But don’t think of them as stodgy safety nets. The returns on offer from these funds can be stratospheric, whether through growth-driven capital gains or dividend income. Take the iShares US Equity High Income Active (LSE:INCU), Global X SuperDividend ETF, and Invesco Morningstar US Energy Infrastructure — these funds offer dividend yields above 7%, far higher than almost every other share on London’s stock market.

If forecasts are correct, a £20,000 ISA invested equally across them will deliver £1,740 in passive income this year alone. So what makes them such terrific dividend payers?

9.4% yield

iShares US Equity High Income — as its name implies — targets dividends from New York-listed companies, and today offers 9.4% dividend yield.

But this particular fund doesn’t only hold shares. To provide a more stable income over time, it also has significant holdings in US Treasures as well as cash. This can also reduce share price volatility when the broader stock market drops.

Focusing on just the US creates more concentrated regional risk. But in other ways the fund is exceptionally diversified. It holds shares in 359 stocks spanning a range of tradionally dividend-paying industries, including financial services, telecoms, and healthcare.

Another reason I like this ETF is its high focus on information technology. More than 30% is dedicated to tech giants like Nvidia and Microsoft, giving it excellent growth potential to complement those dividends.

Global giant

The Global X SuperDividend ETF holds shares in dozens of different companies ranging far and wide, from the US and Brazil to the UK and Hong Kong. But investors don’t have to skimp on dividends to enjoy this benefit — today the fund carries an enormous 9% yield.

The fund focuses on traditionally high-paying companies like banks, energy producers, and real estate operators. In fact, it provides access to “up to 100 of the highest dividend paying equities around the world“. It also receives income from stable government bonds, including those issed by the US, UK, and Germany.

I’m also a fan of this fund because dividend income is paid monthly, giving investors access to their passive income sooner.

Power play

Invesco Morningstar US Energy Infrastructure MLP focuses on a naturally defensive sector. The benefit to investors? Cash flows stay robust across the economic cycle, meaning large dividends every year since the fund was created in 2010.

The ‘MLP’ in its name refers to ‘master limited partnerships.’ These businesses are used chiefly for midstream energy infrastructure, like pipelines, storage, and terminals. They also have to distribute most of their income to shareholders in exchange for tax breaks.

This results in this ETF’s enormous 7.8% dividend yield for this year. Infrastructure funds like this typically experience poor growth. But in my view, that’s more than balanced out by the excellent passive income they can provide.

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Take Henderson Far East Income (LSE:HFEL), iShares US Equity High Income (LSE:INCU), and Greencoat UK Wind (LSE:UKW). These British dividend shares today carry dividend yields north of 9%.

To give you a flavour of what this could mean for your pocket, a £20,000 investment spread across all three will (if forecasts are accurate) provide a £1,980 passive income this year alone. Want to know what makes them hot stocks to consider?

Strength in depth

Dividends are never, ever guaranteed. So spreading one’s exposure across a wide range of companies, industries, and regions can protect against individual shocks and deliver a steady flow of income over time.

This is why I like the Henderson Far East Income investment trust, which currently yields 10.6%. This pooled vehicle holds £488m of assets spread across 71 companies. These range from banks and telecoms providers, to miners, consumer electronics manufacturers, and carmakers.

Furthermore, these businesses operate all over Asia, reducing the trust’s dependence on one or two countries to drive returns. Key regions include economic powerhouses China, South Korea, and Singapore.

Investing in emerging markets can be volatile at times. But over the long term, Asia has proven a top destination for targeting large profits. I’m confident this can continue as wealth levels and population sizes in this region balloon.

A top ETF

The iShares US Equity High Income fund has the same benefits of diversification. At 9.1%, too, its forward dividend yield is more than three times greater than the FTSE 100 offers.

This exchange-traded fund (ETF) holds an even larger pool of assets than Henderson Far East Income, in fact. Holding 307 different companies, it provides even better protection from individual dividend shocks.

Its aim is “to generate income and capital growth with lower volatility than the broader US equity market“. So it holds a large number of lower-yielding dividend shares than funds that focus purely on income.

That said, this ETF also has significant cash holdings and investments in US government bonds to give its dividend credentials a boost. Its focus on US shares leaves it more regionally exposed than global funds. But on balance, it’s still a top pooled investment vehicle to consider.

