The Top High-Dividend ETFs for Passive Income in 2026

Morning Star

Aug 18

Dividend stocks are popular investments: Many investors rely on the regular dividend payments that these stocks offer as sources of passive income. Of course, investors can pursue a total-return ...

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Of course, investors can pursue a total-return ...</p>\n\n<a href=\"https://www.morningstar.com/funds/top-high-dividend-etfs-passive-income-2026\">Source Link</a>\n\n</div>\n","source":"morningstar_fund_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The Top High-Dividend ETFs for Passive Income in 2026</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe Top High-Dividend ETFs for Passive Income in 2026\n</h2>\n\n<h4 class=\"meta\">\n\n\n2026-08-18 00:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.morningstar.com/funds/top-high-dividend-etfs-passive-income-2026><strong>Morning Star</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Dividend stocks are popular investments: Many investors rely on the regular dividend payments that these stocks offer as sources of passive income. Of course, investors can pursue a total-return ...</p>\n\n<a href=\"https://www.morningstar.com/funds/top-high-dividend-etfs-passive-income-2026\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://www.morningstar.com/funds/top-high-dividend-etfs-passive-income-2026","article_id":"2660967584","we_media_id":null,"thumbnails":["https://media.morningstar.com/resizer/v2/IB2R6P43RBF27LVC3NLLIRZ73I.png?auth=0e18a4ff11a296e84307f08be54edf3d8eb10f10ab323d96787b4458b00bc28c&quality=80&height=1350&width=2401&crop=0,0:2401,1350"],"rights":{"source":"morningstar_fund_highlight","url":"https://www.morningstar.com/funds/top-high-dividend-etfs-passive-income-2026","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2660967584","pubTimestamp":1786982400,"columns":[],"sourceInfo":{"source_id":"morningstar_fund_highlight","name":"Morning Star"},"weMediaInfo":null,"summary":"Large US companies have traditionally been the bread-and-butter investments for dividend investors. 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Of course, investors can pursue a total-return approach to generating income to meet their spending needs, too. Or they can combine the two income strategies. Why I’ve Changed My Mind About Dividend-Paying Stocks  Exchange-traded funds that invest in dividend-paying stocks can be simple one-stop solutions for income seekers, for a few reasons:Dividend ETFs maintain a portfolio of dividend stocks and thereby provide instant diversification.Dividend ETFs are, in general, low-cost.Dividend ETFs are easy to buy and sell; many of the best dividend ETFs are managed by popular asset managers with brokerage platforms.Those investors who’d like to get exposure to dividend stocks through an ETF have plenty of good ETFs to choose from.How We Selected the Top High-Dividend ETFs for 2026Choosing the best dividend ETFs for passive income isn’t just about looking for the highest-yielding ETFs. The ETFs with the biggest yields may be taking on outsize risks, or they might be expensive.When it comes to choosing the best dividend ETFs for passive income, we used the following criteria:We focused on dividend ETFs earning Morningstar Medalist Ratings of Gold with 100% analyst coverage. Such highly rated funds generally charge low fees and are likely to outperform over a full market cycle.We only included dividend ETFs with trailing 12-month yields higher than that of the S&P 500 as of Aug. 14, 2026.10 of the Best High-Dividend ETFs for Passive Income in 2026Ten ETFs made our list.Capital Group Dividend Value ETF CGDVFidelity High Dividend ETF FDVVJPMorgan Dividend Leaders ETF JDIVSchwab International Dividend Equity ETF SCHYSchwab U.S. Dividend Equity ETF SCHDState Street SPDR S&P Dividend ETF SDYVanguard Dividend Appreciation ETF VIGVanguard High Dividend Yield ETF VYMVanguard International Dividend Appreciation ETF VIGIVanguard International High Dividend Yield ETF VYMIEven though the funds on our list of the top high-dividend ETFs all focus on income, they practice very different strategies, and as a result, they can behave very differently from each other. Investors seeking passive income need to do some homework to understand exactly what a particular dividend ETF invests in before buying.How to Choose the Best Dividend ETF for Your PortfolioHere are a few things for investors to think about as they research the funds on our list of top-rated high-dividend ETFs to buy. Do I want my dividend ETF to invest primarily in the stocks of large US companies? Large