Key Points
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The market rotation away from growth and tech and toward undervalued areas of the market has paid off for dividend stocks.
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Funds emphasizing balance sheet quality and high yield have generally outperformed.
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These three well-known dividend ETFs are quietly delivering big returns for shareholders.
Seeing the S&P 500 (SNPINDEX: ^GSPC) index down more than 4% year to date is painful. But it might provide some comfort knowing that a number of areas in the market are performing much better.
The rotation that took place in U.S. equities earlier this year has made value, defensive, dividend, and small-cap stocks the new leaders. And several multiyear laggards have turned into stellar performers in 2026.
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This is most evident in the dividend stock category. Of more than 120 U.S. dividend equity exchange-traded funds (ETFs), nearly 90 of them have produced positive returns year to date. A dozen are up more than 8%. Nearly all of them are outperforming the S&P 500.
With so many investors still focused heavily on megacap tech and artificial intelligence (AI) stocks, a lot of this has slipped under the radar. Many “boring” strategies and sectors of the market are doing very well once again. And these three dividend ETFs are clear examples.
Rolled up dollar bills with a note saying dividends.
Image source: Getty Images.
1. Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) tracks an index of stocks that score highly on balance sheet fundamentals, have long dividend histories, and maintain above-average yields. Historically, this strategy has produced a portfolio of durable, defensive cash flow generators.
The reason why this fund is up more than 12% year to date goes back to something that happened in March 2025. During its annual reconstitution, the portfolio became very heavy in two sectors: energy and consumer staples. It didn’t help performance much last year, but it made all the difference in 2026.
Energy stocks have soared this year in large part due to the conflict in Iran. Thanks to the market rotation that occurred at the beginning of the year that benefited value and defensive stocks, consumer staples are beating the S&P 500 by about 10% year to date. This ETF was positioned in the right sectors before their rallies occurred, which has helped the Schwab U.S. Dividend Equity ETF become an elite performer again. It’s dividend yield is about 3.4%.
2. iShares Core High Dividend ETF
The iShares Core High Dividend ETF (NYSEMKT: HDV) targets companies that, as the name suggests, pay above-average dividends. But it also considers two different Morningstar quality metrics to ensure these companies are financially healthy and can sustain high dividend payouts.
Within the dividend stock universe, high-yield ETFs have performed much better than ones focused on dividend growth in 2026. But this fund’s inclusion of a quality screen has also helped. Morningstar’s “Economic Moat” and “Distance to Default” ratings are a bit of a black box, but they also help ensure that this fund’s high yield is also sustainable.
In general, there aren’t a lot of ETFs that mix high yield and high quality in a single strategy. But the iShares Core High Dividend ETF does a solid job of it. It’s up around 11% so far this year, and it’s dividend yield is 2.9%.
3. Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) is more of a pure high-yield portfolio. It simply chooses companies that offer above-average yields and weights them according to their size.
This fund’s reliance on larger companies and pure high-yielders hasn’t paid off as well as the funds listed above, but its 4% return year to date is still better than that of the S&P 500 by a wide margin. Two of its largest sector holdings, financials and healthcare, have both been laggards this year and contributed to dampening overall returns. But its deeper-value tilt has helped, as has its overweighting to utilities and energy.
In general, I’m not a big fan of the Vanguard High Dividend Yield ETF‘s selection strategy. But its diversified coverage (it owns more than 500 stocks) and 2.3% yield can be attractive.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.