The dividend yield from the S&P 500, as distributed by index funds such as "SPY", is around 1.8% right now, and could be heading lower if companies start trimming dividends due to lower earnings brought on by the Covid 19 pandemic. But simply buying those index funds for the dividend yield alone is very risky.
In early 2020, the S&P 500 dropped 34% in 1 MONTH, taking everything including index funds down with it. Yes, the market recovered most of that loss quickly, but most investors don't want to deal with that kind of volatility.
In 2000 and 2008-2009, the S&P suffered even greater hits and it took many YEARS for investors to recover!
However, there is a better way to use the S&P 500 to generate income levels much higher, and it entails very little risk.
Buy using a combination of two to four S&P 500 Index OPTIONS, usually having the same short term expiration date 1 week to 1 month, we will seek to generate an amount of cash income equivalent to an ANNUALIZED yield of 5% or more on our total deposited funds. In fact, when the orders for the options are entered, they go to the broker as a single order, at a specified price limit that will result in the desired income at expiration.
Since the deposited funds are only required to "back up" the option package, they can be left alone to gather interest for the whole year. Let's assume they go into T-Bills paying 1%. Therefore to achieve a minimum of 5% for the year, we need the option combinations to provide ANNUALIZED returns of at least 4% each time we create one.
In a theoretical example, we deposit $100,000 and expect earn at least $5,000 over the period of 1 year. The T-Bills generate $1,000, so we need our option combinations to deliver another $4,000.
Depending on market conditions, we decide that a package of options expiring in 1 week looks attractive. The order for that package will specify a price that will result in a credit to the account of at least $77 net of commissions at expiration. That represents an ANNUALIZED return of $4,004. (52 x $77 = $4,004)
This same procedure is followed every week or month throughout the year.
Since I am investing in this manner myself, I am always selecting the option combinations, expirations and minimum acceptable credits to be earned each time. For those wishing to see or even duplicate what I am doing in real time, please see "Contact" for details.