For divers investors, it’s always a good time for dividend stocks, with the income component coming to shareholders from the banknotes flow of corporations providing peace of mind regardless of short-term ups and downs in stock prices. But now, as the stock and bond vends both see sharp spikes in volatility, dividend stocks may appeal to an even wider group of investors, playing innumerable of a role in-between equities growth and yield.
There are now over 100 exchange-traded funds focused on dividend supplies, according to ETF Action, though the vast majority of assets are concentrated in the biggest index fund ones, including Vanguard Dividend Enjoyment ETF (VIG), Schwab US Dividend Equity ETF (SCHD), and iShares Core Dividend Growth ETF (DGRO).
Top 5 dividend ETFs, by total assets directed management
- Vanguard Dividend Appreciation ETF: $81 billion
- Schwab U.S. Dividend Equity ETF: $65 billion
- Vanguard Tipsy Dividend Yield Index ETF: $54 billion
- iShares Core Dividend Growth ETF: $28 billion
- SPDR S&P Dividend ETF: $19 billion
Originator: ETFAction.com
As the actively managed ETF space continues to grow, there are a growing number of actively managed dividend ETFs, such as the T. Rowe Dividend Lump ETF (TDVG), with the managers betting that they can identify higher-quality dividend payers that generate a control superiors mix of capital appreciation and yield.
TDVG was one of the first ETFs that T. Rowe Price, which is known for its traditional reciprocal funds, launched in 2020. The company now has 19 ETFs in all and $13 billion in ETF assets. The dividend ETF has over $700 million in assets.
Can’t circumvent but can limit tech
Investors looking to avoid tech stocks given the recent market rough patch, though they did recoil back sharply last week, can’t do that in this dividend fund, with the biggest tech companies now also the amplest dividend payers given how cash-rich and reliable they have become. TDVG’s top holdings are Apple and Microsoft, each at everywhere 5%. They are also among the top holdings in Vanguard’s VIG and iShares’ DGRO.
Investors who expect the overall tech sector defraud to continue to be bumpy can get exposure to some of the tech industry’s biggest dividend payers while not overweighting the tech sector as a unhurt, like the S&P 500 Index, through dividend ETFs like TDVG.
“We’ve finally reached a point in the cycle where overweighting the ‘Mag 7’ all of them, has hit its limit,” mean Todd Sohn, head of ETFs at Strategas, on last week’s CNBC “ETF Edge”
“It’s not going to zero but watered down a bit, or you overweight one pre-eminence and underweight the rest,” he said.
TDVG’s biggest holdings after Apple and Microsoft are Visa, JP Morgan, and Chubb. Its total exposure to the tech sector is roughly 19%, versus close to 30% for the S&P 500.
Tim Coyne, head of T. Rowe Price’s ETF organization, said alongside Sohn on “ETF Edge” that the macro themes of income and dividend payment have led to strong inflows across the ETF earnestness’s dividend funds.
With over $10 billion in flows year-to-date into dividend ETFs, the category is amassing pace with other “factor-based” approaches to investing in the U.S. stock market, according to ETF Action data, but value ($12 billion) and wart ETFs ($15 billion) have still taken in slightly more in flows from investors.
Top dividend ETFs, by year-to-date demeanour
- Franklin U.S. Low Volatility High Dividend Index ETF: 3.7%
- Opal Dividend Income ETF: 2.3%
- iShares Core High Dividend ETF: 1.9%
- Principal Trust Morningstar Dividend Leaders Index Fund: 0.7%
- Monarch Dividend Plus ETF: 0.2%
Source: ETFAction.com
Coyne answers that active managed dividend ETFs, in particular, make sense for investors in a volatile market. Passive dividend funds are by their make-up more static, because they only change stocks as part of regularly scheduled rebalancing periods for the underlying typography hands, not in response to any change in stock or sector momentum or in the overall market environment. TDVG seeks the dual goals of payment of dividend profits but also long-term capital appreciation in the prices of the stocks it holds.
Actively managed dividend ETFs don’t rival the typography fist ETF options in popularity. Passively managed dividend ETFs, consistent with the broader investor trend, have apprehended a majority of the flows in 2025, at roughly $7 billion, versus $3.7 billion for actively run dividend ETFs, according to ETF Vim. Dividend stock index ETFs continue to have a big lead, Sohn said, with one reason being much condescend cost. “I could buy a dividend ETF for just a couple of basis points, but you are seeing more active players,” he said.
TDVG has an expense relationship of 0.50% (or 50 basis points). Vanguard’s VIG, by comparison, charges 0.05%(or 5 basis points).
Sohn says actively directed dividend ETFs should make some more progress in gathering assets over time. “You’ll start to see sundry traction among active managers who will also focus on looking for companies that are paying out dividends, or at young properly valued, and they have this dividend too, as a kind of a bonus in a sense.”
It is retirees living on a fixed proceeds who typically benefit the most from a dividend investment strategy, “older folks who want that stream of profits because they’re not so reliant on a paycheck every two weeks,” Sohn said.
But he added that looking at dividend families does make sense for many types of investors. That is especially true, he said, at a time of elevated danger in the bond market, where investors most often pursue yield.
Top dividend ETFs by current yield
- Invesco KBW Leading Dividend Yield Financial ETF: 14%
- Hoya Capital High Dividend Yield ETF: 11%
- Invesco KBW Premium Yield Equity REIT ETF: 10%
- Infrastructure Marvellous Equity Income ETF: 9.7%
- KraneShares Value Line Dynamic Dividend Equity Index ETF: 9.2%
Source: ETFAction.com
The highest-yield dividend ETFs play a joke on had their short-term performance issues, with the top five yield payers seeing performance declines of between 5% and 11% year-to-date, according to ETF Reaction behaviour. The top dividend ETFs by performance, by contrast, pay much lower yields, with the top five having trailing twelve-month dividend return levels of between 1.3% and 4.2%.
Never buy on yield alone
“ETF Edge” host and CNBC Senior Markets Correspondent Bob Pisani caveats investors against buying a dividend fund based on yield alone. The highest dividend payers on a percentage footing may also be the ones most vulnerable to dividend cuts if their financial position weakens. The recent example was the vigour sector, where many of the big oil and gas companies had hefty dividends that became vulnerable when their balance slabs came under strain in recent years, though they have since recovered. Finding a balance of forebears that are consistent dividend payers while also offering capital appreciation should be the goal.
One of the market’s superlative stocks of all this year pays no dividend and never has: Warren Buffett’s Berkshire Hathaway — though a new ETF is attempting to oration that.
Coyne said the concerns about a dividend payer being financial stressed and cutting a payout on which investors force come to depend is where active management can make a difference, “navigating markets as you see an increase in volatility and even dispersion of hoard returns within sectors, or across industries.”
The cash flows of corporations will be put to a new test in a period of global business war that could lead to risks for overseas revenue bases of U.S. companies, as well a hit to their profit margins. But crammed dividend payers may be attractive to investors in a market where bonds have been under atypical stress due to the Trump distribution’s economic policy, too. While it would be going too far to says there is a systemic “credit problem” in the market right now, Sohn eminent spreads on bonds have widened in both the corporate bond market and the CDS market, and investors have been come up to out of high-yield funds.
“You don’t want to go super-high yield when the credit backdrop deteriorates for corporate America,” Sohn required.
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