Income machine

Greencoat UK Wind is the highest-yielding income stock we’re looking at today. Like many energy producers, it enjoys enormous cash flows it can return to shareholders, resulting in a market-beating yield. Today its forward reading is 10.6%.

But are renewable energy stocks more risk than they’re worth right now? It’s true they’ve fallen in popularity in recent years, reflecting higher interest rates that have driven up borrowing costs and depressed asset values. The cost of building new wind farms has also jumped lately.

Yet companies like Greencoat UK Wind still have excellent investment potential in my view. Their ultra-defensive operations still make them excellent dividend providers. And they’re well placed to grow earnings and shareholder payouts as green energy demand steadily rises.

Companies like this should also benefit in the near term as the Bank of England trims interest rates.

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Finding dividend stocks to buy requires some time and effort at the beginning. But once set up — and with a little ongoing maintenance — the money can start to roll in.

Investors with £20,000 sitting in a savings account at the start of 2026 have a great shot at achieving a four-figure income. Here’s one strategy to consider.

High-yield heroes

Stock markets rallied in 2025, pulling the dividend yields on many income-paying shares sharply lower. The average yield on the FTSE 100 is now at 3%, at the bottom end of its 3% to 4% historical range.

Yet investors still have stacks of great, high-yield shares to choose from right now. What’s more, these dividend stars can be found across different sectors, while they also provide exposure to a variety of regions.

This in turn reduces concentration risk for investors. If one industry or territory comes under pressure, the impact on the portfolio’s overall dividend income is limited.

Let’s now look at a diversified portfolio that could deliver a £1,620 second income in 2026.

The top 10

With an 8.1% average dividend yield, this portfolio — based on a £20k lump sum investment today — should deliver a £1,620 dividend income in 2026, based on broker forecasts.

I must point out that analyst figures are never guaranteed. Dividends can fall short of forecasts. They can also come in higher than expected. But what’s great about this portfolio is that it’s diversified across thousands of companies, which significantly reduces the risk of disruption to one’s income stream from any one company cutting its dividend.

Strength in depth

This huge footprint reflects the portfolio’s 50% weighting to investment trusts and ETFs. Take the iShares US Equity High Income fund, which “aims to generate income and capital growth with lower volatility than the broader US equity market“.

This ETF holds shares in 302 different US stocks. These span a multitude of industries, from information technology (like Nvidia) and banking (JP Morgan), through to pharmaceuticals (Eli Lilly) and consumer goods (Coca-Cola).

That’s not all. With large cash and US Treasury holdings too, the fund can provide a more stable income than pure-play equity funds. Fixed income holdings like this reduce exposure to short-term stock market volatility.

Dividends are never, ever guaranteed. But a portfolio like this gives investors a great chance of a large and stable passive income in 2026 and beyond.

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Foresight Solar Fund

Renewable energy stocks like Foresight Solar Fund (LSE: FSFL) can be excellent picks for long-term income. On the downside, earnings can suffer during unfavourable weather conditions when energy production drops. But these companies enjoy plenty of other qualities that can make them reliable dividend payers.

Electricity demand is famously stable over time, so earnings and cash flow pressures don’t (unlike with many other dividend stocks) materialise during economic downturns. What’s more, the majority of Foresight’s energy is sold at pre-agreed rates under power purchase agreements, or backed by government subsidies.

These qualities have allowed the fund to raise annual dividends each year since it listed in 2013. And it’s set to raise the payout again to 8.1p per share in 2025, according to City analysts.

This leaves the business with a 10.8% dividend yield. And encouragingly, the targeted dividend is covered 1.3 times by expected cash, which is reasonably strong relative to the broader sector.

iShares US Equity High Income ETF

Pooled instruments like the iShares US Equity High Income ETF (LSE:INCU) can also provide a reliable second income over time. Spreading investors’ capital means many different dividend-paying shares contribute to the overall payout, protecting returns if one or two run into difficulties.

This particular one holds shares in 223 different Wall Street companies, spread across sectors such as information technology, financial services, telecoms and consumer goods. With a large number of multinational businesses in its basket too, it safeguards dividends from trouble in particular regions.

