manageable volatility, and broad diversification.

2. Schwab U.S. Dividend Equity ETF (SCHD) — Best for Dividends

Charles Schwab • U.S. Large-Cap Dividend

SCHD focuses on high-quality U.S. companies with strong track records of paying and growing dividends. It uses a rules-based approach to select about 100 stocks that have consistently paid dividends for at least 10 years. Beginners who want both income and growth often find SCHD attractive because it combines a solid dividend yield with quality stock selection at a very low cost.

Schwab U.S. Dividend Equity ETF earns its spot as our best for dividends pick because it delivers on the metrics that matter most for side income investors. With an expense ratio of just 0.06%, you keep more of your returns working for you over time. The fund manages $62.0B in total assets, which speaks to its popularity and ensures strong liquidity with tight bid-ask spreads when you buy or sell shares.

Over the past five years, SCHD has delivered a total return of 12.10%, outperforming many of its peers and rewarding patient, long-term investors. The fund holds 103 individual securities, giving you solid diversification across a meaningful number of positions. Its beta of 0.82 indicates that the fund is closely aligned with overall market movements, which is expected for a broadly diversified fund.

SCHD currently pays a dividend yield of 3.40%, providing investors with a stream of regular income on top of capital appreciation. Dividends are typically distributed quarterly and can be automatically reinvested through most major brokerages, accelerating the compounding process. With a track record stretching back to 2011, SCHD has weathered multiple market cycles including the 2008 financial crisis and the 2020 pandemic, proving its resilience. Our Beginner Suitability Score rates it 9/10 (Great for Beginners), reflecting its excellent combination of low costs, manageable volatility, and broad diversification.

3. Vanguard High Dividend Yield ETF (VYM) — Best for Dividends

Vanguard • High Dividend

VYM tracks an index of U.S. stocks that are forecasted to have above-average dividend yields, providing broad exposure to large-cap value companies. It holds around 550 stocks, making it more diversified than most dividend ETFs. Beginners who want income from their investments find VYM appealing because it combines a solid yield with Vanguard's trademark low costs and broad diversification.

Vanguard High Dividend Yield ETF earns its spot as our best for dividends pick because it delivers on the metrics that matter most for side income investors. With an expense ratio of just 0.06%, you keep more of your returns working for you over time. The fund manages $60.0B in total assets, which speaks to its popularity and ensures strong liquidity with tight bid-ask spreads when you buy or sell shares.

Over the past five years, VYM has delivered a total return of 10.50%, outperforming many of its peers and rewarding patient, long-term investors. The fund holds 550 individual securities, giving you exceptional diversification across a wide swath of the market. Its beta of 0.85 indicates that the fund is closely aligned with overall market movements, which is expected for a broadly diversified fund.

VYM currently pays a dividend yield of 2.80%, providing investors with a stream of regular income on top of capital appreciation. Dividends are typically distributed quarterly and can be automatically reinvested through most major brokerages, accelerating the compounding process. With a track record stretching back to 2006, VYM has weathered multiple market cycles including the 2008 financial crisis and the 2020 pandemic, proving its resilience. Our Beginner Suitability Score rates it 9.5/10 (Great for Beginners), reflecting its excellent combination of low costs, manageable volatility, and broad diversification.

4. JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) — Best for Income

JPMorgan • Covered Call

JEPQ applies JPMorgan's equity premium income strategy to Nasdaq-100 stocks, combining a portfolio of high-quality tech-heavy companies with options overlay to generate substantial monthly income. It offers a way to own growth-oriented technology stocks while earning income that these companies typically do not pay as dividends. The fund bridges the gap between growth investing and income generation.

JPMorgan Nasdaq Equity Premium Income ETF earns its spot as our best for income pick because it delivers on the metrics that matter most for side income investors. With an expense ratio of just 0.35%, you keep more of your returns working for you over time. The fund manages $18.0B in total assets, which speaks to its popularity and ensures strong liquidity with tight bid-ask spreads when you buy or sell shares.

Over the past five years, JEPQ has delivered a total return of 0.00%, providing steady growth for investors who stayed the course through market volatility. The fund holds 85 individual securities, giving you focused exposure to a curated selection of holdings. Its beta of 0.65 indicates that the fund is significantly less volatile than the broader market, making it a more stable choice for conservative investors.

JEPQ currently pays a dividend yield of 9.00%, providing investors with a stream of regular income on top of capital appreciation. Dividends are typically distributed quarterly and can be automatically reinvested through most major brokerages, accelerating the compounding process. With a track record stretching back to 2022, JEPQ has a relatively shorter but still notable history that investors should consider alongside its other strengths. Our Beginner Suitability Score rates it 8/10 (Great for Beginners), reflecting its excellent combination of low costs, manageable volatility, and broad diversification.

5. Amplify CWP Enhanced Dividend Income ETF (DIVO) — Best for Dividends

Amplify • Covered Call / Dividend

DIVO combines a portfolio of high-quality dividend-paying stocks with a tactical covered call writing strategy to generate enhanced income. The fund holds blue-chip stocks and selectively sells call options on individual holdings to boost cash flow. Beginners seeking above-average income with some downside protection will appreciate DIVO's blend of dividend income and option premium collection.

Amplify CWP Enhanced Dividend Income ETF earns its spot as our best for dividends pick because it delivers on the metrics that matter most for side income investors. With an expense ratio of just 0.55%, you keep more of your returns working for you over time. The fund manages $3.0B in total assets, which speaks to its popularity and ensures strong liquidity with tight bid-ask spreads when you buy or sell shares.

Over the past five years, DIVO has delivered a total return of 10.80%, outperforming many of its peers and rewarding patient, long-term investors. The fund holds 30 individual securities, giving you focused exposure to a curated selection of holdings. Its beta of 0.85 indicates that the fund is closely aligned with overall market movements, which is expected for a broadly diversified fund.

DIVO currently pays a dividend yield of 4.50%, providing investors with a stream of regular income on top of capital appreciation. Dividends are typically distributed quarterly and can be automatically reinvested through most major brokerages, accelerating the compounding process. With a track record stretching back to 2016, DIVO has demonstrated its ability to perform across different market environments over a meaningful period. Our Beginner Suitability Score rates it 8/10 (Great for Beginners), reflecting its excellent combination of low costs, manageable volatility, and broad diversification.

Comparison Table

Here is a side-by-side comparison of all 5 ETFs in our side income category. This table highlights the key metrics you should evaluate when choosing between these funds. Pay close attention to expense ratios and beginner scores, as these are the most impactful factors for long-term investment success.

*Beginner Score is calculated based on expense ratio, beta, holdings count, dividend yield, and fund inception year. Past performance does not guarantee future results.

Common Mistakes Side Income Investors Make

Even with a solid selection of ETFs, investors in the side income category can undermine their results by falling into avoidable traps. Understanding these common pitfalls will help you stay on track and avoid costly errors that could set back your financial progress by years or even decades.

• 1

  Chasing the highest yield: Chasing the highest yield without understanding the risks behind it

• 2

  Not accounting for taxes: Not accounting for taxes on dividend income in taxable accounts

• 3

  Expecting dividend income to: Expecting dividend income to replace a salary without substantial capital invested

• 4

  Ignoring total return and: Ignoring total return and focusing exclusively on yield

The best defense against these mistakes is a simple, written investment plan that you commit to following regardless of market conditions. Define your target allocation, set up automatic contributions, and schedule a review only once or twice per year. This removes emotion from the process and keeps you focused on long-term wealth building rather than short-term noise.

Frequently Asked Questions