Best Dividend ETFs: High-Yield Funds With Strong Returns

If you’re looking for steady, regular cash payouts, dividend ETFs can be a great option. The best dividend ETFs offer a steadily rising stream of payments year after year.

The best dividend ETFs give investors a ton of advantages, including:

• A strong cash dividend

• A growing payout over time

• Attractive, long-term returns potential

• A diversified portfolio of stocks, reducing your risk

• Lower volatility than the bellwether S&P 500 Index

• Easy to invest in

Here are some of the most followed dividend ETFs, including their yields and long-term performance.

Best Dividend ETFs: Overview

Data: Yahoo Finance and Morningstar, as of January 26, 2026

These funds all have strong long-term track records, they sport solid dividend yields, and they offer low expense ratios, which is the fund’s annual cost expressed as a percentage of your investment.

The long-term performance is your best gauge of how the fund may perform in the future. While there are no guarantees in investing, these figures indicate the level of potential returns.

5 Top Dividend ETFs: High Yield and Growth

Below are the details on five top dividend ETFs, including their strategy, a few of their largest holdings, and their expense ratios.

1. Vanguard Dividend Appreciation Fund (VIG)

This ETF is one of the market’s most highly regarded dividend funds. It focuses on stocks where the yield can grow over time rather than ones with a high current yield, meaning that today’s yield is lower than that of some other funds. This strategy tends to offer higher returns over time, however. This fund selects only stocks that have increased their dividend for 10 straight years or more.

Its top positions include Broadcom (AVGO), Microsoft (MSFT), Apple (AAPL), JPMorgan Chase (JPM), and Eli Lilly (LLY).

Expense ratio: 0.05%

2. Vanguard High Dividend Yield Fund (VYM)

This is another well-regarded Vanguard dividend fund, and its strategy focuses on higher current yields rather than growth. Its portfolio consists of stocks where the dividend yield is in the top half of eligible investments, which includes mid- and large-cap domestic stocks.

This fund’s largest positions include Broadcom, JPMorgan Chase, ExxonMobil (XOM), Johnson & Johnson (JNJ), and Walmart (WMT).

Expense ratio: 0.06%

3. Schwab U.S. Dividend Equity Fund (SCHD)

This Schwab fund offers a higher yield than others on this list. The fund tracks the Dow Jones U.S. Dividend 100 Index, which includes high-yield U.S. stocks with at least 10 straight years of dividends and other characteristics of strong performance, such as high return on equity.

The top positions include Lockheed Martin (LMT), Chevron (CVX), The Home Depot (HD), and Altria (MO).

Expense ratio: 0.06%

4. Vanguard International High Dividend Yield Fund (VYMI)

This fund is the international counterpart to Vanguard’s domestic-focused fund mentioned above. It selects high-quality stocks where the dividend yield is in the top half of the eligible investments, so it’s focusing more on current yield than on dividend growth.

Its top positions include Roche (ROG.SW), HSBC (HSBA.L), Novartis (NOVN.SW), Nestle (NESN.SW), and Royal Bank of Canada (RY).

Expense ratio: 0.17%

5. Fidelity High Dividend Fund (FDVV)

This fund tracks the Fidelity High Dividend Index, which includes mid- and large-cap stocks that are expected to grow their dividend. The fund is just shy of its 10-year anniversary, but it has put up strong returns in the last half-decade, while still offering a strong current yield.

This fund’s largest positions include Nvidia (NVDA), Apple, Microsoft, Broadcom, and JPMorgan Chase.

Expense ratio: 0.15%

But Not All Dividend ETFs Are Created Equal

Dividend ETFs focus exclusively on dividend-paying stocks, though the stocks they select depend on the fund’s strategy. For example, some funds focus on high current yield – getting paid more today – while others focus on growth – getting a faster-rising stream of cash later.

Dividend stocks tend to be less volatile than the average stock. The reason is simple: These stocks usually represent slower-growing segments of the market where companies are paying out cash instead of reinvesting it into their business. But one word is important there – “usually.”

For instance, you might have noticed that FDVV has large positions in many of the big tech firms. In fact, Nvidia, Apple, Microsoft, and Broadcom make up a whopping 19% of the ETF’s holdings. It’s true they all pay dividends. So, technically, they’re “dividend stocks.” But investors don’t think of them that way.

Nvidia, which is 6.45% of the ETF’s weighting, is the best example of this. The company currently pays a $0.01 quarterly dividend. That’s right – one penny. And considering the current share price around $189, it results in an annual dividend yield of 0.02%.

Make no mistake – nobody is buying NVDA for the dividend. It’s a similar story with many of the other tech holdings. While they do pay dividends and have raised those dividends over time, the market is valuing them for what they are – growth stocks.

It’s a good reminder that an ETF may market itself as a “dividend fund,” but it’s always worth looking under the hood.

Here are five tips for investing safely in dividend ETFs and what you need to watch out for:

• Balance high current yield against growth: The general trade-off with dividend funds is between high yield and dividend growth. You can get a higher yield now, but that yield will tend to grow slower over time, so your total return is lower. Alternatively, you can take a lower yield today, but enjoy higher growth over time. So, you need to figure out which approach makes the most sense for your financial needs.

• Find a low expense ratio:The expense ratio is the management fee that an investor pays to the fund company. The lower, the better. Every dollar that doesn’t go to fees stays invested in the fund to make you money. An expense ratio below 0.5% is good, but anything below about 0.2% is exceptional, including all the funds listed above. At a 0.2% expense ratio, you’ll pay $20 annually for every $10,000 invested in the fund.

• Stick to broad-based funds:Some dividend ETFs focus on a specific sector of the market, but if that sector faces a downturn every stock in the portfolio could be hit. A broad-based ETF, like those mentioned above, covers many different industries, making it more diversified and reducing your overall risk. Just be sure to check the ETF’s weightings. As FDVV showed, you might have more exposure to one sector (tech, in this case) than you might realize.

• Avoid the highest-yielding funds:You’ll find plenty of dividend ETFs offering higher yields than the funds mentioned above. They may do well for a while, but there’s often a good reason the yield is so high. Often, the market is pricing in a dividend cut, the payout is unsustainably high, or it’s priced for its current yield and has little or no potential for growth.

• Look at the fund’s long-term track record: A fund may offer a high yield today, but be careful with funds where the long-term returns are lower than the dividend yield itself. If the yield is higher than the long-term return, you’re getting a large dividend but you’re losing money overall. In other words, don’t shoot for an 8% yield on a fund when its long-term record suggests it’s only going to return a total of 5% annually on average. You’d lose about 3% per year to get that high dividend – and then pay taxes on the yield, too.

Part of the beauty of dividend ETFs is the ability to build wealth and receive regular income without having to do the heavy lifting of analyzing individual stocks. But be wary of some of the pitfalls mentioned above. The questionable status of many of these holdings as “dividend stocks” is a trap many would-be dividend investors can fall into.

Regards,

James Royal

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