US companies have traditionally been the bread-and-butter investments for dividend investors. But they’re not the only place to go for dividends. Midsize and small US companies pay dividends, too; in fact, one of the dividend ETFs on our list lands in the mid-cap value Morningstar Category. And the yields on many companies abroad are more attractive than those of their US counterparts today. Indeed, three of the best high-dividend ETFs on our list focus on international dividend payers.Do I want my dividend ETF to be passive or active? Most high-dividend ETFs are passive investments, which means they’re tracking a particular index; there’s no manager actively picking stocks. In fact, just two of the names on our list of top high-dividend ETFs are actively managed.Do I want a monthly dividend ETF? Although investors may own dividend ETFs to supplement their monthly income needs, most ETFs do not pay monthly dividends. Instead, most dividend ETFs—and most dividend stocks in the US, for that matter—pay quarterly dividends instead. Not surprisingly, the funds on our list of top dividend ETFs don’t pay monthly dividends. Do I want a dividend-yield or a dividend-growth approach? Some dividend strategies are focused more on absolute yield, while others emphasize the growth of a dividend over time and care less about what a stock’s current yield is. Many strategies rest somewhere between the two.Read more: How to Choose a Dividend FundHere’s a look at each of the best high-dividend ETFs, along with a commentary from the Morningstar analyst who covers the ETF.Capital Group Dividend Value ETFMorningstar Medalist Rating: GoldMorningstar Category: Large Value12-Month Yield: 1.18%Dividend Frequency: QuarterlyActive or Passive: ActiveTop 3 Sectors: Technology, Industrials, Consumer CyclicalCapital Group Dividend Value ETF is one of two actively managed funds on our list of top high-dividend ETFs; it’s also the lowest-yielding option of the group.Capital Group Dividend Value ETF benefits from a core group of veteran leaders, strong resources, and a flexible, quality-oriented approach. It earns High People and Above Average Process ratings.Although the exchange-traded fund saw an unexpected retirement at the start of 2026, it remains in capable hands. Chris Buchbinder leads the strategy alongside long-tenured managers James Lovelace and Martin Jacobs, each with more than 25 years at Capital Group. Following the firm’s latest periodic self-assessment in late 2025, manager Keiko McKibben retired in early 2026. To offset her departure, the firm disclosed Adam Ward as a manager. Ward had already served as an undisclosed manager on a similar strategy for four years, helping ease the transition. Brittain Ezzes rounds out the manager lineup, which is supported by more than 50 analysts, some of whom pick stocks within the analyst-run sleeve of the portfolio.The ETF tracks a long-standing composite but makes sensible refinements to create a more compact, liquidity-aware portfolio that still lands firmly within Capital Group’s stylistic wheelhouse.Income and quality are the anchors. Targeting a dividend yield before fees roughly 30% greater than the S&P 500, the fund primarily invests in US investment-grade companies with long dividend-paying histories—most have paid dividends in each of the past 10 years. Top holdings include Broadcom, RTX, and Microsoft. However, the managers maintain flexibility to allocate up to 10% of assets in non-dividend-paying companies with strong balance sheets and growth prospects, such as Vertex Pharmaceuticals and Amazon.com, which gives it an avenue to add value that some income-oriented peers might lack.While this quality-dividend-focused approach can leave the strategy out of step with a pure large-value play, it has proved beneficial over time. The ETF tracks the firm’s Capital Group Dividend Value composite, which dates to 2001.With a 0.33% net expense ratio, this ETF ranks among the category’s least expensive actively managed options, and combined with its tax-efficient structure, it remains a top option. Stephen Welch, Morningstar senior analystRead Morningstar’s full report about Capital Group Dividend Value ETF.Fidelity High Dividend ETFMorningstar Medalist Rating: GoldMorningstar Category: Large Value12-Month Yield: 2.77%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Technology, Financial Services, Consumer CyclicalFidelity High Dividend ETF’s yield lands around the middle of the pack, which aligns with a strategy that focuses on high dividend yield with a nod to dividend growth.Fidelity High Dividend ETF rides the line between