It’s true that a focus on equities leaves the exchange-traded fund (ETF) vulnerable to stock market downturns. But a selection of fixed income securities helps reduce this threat to the fund’s value.

In addition, its portfolio allocation is designed to “to generate income and capital growth with lower volatility than the broader US equity market”. The forward dividend yield here is 9.6%.

Phoenix Group

Financial services ace Phoenix Group‘s (LSE:PHNX) also proved a dependable dividend raiser in recent years. With another yearly hike tipped for 2025, its forward yield is an excellent 9%.

As with any share, the FTSE 100 company isn’t risk free. In this case, a economic downturn could pull its share price lower. But from a dividend perspective things look largely secure in my book. Its Solvency II capital ratio was a robust 175% as of June.

Phoenix’s operations are highly cash generative, which underpin its solid dividend record. It primarily manages old pension and insurance policies, which provide predictable cash flows over time from premiums and investment returns. With limited scope to grow earnings too, Phoenix is happy to return excess cash to its shareholders than to invest in the business.

Having said that, I’m confident steady structural growth in the retirement products market should underpin impressive dividend income over the long term.

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Demand for them continues to take off, with European ETFs experiencing inflows of $30.8bn and $31.6bn in July and August, respectively. According to Invesco, this was “the strongest two-month run since February“.

Offering diversification across regions, industries, and even asset classes, these funds can cushion the impact of individual stock shocks and deliver a steady return. Here are two I think demand serious attention today.

US shares

The iShares US Equity High Income ETF (LSE:INCU) holds shares in 209 different Wall Street-listed companies. But its name is somewhat misleading, as it also generates an income from cash, as well as the BlackRock ICS US Treasury Fund, which owns government bonds.

The guaranteed returns these assets provide give the fund’s passive income flows more stability. They also reduce the fund’s exposure to stock market volatility.

I especially like this iShares ETF’s heavy weighting of information technology shares, with companies like Nvidia, Amazon, and Microsoft making up 31.6% of the entire fund. Indeed, it owns each one of the Magnificent Seven tech stocks. These companies have delivered a combined average annual return of roughly 40% over the last decade.

Of course, this tech bias can leave the fund vulnerable to economic downturns. However, it also creates substantial long-term growth potential, as phenomena like artificial intelligence (AI), cloud computing, and robotics take off.

The fund’s exposure to defensive industries like consumer goods, utilities, telecoms, and healthcare also helps provide a smooth return across the economic cycle.

For 2025, the iShares US Equity High Income ETF carries a substantial 9.7% forward dividend yield.

Property powerhouse

The iShares MSCI Target UK Real Estate (LSE:UKRE) is another top fund to consider for a large and stable second income over time.

This is because it’s loaded more specifically with real estate investment trusts (REITs). These companies receive sizeable tax breaks, such as exclusion from corporation tax. And in return they’re required to pay a minimum of 90% of yearly rental earnings out in the form of dividends.

This doesn’t necessarily guarantee a large and growing passive income. Some property stocks concentrate on cyclical sectors like industrials and retail, where occupancy and rent collection issues can be common during downturns.

But ETFs like this iShares one reduce (if not completely eliminate) such pressures by holding a variety of property stocks. In this case, the portfolio holds 29 different companies. And these range across multiple industries, like logistics, self-storage, healthcare, and student accommodation, limiting the fund’s vulnerability to adverse economic conditions.

It also holds government bonds — in this case, UK gilts — providing extra income visibility.

For this year, the iShares MSCI Target UK Real Estate’s dividend yield is an enormous 7.5%.

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• Operate in defensive industries, and therefore enjoy long-term earnings stability.
• Have strong balance sheets with low debt and/or impressive cash flows.
• Enjoy robust economic moats (like barriers to entry, patented products and brand power).
• Maintain strong diversification, which protects profits from localised issues.

With this in mind, here are three great dividend stocks I think savvy share pickers should look at today.

iShares US Equity High Income ETF

With holdings in 211 companies, the iShares US Equity High Income ETF (LSE:INCU) could be an effective way for investors to reduce risk and source a long-term income.

Its exposure is spread far and wide, from tech businesses like Nvidia and Apple to classic safe-havens like consumer goods giant Pepsico, pharmaceuticals developer Merck and telecoms provider AT&T. This isn’t all, as it also generates earnings from government bonds and cash, providing additional stability.

