iShares Select Dividend ETF (NASDAQ:DVY | DVY Price Prediction) stands out as one of the long-standing income-focused funds available. For its investors, the main concern is whether this fund can continue providing a reliable source of income. DVY offers variable dividends every quarter, derived from around 100 vetted U.S. companies known for their payment history and yield, and it currently boasts a yield of nearly 3.5%. This positioning indicates that DVY is tailored for those looking for income and modest growth, emphasizing durability in its distributions.
How does DVY earn money?
DVY follows the Dow Jones US Select Dividend Index, which assesses factors like dividend growth, payout ratios, and yields. The fund weights its holdings based on the declared dividend amounts. Essentially, the distributions comprised of dividends collected from the underlying stocks are passed to shareholders each quarter, minus an expense ratio of 0.38%. There are no options or leverage involved, which means that what companies pay out is exactly what shareholders receive.
This portfolio is heavily skewed toward stable cash-generating sectors. Utilities make up 25% of its assets, financial services account for 23%, while consumer staples represent 14%, and the remaining portion is divided mainly between energy and communications. With $22.3 billion in assets, liquidity isn’t an issue here.
Top income-producing holdings
The fund’s largest holding is Pfizer at 2%, which appears to maintain its dividend thanks to solid free cash flow, although it faces a high payout ratio due to a reset in earnings following COVID-19. While the dividend seems secure, expectations for growth are somewhat muted until the company recovers lost earnings. Conversely, Altria, also at 2%, continues to support one of the most reliable dividends in the S&P 500 despite its declining tobacco business. Verizon, another 2% holding, carries significant debt, yet its wireless cash flow has reliably covered its dividend payments for years.
Prudential Financial (2%) and T. Rowe Price (2%) are linked to market conditions and credit status, making them vital for DVY’s overall performance. As markets stabilize and credit spreads tighten, these payments are likely to rise. OneOK, also at 2%, is a midstream energy utility, and its allocation is dependent on throughput based on rates, ensuring its presence throughout fluctuating oil market cycles.
Macro background
Support for dividends stems from solid profits. According to data from the BEA, domestic corporate profits hit $3.73 trillion in Q4 2025, reflecting a 10% increase compared to the previous year. The financial sector—constituting a significant portion of DVY—saw a rebound to $897.1 billion in Q4 2025, while utility profits, although slowing to $54.9 billion, remained steady. These dividends are well-supported by operational cash flow due to ongoing profitability.
There is a notable risk regarding interest rates, with the yield on the 10-year Treasury note reaching about 4.6%, the highest level in a year, despite a lowered federal funds cap of around 4%. This scenario reduces the appeal of DVY’s 3.5% equity yields and raises the cost of refinancing for the utilities and telecommunications sectors, central to the portfolio.
Distribution history and total return
DVY has consistently paid dividends quarterly since November 2003. While the amount varies each quarter, reflecting the timing of the underlying companies’ payouts, the overall trend shows an increase. The $1.61 distributed in Q4 2025 marked the highest quarterly dividend in DVY’s history. Looking at total returns, the fund saw an increase of 18% over the past year and approximately 169% over the last decade, excluding dividends, with the stock price currently around $152.
Judgment
DVY’s delivery of income seems secure. The income stems from genuine corporate dividends issued by well-established cash-generating firms across sectors with stable earnings. While it’s important to anticipate fluctuations in payments each quarter, and to realize that rising Treasury yields may slow price gains, DVY has been a reliable choice for retirees seeking a consistent, increasing income from U.S. stocks with minimal fees. For those eyeing yields above 5%, alternatives like covered call ETFs or high-risk credit ETFs might be necessary, though they come with their own trade-offs.