income and price appreciation. It provides a higher dividend yield than the average fund in the large-value Morningstar Category without sacrificing its growth prospects.The fund tracks the Fidelity High Dividend Index, which encompasses large- and mid-cap US stocks as well as some from international developed markets. The index filters out stocks without dividends and those with the highest payout ratios, which could signal unsustainable dividends. Stocks are then scored based on their dividend yield, payout ratio, and dividend growth. Those with the best sector-relative scores are included in the index, while companies with poor financial health are excluded.The index reweights each sector using the broad US market as a starting point. It reallocates up to 40% from the lower-dividend-paying sectors to the higher-dividend-paying sectors. Within each sector, stocks are weighted based on their market cap with a size adjustment to mitigate any biases toward smaller stocks.The fund’s market-relative sector weights mean its sector allocations look different from its average large-value peer. It held nearly 13 percentage points more in technology stocks and 10 percentage points less in healthcare stocks in April 2026. Though, it still held fewer technology stocks than the broad US market. Technology stocks don’t pay high dividends compared with other sectors, but they have helped in fund price appreciation. Heavier portions of higher-dividend-paying sectors, like real estate and consumer defensive stocks, have pushed the fund’s dividend yield higher than its average peer. Brendan McCann, Morningstar senior associate analystReview Morningstar’s full report about Fidelity High Dividend ETF. JPMorgan Dividend Leaders ETFMorningstar Medalist Rating: GoldMorningstar Category: Global Large-Stock Blend12-Month Yield: 1.68%Dividend Frequency: QuarterlyActive or Passive: ActiveTop 3 Sectors: Technology, Financial Services, HealthcareJPMorgan Dividend Leaders ETF is the only global dividend fund on our list of top high-dividend ETFs to buy, which means it invests in both US dividend stocks and non-US dividend stocks.JPMorgan Dividend Leaders is a compelling option, and it earns an Above Average People rating and a High Process rating.Helge Skibeli has overseen the strategy since March 2018 and remains the ultimate decision-maker. A J.P. Morgan veteran of nearly 40 years, Skibeli has built his career around fundamental research, having previously led research teams across Asian, US, and global equities.He is joined by two comanagers. Sam Witherow, a 16-year firm veteran, has been a named manager since February 2019 and, in practice, has increasingly taken on a lead role. Witherow spent his early years as an analyst before shifting into global portfolio management. Michael Rossi became comanager in February 2023. The most junior of the trio, Rossi brings seven years of experience, all at J.P. Morgan, and has worked closely with Skibeli and Witherow since 2019.Crucially, the portfolio managers are underpinned by J.P. Morgan’s deep fundamental analyst resources, one of the industry’s deepest and most experienced teams. Around 80 sector specialists each cover 20 to 35 companies, on average bringing 17 years of industry experience and 13 years at the firm.The strategy employs a disciplined, bottom-up stock-picking process supported by this extensive global research platform. Analysts covering more than 2,500 companies classify stocks as premium, quality, standard, or challenged and assign five-year expected return targets to guide portfolio construction. On top of this, the managers identify three types of dividend-payers: compounders, high dividend growth, and high dividend yield. About half of the portfolio is allocated to compounders, while the remainder is spread across high-yield and high dividend growth stocks.The manager’s primary focus is on premium and quality names, maintaining a valuation-conscious, conviction-driven approach in a relatively concentrated portfolio of 60 to 80 holdings. The portfolio favors financially healthy, large- and mega-cap companies, with minimal small-cap exposure. Henry Ince, Morningstar analystRead Morningstar’s full report about JPMorgan Dividend Leaders ETF.Schwab International Dividend Equity ETFMorningstar Medalist Rating: GoldMorningstar Category: Foreign Large Value12-Month Yield: 3.33%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Financial Services, Consumer Defensive, Communication ServicesSchwab International Dividend Equity ETF is the first of three foreign-stock funds on our list of top high-dividend ETFs to buy—and its