In 2025, dividend exchange traded funds (ETFs) did not perform as well as expected, primarily because tech stocks were at the forefront of the market surge. Only a few US dividend ETFs found success, mostly due to a heavy focus on technology.
However, there’s reason to be optimistic. As we move into the latter half of 2025, the market is likely to grow, which could lead to better performance from dividend ETFs. Sectors like financials, industrials, and healthcare—common in these funds—often excel, and this trend may carry through to 2026.
High yield dividend ETFs are beginning to look appealing again, particularly a few that combine strong income potential with positive future prospects.
One interesting player is the Schwab US Dividend Stock ETF, which, despite a less impressive record in recent years, continues to draw significant investment. This can be attributed to its solid long-term performance and smart portfolio design.
The approach here involves selecting stocks that have consistently paid dividends for at least a decade, while also analyzing key metrics like return on equity and cash flow compared to debt. The aim is to build a portfolio of 100 stocks that strike the right balance.
Yet, this strategy has its downsides. Currently, several leading sectors—energy, consumer staples, healthcare, and industrial products—only one has outpaced the S&P 500 this year. Energy and consumer staples have been underwhelming performers lately, while tech stocks hold a mere 8.3% of the portfolio.
This defensive, high-quality stance might prove beneficial if economic conditions start to weaken, as indicators suggest could happen. With a yield of 3.7%, it attracts traditional income-focused investors, and its history shows that it typically outshines the market over longer time frames.
The Vanguard High Dividend Yield ETF takes a relatively straightforward approach, targeting a collection of high-yield stocks while also tapping into areas with potential growth next year.
This fund boasts significant tech stock exposure at 14%, which could enhance its growth potential, though it might introduce a bit more volatility. Still, its diversified nature, with at least 8% across seven sectors, and a low expense ratio work in its favor, alongside a 2.4% yield.
Much like the Schwab fund, if the market turns cautious, this combination could become more appealing. Plus, it maintains enough growth exposure to stand out among dividend ETFs, especially if the bull market remains strong.
Then there’s the JPMorgan Equity Premium Income ETF, which mirrors Schwab’s recent trends of seeing considerable inflows despite a dip in recent performance. This ETF revolves around a portfolio of high-quality, low-volatility stocks paired with a covered call strategy, which might serve as an attractive high-yield option.
However, this strategy may limit upside potential. Typically, covered call strategies perform best in stable market conditions, and with fluctuations expected next year, it could be well-positioned.
While JPMorgan’s funds may lag during periods of strong market growth, that situation seems to be shifting. The current macroeconomic environment and the possible shift away from growth stocks make this fund a viable option to consider.
Before you dive into the Schwab U.S. Dividend Stock ETF, consider some key points.
Analysts from a different firm have pointed out what they see as the ten best stocks for investment now—and interestingly, the Schwab U.S. Dividend Stock ETF isn’t one of them. These highlighted stocks show promise for impressive returns in the following years.
Now, a notable example to reflect on is Netflix. If you’d invested $1,000 when that recommendation was made in December 2004, you’d have seen returns soaring to $505,641! Similarly, Nvidia’s recommendation made in April 2005 would have turned a $1,000 investment into $1,143,283!*
Ultimately, it’s worth highlighting that the average returns of the advisory service stand at 974%, outpacing the S&P 500, which sits at a mere 193%.
So, keep an eye out for the latest top stocks. Building a community geared towards retail investors has its perks.
