Dividends & Delight: A Most Sensible Income Plan

Now, one observes, with a touch of satisfaction, that dividend-paying ETFs are, after a period of distinctly uninspired performance, reminding us why they’re rather jolly good things to have in the portfolio. It’s a bit like a reliable aunt – not terribly exciting, perhaps, but always there with a comforting cheque when one is in a bit of a fix.

This year, whilst the S&P 500 has been behaving with a disconcerting lack of ambition – practically flat, you know – and the tech sector appears to be having a bit of a wobble, the WisdomTree U.S. Total Dividend ETF, which one might consider a benchmark for the dividend universe, has put on a respectable six percent or so (as of February 12th, naturally). A most agreeable result, wouldn’t you say?

High-yield strategies, generally speaking, have been doing even better. Income investors, after a period of patiently waiting, are enjoying some capital growth, and are also able to pocket a rather handsome 3-4% yield – and occasionally even more – on the side. It’s a bit like finding a ten-shilling note in an old waistcoat pocket – a most unexpected and pleasant surprise.

We’re barely two months into 2026, but this trend has persisted long enough to suggest it might continue for a good while yet. That means there’s still a chance to capture not just a bit of share price appreciation, but a substantial income stream as well. A truly splendid prospect, wouldn’t you agree?

Depending on one’s particular preferences, here are three high-dividend ETFs that appear rather well-positioned for the coming months, and indeed, beyond. Consider them, if you will, as a carefully curated selection of financial allies.

1. The Pure High-Yield Play

The Vanguard High Dividend Yield ETF (VYM 0.15%) tracks the FTSE High Dividend Yield Index. It begins with a broad selection of U.S. dividend-paying stocks, calculates the expected dividend yield over the next twelve months, and then selects the top half for inclusion in the portfolio. The result is then weighted by market capitalization. It currently yields 2.3%.

This ETF doesn’t employ a terribly complicated or robust strategy when it comes to building a high-yield portfolio. But if one’s goal is simply to use a broadly diversified and relatively low-risk approach to capture a high yield, the Vanguard High Dividend Yield ETF does the trick rather nicely. There’s no reckless attempt to boost the yield by taking on unnecessary risks. The fund holds over 500 different stocks, so there’s no concentrated risk, and the 0.04% expense ratio is remarkably reasonable.

One might argue that there are more sophisticated ways to target high-yield stocks. But for a no-frills option to elevate one’s yield, this fund does the job admirably.

2. The Quality Income Choice

The Schwab U.S. Dividend Equity ETF (SCHD 0.60%) follows the performance of the Dow Jones U.S. Dividend 100 Index. It’s one of the few ETFs that considers dividend growth, dividend quality, and high yield in its selection process. A most discerning approach, wouldn’t you say?

The final portfolio selects the 100 stocks that demonstrate the best combination of all factors (REITs are excluded) and then weights them by market capitalization. It currently yields 3.4%.

In my humble opinion, this would be the more sensible way to invest in high-yield stocks. It specifically targets the higher end of the yield spectrum, automatically providing a boost to one’s income. But it layers on quality screens – such as return on equity and cash flow-to-debt – to ensure that these yields are healthy and sustainable. The dividend growth screen ensures that companies are committed to their shareholder payouts long-term. A truly comprehensive strategy, wouldn’t you say?

I rather like strategies that use different screens to act as cross-checks against each other. The Schwab U.S. Dividend Equity ETF does one of the best jobs of identifying the best of the best dividend stocks. The current yield, a good bit higher than that of the S&P 500, ensures a substantial passive income stream.

3. The Ultra-High-Yield Option

The JPMorgan Equity Premium Income ETF (JEPI 0.18%) is not a pure dividend stock portfolio. Instead, it actively selects a portfolio of over 100 low-volatility stocks that still exhibit above-average risk/return characteristics and then writes covered call options on the S&P 500 index to generate a high yield. It currently yields 7%.

With covered call strategies, one gives up some share price upside in exchange for the high yield. That means the JPMorgan Equity Premium Income ETF is more geared toward pure income seekers as opposed to those who are seeking a growth and income combination. A perfectly reasonable trade-off, if one is primarily concerned with income.

I rather like that the fund’s foundation is a portfolio of low-volatility stocks. These stocks are often more durable and backed by solid fundamentals, making them ideal for long-term income generation. It won’t have the same risk/return profile as the other ETFs listed, but that can help diversify an investor’s income stream. A most prudent approach, wouldn’t you say?

2026-02-18 15:02

1. The Pure High-Yield Play

2. The Quality Income Choice

3. The Ultra-High-Yield Option

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