yield is among the highest on our list.Schwab International Dividend Equity ETF builds a defensive, value-oriented portfolio that should offer better risk-adjusted performance than many of its peers in the foreign large value category.This ETF tracks the Dow Jones International Dividend 100 Index. It starts with stocks in the Dow Jones Global ex-US Large-Cap and Dow Jones Global ex-US Mid-Cap Indexes, and it whittles those cohorts down to a select portfolio of just 100 stocks. It excludes REITs and searches for stocks with higher dividend yields, greater profitability and free cash flow, lower volatility, and a long history of regular cash dividend payments. It focuses on the top names that meet these criteria while incorporating some buffer rules to keep turnover within reasonable levels. The fund also promotes diversification by limiting single-stock weightings to 4% at each rebalance, sector weightings to 15%, and emerging markets to 15%.The resulting portfolio favors dividend-payers that are likely to maintain their dividend payments. On average, its profitability has been consistently higher than the average of its peers in the foreign large-value Morningstar Category, and it has tended to be less volatile. Despite looking for stocks with higher dividend yields, it doesn’t provide a dramatically higher yield than the category average. That said, yield does not play a big role in the portfolio’s overall ability to deliver strong risk-adjusted performance relative to the index or its category peers. Daniel Sotiroff, Morningstar associate directorReview Morningstar’s full report about Schwab International Dividend Equity ETF.Schwab U.S. Dividend Equity ETFMorningstar Medalist Rating: GoldMorningstar Category: Large Value12-Month Yield: 3.13%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Healthcare, Consumer Defensive, EnergySchwab U.S. Dividend Equity ETF is the highest-yielding US-focused fund on our list of the best high-dividend ETFs to buy.Schwab U.S. Dividend Equity ETF stands out for its sensible, transparent, and defensive approach.The Dow Jones US Dividend 100 Index, which this fund tracks, includes 100 stocks that have a proven track record of dividend growth and stability. By requiring a minimum of 10 years of uninterrupted dividends and five years of stable dividend growth, the index has naturally favored stocks that have a healthy financial history. Household names like PepsiCo, Verizon, and Home Depot are just a few of the high-quality companies included. Many stocks included in the index are stable and defensive companies that have weathered many storms without cutting their dividend. The index uses multiple constraints and buffers to mitigate turnover, trading costs, and concentration. Market-cap weighting further reins in turnover and trading costs.The fund still produces a top-heavy portfolio despite these constraints. Roughly 42% of assets are allocated to its top 10 holdings, a level that amplifies stock-specific risk. The constraints on individual stocks and sectors reduce, but do not eliminate, the structural concentration inherent to a market-cap-weighted 100-stock portfolio.Turnover remains relatively high, considering it favors existing holdings. Shifts in fundamentals and relative rankings can drive meaningful turnover within the fund. It averaged 29% turnover over the past three years, and sector weightings have swung dramatically. Energy’s rise from under 2% of assets in 2021 to more than 21% by 2025 illustrates how the portfolio can quickly evolve to maintain its stable dividend and low volatility. Brian Paoli, Morningstar associate analystRead Morningstar’s full report about Schwab U.S. Dividend Equity ETF.        \n\t\t\t3 Great Dividend Stock ETFs\n\t\t \n\t\t\tThese ETFs range in how active they are, but all seek to avoid value traps.\n\t\t  \n\t\t\t\t3m 23s\n\t\t\t Aug 17, 2026   \n\n\n Watch  State Street SPDR S&P Dividend ETFMorningstar Medalist Rating: GoldMorningstar Category: Mid-Cap Value12-Month Yield: 2.41%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Industrials, Consumer Defensive, UtilitiesState Street SPDR S&P Dividend ETF is the only mid-cap fund among our best high-dividend ETFs for passive income.State Street SPDR S&P Dividend ETF sets a high bar for eligibility through its strict dividend requirement.The exchange-traded fund tracks the S&P High Yield Dividend Aristocrats Index, which screens the S&P Composite 1500 Index for stocks with market capitalizations above USD 2 billion, have increased dividends for at least 20 consecutive years, and trade frequently. These stringent criteria are highly