Drew Carter: If you’re considering buying an equity dividend strategy, now may be a good time. That’s especially true if you’re rebalancing away from large growth stocks that have rallied with the AI boom, because stocks that pay dividends tend to be from sturdy businesses that typically provide some ballast in declining markets, and we never know what’s ahead.
That said, it’s worth noting that dividend ETFs do not have any extra tax benefits beyond those for any equity ETF. So, there’s an argument for holding these funds like other income-generating ones in a tax-sheltered account like an IRA or a 401(k).
3 Great Dividend Stock ETFs
- Vanguard High Dividend Yield ETF VYM
- Fidelity High Dividend ETF FDVV
- BNY Mellon Enhanced Dividend and Income ETF BEDY
With that in mind, the first dividend ETF to consider is Vanguard High Dividend Yield ETF VYM. It earns our top
Morningstar Medalist Rating
of Gold and for good reason. This passive fund tracks the higher-yielding half of US dividend-paying stocks, then weights them by market cap, which naturally steers the portfolio toward bigger, steadier companies, and that helps investors capture yield without loading up on distressed high-risk stocks. I hold this ETF in my own portfolio largely because it’s hard for active managers to beat and because its expense ratio of just four basis points is about as cheap as they come.
Second is Fidelity High Dividend ETF FDVV, which is also Gold-rated with a fee of 15 basis points. This passive strategy’s underlying index filters out companies with unsustainably high payout ratios, where the portion of a company’s profits it pays in dividends. As with Vanguard’s approach, this step should help weed out stocks with weaker fundamentals. Next, it ranks remaining stocks by yield, payout ratio, and dividend growth. This ETF’s index also shifts weight away from lower-yielding sectors like technology and toward higher-yielding ones like real estate, which can help improve income for ETF investors.
My third selection is an actively managed ETF. BNY Mellon Enhanced Dividend and Income ETF BEDY earns a Silver rating and charges 50 basis points. Higher than most passive options, but still a decent fee for active management. It converted from a similarly managed mutual fund in December 2025. While the vehicle is new, its team and process are not. In fact, its team has definitely managed this strategy for 15 years. The process focuses on catalysts such as positive and growing free cash flow, which helps the managers avoid value traps. When the fund converted to an ETF, it added a derivatives-based sleeve, which is capped at 10% of the portfolio and is designed to boost yield while maintaining market exposure. Finally, this ETF’s team and process have an attractive long-term track record that’s worth considering. Thanks for watching.
Watch 3 Overrated ETFs for more on ETFs.