In a world where cash is once again king, investors are turning their attention to cash-like funds and ETFs. One universe garnering notable interest is the U.S. Treasury market, where yields on short-term bonds have climbed to levels not seen in nearly two decades.
As of now, the annual yield on U.S. Treasury bonds, particularly those with maturities of up to two years, hovers around 5%. To put this into perspective, it’s the highest yield these securities have offered since June 2007 and is currently well above the latest annual inflation rate of 3.7%.
What’s remarkable about this return is that it comes from one of the safest assets in the world — U.S. Treasury securities.
Why Short-Term Treasury ETFs Are The Safest Assets On The Planet
These bonds, which are issued by the federal government, are highly regarded for their safety due to the fact that they are backed by the unwavering trust and creditworthiness of the U.S. government. Regardless of the prevailing economic conditions, whether it be during a recession, periods of inflation, or even times of conflict, the U.S. government remains steadfast in fulfilling its commitments to bondholders.
The yields on the shorter end of the Treasury yield curve are often dubbed “risk-free.” This label stems from the clear-cut expectation that the U.S. government will fulfill its obligations upon maturity.
For non-U.S.-based investors, these short-term Treasury ETFs offer another perk. They provide exposure to the U.S. dollar, a primary safe-haven asset that tends to appreciate during liquidity crises and global risk-off periods.
Read Also: Cash Is King: 5 Bond ETFs Unlocking Attractive Returns In A 5% Rate World
But here’s where it gets interesting for income-seeking investors: dividends paid by bond ETFs, such as these Treasury-focused ones, translate into reliable and predictable monthly income.
While there are bond ETFs out there offering yields higher than 5%, they often lean towards high-yield corporate bonds or emerging market debt. While these can provide attractive yields, they might not provide the same level of security during times of global market turbulence.
In contrast, short-term Treasury ETFs maintain a stable annual yield of around 5% while serving as a protective cushion within a diversified portfolio. They act as a shield during bouts of heightened market volatility.
How To Generate A $500 Monthly Dividend With These 7 U.S. Treasury ETFs
Now, let’s delve into how an annual yield of 5% can generate a consistent monthly income of $500, thanks to these Treasury ETFs:
- SPDR Bloomberg 3-12 Month T-Bill ETF
BILS
: Priced at $99.13, it offers an indicative dividend yield of 4.58%. With a last reported dividend of $0.425, paid monthly, you’d need 1,177 shares, amounting to $116,676, to generate $500 per month.
- iShares 0-3 Month Treasury Bond ETF
SGOV
: Currently trading at $100.39, it yields 4.39%. Its last reported dividend was $0.412, also paid monthly. To secure $500 monthly, you’d require 1,214 shares, totaling $121,873.
- SPDR Bloomberg 1-3 Month T-Bill ETF
BIL
: Priced at $91.55, this ETF offers a 4.36% yield. Its most recent dividend amounted to $0.394, paid monthly. To achieve $500 per month, you’d need 1,270 shares, valued at $116,268.
- US Treasury 2 Year Note ETF
UTWO
: With a price of $47.90, it boasts a 4.28% yield and a last dividend of $0.194, paid monthly. To secure $500 monthly, you’d require 2,578 shares, worth $123,486.
- BondBloxx Bloomberg One Year Target Duration US Treasury ETF
XONE
: Currently trading at $49.51, it yields 4.27% and recently paid a dividend of $0.199, on a monthly basis. To attain $500 per month, you’d need 2,513 shares, amounting to $124,418.
- Goldman Sachs Access Treasury 0-1 Year ETF
GBIL
: Priced at $99.82, it boasts a 4.20% yield and a last dividend of $0.407, distributed monthly. To generate $500 monthly, you’d require 1,229 shares, totaling $122,678.
- iShares Short Treasury Bond ETF
SHV
: Trading at $110.16, it offers a 4.18% yield, with a last dividend of $0.465, paid monthly. To achieve $500 per month, you’d need 1,076 shares, worth $118,532.
| ETF | Price | Dividend Yield (Indicative) | Last Dividend Reported | Frequency | No. of ETF Shares To Buy | Amount needed to generate $500/m income |
|---|---|---|---|---|---|---|
| SPDR Bloomberg 3-12 Month T-Bill ETF | $99.13 | 4.58% | $0.425 | Monthly | 1,177 | $116,676 |
| iShares 0-3 Month Treasury Bond ETF | $100.39 | 4.39% | $0.412 | Monthly | 1,214 | $121,873 |
| SPDR Bloomberg 1-3 Month T-Bill ETF | $91.55 | 4.36% | $0.394 | Monthly | 1,270 | $116,268 |
| US Treasury 2 Year Note ETF | $47.90 | 4.28% | $0.194 | Monthly | 2,578 | $123,486 |
| BondBloxx Bloomberg One Year Target Duration US Treasury ETF | $49.51 | 4.27% | $0.199 | Monthly | 2,513 | $124,418 |
| Goldman Sachs Access Treasury 0-1 Year ETF | $99.82 | 4.20% | $0.407 | Monthly | 1,229 | $122,678 |
| iShares Short Treasury Bond ETF | $110.16 | 4.18% | $0.465 | Monthly | 1,076 | $118,532 |
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