selective and focus on established, financially resilient businesses. More than two-thirds of the portfolio have a wide or narrow Morningstar Economic Moat Rating compared with around 42% of its typical peer’s portfolio.Indicated annual dividend yield determines each constituent’s weight in the portfolio. This approach consistently produces a yield higher than both its parent S&P Composite 1500 Index and Morningstar Category peers. While yield-weighting can increase exposure to companies experiencing price declines, the requirement for two decades of uninterrupted dividend growth helps mitigate the risk. Additional safeguards limit position sizes, capping individual holdings at the lesser of 4% of assets or 30 times their weight in the parent index.The strategy maintains a defensive profile, with industrials, consumer staples, and utilities representing more than half of the portfolio as of June 2026. This contrasts sharply with the S&P Composite 1500 and the Russell Midcap Value indexes, which allocate more assets to volatile sectors such as information technology, consumer discretionary, and communication services. This positioning has historically provided superior downside protection during market stress but has also contributed to periods of underperformance when growth-oriented stocks led the market. Brian Paoli, Morningstar associate analystRead Morningstar’s full report about State Street SPDR S&P Dividend ETF.Vanguard Dividend Appreciation ETFMorningstar Medalist Rating: GoldMorningstar Category: Large Blend12-Month Yield: 1.50%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Technology, Financial Services, HealthcareVanguard Dividend Appreciation ETF is the only name on our list of top high-dividend ETFs that lands in the large-blend category, which is in line with its focus on dividend growth.Vanguard Dividend Appreciation pulls in stable, profitable firms that have increased their dividend payments for over a decade. This simple, repeatable approach and low costs form a long-term edge over peers.This strategy tracks the S&P US Dividend Growers Index, which targets US stocks that have increased their dividend payments for at least 10 consecutive years. It eliminates the highest-yielding names from that cohort to ensure its holdings are financially stable and more likely to continue making dividend payments. The index weights its holdings by their free-float-adjusted market cap, which leverages the market’s collective wisdom and mitigates turnover and the associated trading costs. It also limits individual stocks to 4% of the portfolio at each annual rebalance to promote diversification.Targeting stocks with 10 years of dividend growth is a strict hurdle that provides a big advantage. It indirectly targets profitable companies that not only have the capacity to increase their dividend payments but also a willingness to do so. Combining yield and quality results in a balanced stable of more than 300 companies. However, if a company were to miss a single dividend payment, it would have to wait 10 years before it is welcomed back. For example, Apple and ExxonMobil didn’t join the portfolio until 2023 after a decade of increasing dividends. Still, this is a worthwhile trade-off that keeps the portfolio full of high-quality companies that should continue to increase their dividends.The strategy’s strict requirements tend to weed out recent highflyers. Magnificent Seven stocks Amazon.com, Tesla, Alphabet, and Nvidia are among the biggest stocks missing from this portfolio. These omissions can cause diverging performance relative to large-blend peers in the short term, but this strategy should result in smoother and more consistent performance over the long run. Likewise, excluding the highest-yielding eligible stocks reduces the portfolio’s exposure to value traps without giving up the fund’s yield advantage over the broad market.A portfolio of high-quality, stable companies should be tough to beat on a risk-adjusted basis over the long haul. This strategy’s low expense ratios further carve out a durable edge. Bryan Armour, Morningstar directorRead Morningstar’s full report about Vanguard Dividend Appreciation ETF.Vanguard High Dividend Yield ETFMorningstar Medalist Rating: GoldMorningstar Category: Large Value12-Month Yield: 2.24%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Financial Services, Technology, HealthcareThe second of four Vanguard funds among our group of the best high-dividend ETFs, Vanguard High Dividend Yield ETF differs from its predecessor on our list by emphasizing dividend yield over dividend growth.Vanguard High Dividend