How To Earn $500 Monthly Income With These Cash-Like Treasury ETFs - iShares Short Treasury Bond ETF (NASDAQ:SHV), US Treasury 2 Year Note ETF (NASDAQ:UTWO), SPDR Bloomberg 3-12 Month T-Bill ETF (ARCA:BILS), SPDR Bloomberg 1-3 Month T-Bill ETF (ARCA:BIL) (2024)
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.
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
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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 ETFSHV: 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
1 Month Treasury Rate is at 5.51%, compared to 5.51% the previous market day and 5.56% last year. This is higher than the long term average of 1.45%. The 1 Month Treasury Rate is the yield received for investing in a US government issued treasury bill that has a maturity of 1 month.
The iShares 0-3 Month Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities less than or equal to three months.
6 Month Treasury Rate is at 5.43%, compared to 5.41% the previous market day and 5.14% last year. This is higher than the long term average of 2.84%. The 6 Month Treasury Bill Rate is the yield received for investing in a US government issued treasury security that has a maturity of 6 months.
The 3-Month Treasury bill is a short-term U.S. government security with a constant maturity period of 3 months. The Federal Reserve calculates yields for "constant maturities" by interpolating points along a treasury curve comprised of actively traded issues of term (e.g., 1 month) maturities.
For many investors, investing in the right bond funds can be a better option than holding a portfolio of individual bonds. Bond ETFs can provide better diversification — often for a lower cost — can offer higher liquidity, and can be easier to implement.
Whether you invest in Treasury bonds or bills depends on your time horizon and risk tolerance. If you'll need the money sooner, a Treasury bill with a shorter maturity might be best. If you have a longer time horizon, Treasury notes with maturities of up to 10 years might be better.
Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.
To calculate the price, take 180 days and multiply by 1.5 to get 270. Then, divide by 360 to get 0.75, and subtract 100 minus 0.75. The answer is 99.25. Because you're buying a $1,000 Treasury bill instead of one for $100, multiply 99.25 by 10 to get the final price of $992.50.
You can only buy T-bills in electronic form, either from a brokerage firm or directly from the government at TreasuryDirect.gov. (You can also buy Series I savings bonds through TreasuryDirect.gov). The most common maturity dates are four weeks, eight weeks, 13 weeks, 26 weeks and 52 weeks.
A Treasury yield refers to the effective yearly interest rate the U.S. government pays on money it borrows to raise capital through selling Treasury bonds, also referred to as Treasury notes or Treasury bills depending on maturity length.
Yield is a measure of cash flow that an investor gets on the amount invested in a security. It is mostly computed on an annual basis, though other variations like quarterly and monthly yields are also used. The gross yield is the return on the investment without the deduction of taxes or other expenses.
Treasury notes are medium-term, ranging from two to 10 years, and are otherwise the same, with semiannual interest payments and the face value when they mature. Treasury bills mature within a year, do not pay interest, and are sold at a discount to the face value that you get at maturity.
Introduction: My name is Stevie Stamm, I am a colorful, sparkling, splendid, vast, open, hilarious, tender person who loves writing and wants to share my knowledge and understanding with you.
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