The universe, as we all know, is a profoundly improbable place. And yet, here we are, discussing dividend-paying exchange-traded funds in 2026. It’s enough to make one question the fundamental constants. After a brief, almost alarming period of competence in 2022 – where some dividend ETFs actually outperformed the S&P 500 by a margin that bordered on the statistically significant – things rather settled back into their usual state of… well, not quite chaos, but a gentle, pervasive underperformance.
The WisdomTree U.S. Total Dividend ETF, which we’ll use as a sort of proxy for the entire dividend universe (mostly because it has a pleasingly bureaucratic name), managed a respectable 50% total return from 2023 to 2025. But then, the Vanguard S&P 500 ETF went and achieved 86%. It’s a bit like comparing a reasonably efficient bicycle to a rocket-propelled unicycle. Both get you somewhere, but one does it with a disturbing lack of subtlety. (And a significantly higher chance of spontaneous combustion.)
However, this year has seen a peculiar rotation towards value, low volatility, and defensive stocks. It’s as if the market collectively decided that excitement was vastly overrated. This, surprisingly, has benefited dividend payers. They’re rising from the ashes, like particularly resilient phoenixes with quarterly payout schedules.
1. State Street SPDR S&P Dividend ETF
The State Street SPDR S&P Dividend ETF (SDY 0.11%) is a curious beast. It combines dividend growth with yield in a way that suggests someone actually thought about it for more than five minutes. Its index targets companies with a 20-plus-year track record of annual dividend growth – which is impressive, frankly. It’s like a particularly stubborn weed that refuses to be eradicated by economic downturns. The portfolio is then weighted by dividend yield, which is a sensible thing to do, really. It currently offers a yield of 2.4%.
Dividend growers aren’t usually high yielders, which is a bit like expecting a cheetah to be good at underwater basket weaving. So, maximizing income potential from this group makes a certain, slightly perverse, sense. The top four sector holdings are what you’d expect: industrials (19%), consumer staples (18%), utilities (15%), and financials (12%). Energy and technology only have mid-single-digit allocations. (One suspects the technology sector is busy inventing something that will render dividends obsolete. It’s always something.)
This portfolio is hitting the areas that are performing well this year, and its deep-value style (a forward price-to-earnings ratio of just 18) is getting a real tailwind. It’s as if the market is finally admitting that cheap things are, occasionally, a good idea.
2. Invesco S&P 500 High Dividend Low Volatility ETF
The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD +0.26%) begins by identifying the 75 stocks from the S&P 500 with the highest dividend yield over the past 12 months. Then, it whittles that down to the 50 stocks with the lowest realized volatility over the past year. It’s a bit like asking a group of hyperactive squirrels to choose the calmest one. The result is a current yield of 4.5%.
Given that this fund’s strategy focuses on dividend yield first before considering volatility, it’s more of a pure income play. It doesn’t exclude real estate investment trusts (REITs) right off the bat, like some dividend ETFs do, which means this sector accounts for 20% of the portfolio. Other top sectors include consumer staples (20%), financials (14%), utilities (14%), and energy (13%). That makes this fund very well diversified, although it does have a unique twist: There isn’t a single tech stock to be found in the portfolio. (One suspects they’re all busy plotting the downfall of traditional finance. It’s a long-term play.)
If you’re considering dividend stocks for your portfolio and you want to look beyond the popular names, such as the Vanguard Dividend Appreciation ETF, these two are worth considering. Their strategies produce portfolios very different from what investors are probably used to, but that can be a good thing. After all, conformity is the first path to obsolescence. And in the grand scheme of things, isn’t everything just…mostly harmless?
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2026-03-18 15:03