Yield strikes a nice balance between higher-yielding stocks and distressed yield traps. Its ability to manage risk should provide an advantage over most of its Morningstar Category peers.This fund tracks the FTSE High Dividend Yield Index. It starts with large- and mid-cap stocks in the FTSE USA Index, excluding REITs, and ranks them by their expected dividend yield over the next 12 months. The index selects those representing the higher-yielding half of eligible dividend-paying stocks. Selected holdings are weighted by float-adjusted market cap, pulling the portfolio toward larger, more stable stocks.Focusing on dividend yield gives the portfolio a value orientation that can open the portfolio to risk. Yield traps, or stocks with untenably high dividends, pose a significant risk to dividend funds. But this strategy limits its exposure to risky companies. Sweeping half the dividend-paying universe into its portfolio diversifies stock-specific risks and limits the influence of distressed firms. Market-cap weighting also emphasizes larger, more stable firms that should have the capacity to continue making dividend payments. This mitigates the impact of yield traps because their weight drops as their prices fall.Leaning toward stable companies comes at the cost of maximizing dividend yield. But the fund’s yield still typically surpasses the Russell 1000 Value Index by about 1 percentage point. Stability extended to performance as well, with the fund historically experiencing a standard deviation consistently lower than its category bogy.Like other dividend funds, this portfolio’s sector composition can deviate substantially from the category index, owing to its yield orientation. Market-cap weighting normally keeps these differences small, but the fund’s yield screen can still exclude a significant portion of the market during extreme conditions. Between 2010 and 2018, for instance, the fund’s allocation to financial stocks was anywhere from 15 to 20 percentage points below the category average. This is an artifact of the post-financial-crisis dividend cuts across much of the sector. While this did not hurt the fund’s performance significantly, sector bets tend to be an uncompensated risk. Bryan Armour, Morningstar directorRead Morningstar’s full report about Vanguard High Dividend Yield ETF.Vanguard International Dividend Appreciation ETFMorningstar Medalist Rating: GoldMorningstar Category: Foreign Large Growth12-Month Yield: 2.05%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Financial Services, Industrials, HealthcareVanguard International Dividend Appreciation is among the lower-yielding ETFs on our list of top high-dividend ETFs, which is unsurprising given its emphasis on dividend growth.Vanguard International Dividend Appreciation holds profitable firms with consistent dividend growth that should offer attractive long-term performance. Its focus is on stable firms that insulate the portfolio from volatility and should lead to a long-term risk-adjusted advantage.This fund tracks the S&P Global Ex-U.S. Dividend Growers Index, which targets large- and mid-cap stocks from developed and emerging markets that have increased their dividend payments for at least seven consecutive years. It eliminates the highest-yielding names from that cohort to avoid distressed stocks. That should ensure its holdings are financially stable and more likely to continue making dividend payments. The index weights its holdings by free-float-adjusted market cap to help mitigate turnover and trading costs. It also limits individual stocks to 4% of the portfolio at the annual rebalance to improve diversification.Targeting stocks with seven years of dividend growth is a strict hurdle that provides a big advantage. It indirectly targets profitable companies that not only have the capacity to make dividend payments but also a willingness to do so. However, the strategy doesn’t consider other metrics, such as debt levels and analyst earnings growth estimates, which may be indicative of a firm’s capacity to continue making payments. Additionally, if a company were to miss a single dividend payment, it must wait seven years before it is welcomed back.Overseas companies that have a history of increasing their dividend payments are likely becoming more profitable as well. These stable businesses should be less volatile than the broader market and hold up better during downturns. For example, this fund outperformed the MSCI ACWI ex USA Growth Index by 5 percentage points in 2022, when the index declined by 22 percentage points. Bryan Armour, Morningstar directorRead Morningstar’s