Right now, iShares US Equity High Income’s forward dividend yield is a mighty 9%. Its ongoing charge meanwhile is 0.35%, which I consider reasonable.

I think it’s a great diversified fund to consider, even though its focus on Stateside stocks could leave it vulnerable if investors continue rotating away from US shares.

Chelverton UK Dividend Trust

Like a shares-based ETF, investment trusts can also provide high returns while helping share pickers to reduce risk. As its name implies, the Chelverton UK Dividend Trust (LSE:SDV) is designed to supply a steady stream of passive income.

More specifically, this pooled investment vehicle “aims to deliver a high and growing income through investments in mid to small-cap companies exclusively outside the largest 100 UK stocks.” Such smaller companies can be more susceptible to weakness during economic downturns. But again, a wide variety of holdings (it owns shares in 62 companies today) helps to reduce (if not completely eliminate) this threat.

Some of Chelverton’s largest holdings are insurer Chesnara, food manufacturer Bakkavor and Arbuthnot Banking. The forward dividend yield here is an impressive 9.1%.

Aviva

In my opinion, Aviva (LSE:AV.) is one of the best FTSE 100 shares to consider for a long-term passive income. And it’s not just because its 6.3% forward yield is one of the largest on the UK blue-chip index.

The company has significant brand power, which helps protect earnings even during downturns. Its status as the largest life insurer in the UK (market share of 24%) and market-leading positions in other diversified product lines underlines this. It also has a significant position in the defensive general insurance markets to protect revenues when consumers feel the pinch.

On top of this, Aviva has a cash-rich balance sheet it can use to pay large dividends while still investing for growth. Its Solvency II capital ratio was 203% as of December.

Intense competition remains an ongoing threat. But Aviva’s long-term resilience helps soothe any fears I have.

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However, investors can lessen the chances of their passive income sinking by investing in a variety of different stocks. This can be achieved easily and cheaply by purchasing one or more dividend-paying exchange-traded funds (ETFs).

Some such funds are geared specicially towards paying high dividends. They can also hold companies that have strong records of dividend growth. By holding a basket of shares, ETFs can be a better way to target a dependable passive income over time, though it’s important to remember that dividends are never, ever guaranteed.

With this in mind, here are two dividend-paying ETFs I think are worth considering today.

A US-focused fund

As the name implies, the iShares US Equity High Income ETF (LSE:INCU) is geared towards generating income from North American assets (218 in total). For this financial year, its dividend yield’s huge, at 10.1%.

Perhaps surprisingly, it comprises a large section of tech stocks (including Nvidia, Microsoft and Apple). Around 28.3% of the fund is devoted to the information technology space.

But this iShares ETF holds classic defensive sectors, too, to give it added steel and exposure to higher dividend yields. Real estate, healthcare and telecoms also feature prominently.

In addition, the fund also generates income from US government-backed securities and cash. The BlackRock ICS US Treasury Fund’s the single largest holding here.

The ETF’s pure focus on US assets could leave it vulnerable if investor confidence in the States begins to dim. But right now, I still believe it offers decent diversification for dividend chasers.

X marks the spot

The Global X SuperDividend ETF (LSE:SDIP) holds 100 of some of the highest-yielding dividend stocks out there. As a consequence, its forward yield’s now 12.9%, which puts it in the top three largest-yielding ETFs.

In total, it has holdings in 105 businesses, which provides reslience even if one or two dividend shares deliver disappointing cash rewards. It’s also well diversified by geography — the US is its largest single territory by share exposure, comprising 30.5% of the fund. And its holdings span multiple sectors including financial services, mining, real estate and utilities.

Major holdings include satellite operator SES, food manufacturer Marfrig and telecom business Proximus.

GlobalX does have high weightings in cyclical industries. For instance, financial services companies and energy producers account for 27.5% and 23.6% of the fund respectively. This carries higher danger during economic downturns than ETFs that are focused on more defensive industries.

Yet the fund’s ability to deliver a large and constant stream of passive income during previous crises helps soothe any concerns I have. Its unbroken record of delivering monthly distributions dates back to 2012.

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