full report about Vanguard International Dividend Appreciation ETF.Vanguard International High Dividend Yield ETFMorningstar Medalist Rating: GoldMorningstar Category: Foreign Large Value12-Month Yield: 3.49%Dividend Frequency: QuarterlyActive or Passive: PassiveTop 3 Sectors: Financial Services, Energy, Consumer DefensiveThe highest-yielding dividend ETF on our list, Vanguard International High Dividend Yield ETF has more than 40% of its assets tucked away in the financial-services sector.Vanguard International High Dividend Yield strikes a nice balance between higher-yielding stocks and distressed yield traps. Its ability to manage risk should provide an advantage over most of its Morningstar Category peers.This fund tracks the FTSE All-World ex-US High Dividend Yield Index. It starts with large- and mid-cap stocks in the FTSE All-World ex-US Index, excluding REITs, and ranks them by their expected dividend yield over the next 12 months. The index selects those representing the higher-yielding half of eligible dividend-paying stocks. Focusing on dividend yield gives the portfolio a value orientation and can be a source of risk. High yields can stem from stocks with poor prospects and declining prices. Some of these firms may also pay out a high percentage of their earnings as dividends, reducing the portion that can be reinvested to grow their businesses.Yield traps, or stocks with unsustainably high dividends, pose a significant risk to dividend funds. But this strategy effectively limits its exposure to risky companies. Sweeping half the dividend-paying universe into its portfolio diversifies stock-specific risks, which limits the influence of distressed firms. Weighting constituents by market cap also emphasizes larger, more stable firms that should have the capacity to continue making dividend payments. Market-cap weighting further reduces the impact of yield traps by reducing their weight as their prices fall.Leaning toward large, profitable firms has aided the fund’s performance. It has tended to carve out an edge against its MSCI ACWI ex USA Value Index category benchmark with lower volatility than its average category peer. Bryan Armour, Morningstar directorRead Morningstar’s full report about Vanguard International High Dividend Yield ETF.The Right Dividend ETF for YouThe best dividend-paying ETF for an investor is, of course, dependent on personal preferences. Here are a few ways to slice and dice our list of top high-dividend ETFs for passive income based on some common investor preferences.Best dividend ETFs with the highest yields: Vanguard International High Dividend Yield ETF (focused on non-US stocks) and Schwab U.S. Dividend Equity ETF (focused on US stocks)Top dividend ETF combining US and non-US stocks: JPMorgan Dividend ETFBest ETF for blending value and growth characteristics: Vanguard Dividend Appreciation ETFHigh-Dividend ETFs and TaxesBecause they invest primarily in stocks that are paying dividends, high-dividend ETFs aren’t very tax-efficient: Most investors will pay taxes on the income they receive from these ETFs, depending on their income tax bracket. The dividends paid by ETFs that own international stocks may also be subject to foreign withholding tax.How to Find More of the Best Dividend ETFs to BuyInvestors who like to find more dividend ETFs to invest in can do the following:If dividend yield isn’t the be-all and end-all to you, expand your search beyond ETFs that yield more than the market. For instance, T. Rowe Price Dividend Growth ETF TDVG earns a Medalist Rating of Gold, but its trailing yield is less than the market’s yield today.Consider reviewing dividend ETFs and dividend mutual funds from our list of The Best Dividend Funds.How to Screen for More Top Dividend ETFsInvestors can use our Morningstar Investor Screener tool to build a customized list of dividend ETFs. To build your screen, include the following filters:Security Type: Select “ETFs” from the drop-down box.Keyword: Click the “+ Filter” button, then choose “Keyword” from the list in the pop-up box. Once selected, type “dividend” as the keyword.Medalist Rating (Overall): Click the “+ Filter” button again, then choose “Medalist Rating (Overall)” from the list in the pop-up box. Select Gold, Silver, and Bronze to see a full list of all the dividend stock ETFs that earn positive Medalist Ratings from Morningstar.From here, you can refine the screen further. For instance, you can filter out ETFs with yields that are too high or too low, or only include ETFs with expense ratios at or below a particular level.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}