Why I'm Loading Up on These 3 High Dividend ETFs for Passive Income

Dividend exchange-traded funds (ETFs) have largely underperformed in 2025 as tech stocks kept leading the equity markets higher. Only a handful of U.S. dividend ETFs have managed to beat the S&P 500 and those were mostly due to their overweighting in tech.

However, there is reason for hope. During the latter part of 2025, the markets have broadened, improving the performance of dividend ETFs in the process. Financials, industrials, and healthcare, three sectors that tend to show up heavily in dividend ETFs, had stretches of beating the market and could continue doing so in 2026.

High-yield dividend ETFs are looking quietly compelling again and a few look especially attractive. Here are three that combine high income with a bright future.

1. Schwab US Dividend Equity ETF

Despite having one of the weaker track records among dividend ETFs during the past couple of years, the Schwab US Dividend Equity ETF (SCHD 0.72%) is still pulling in billions of dollars in new investor money. The reason is that it still has a very good longer-term track record and uses one of the smartest portfolio constructions around.

The fund mixes elements of dividend growth, quality, and high yield. It starts by considering only those stocks that have paid dividends for at least 10 straight years. Then it looks at fundamental metrics, such as return on equity (ROE) and cash flow to debt, while giving consideration to above-average yields. The final portfolio accepts the 100 stocks with the best combination of these factors.

This methodology, however, has been positioning the fund in all the wrong places lately. Of the top four sector holdings — energy (19.3%), consumer staples (18.5%), healthcare (16.1%), and industrials (12.3%) — only the latter has beaten the S&P 500 this year. Energy and consumer staples were among the worst three performing S&P 500 sectors in 2025 (as of Dec. 29). Tech is significantly underweight, with just an 8.3% allocation.

If the economy begins slowing as some signs suggest, this type of defensive, quality posturing could work well. Its 3.7% yield will no doubt appeal to traditional income investors and the fund’s long track record of success — until the past couple of years — shows it outperforms the market over multi-year cycles.

2. Vanguard High Dividend Yield ETF

While it has one of the blander security selection strategies (it simply targets the upper half of dividend yields from a large-cap universe), the Vanguard High Dividend Yield ETF (VYM 0.71%) is hitting some high potential areas in the coming year.

The fund’s advantage is that it combines some of the better elements of the high yield equity market with a higher 14% allocation to tech stocks to keep some of that growth potential intact. This makes it potentially a little more volatile, but the diversified approach (seven sectors have at least an 8% allocation), 2.4% yield and rock bottom expense ratio help make up for it.

The Vanguard High Dividend Yield ETF has a similar case working for it as the Schwab ETF. If markets turn more cautious, this portfolio mix looks more attractive. It also has enough non-defensive exposure to potentially make it one of the better performers within the dividend ETF universe should the bull rally continue.

3. JPMorgan Equity Premium Income ETF

The JPMorgan Equity Premium Income ETF (JEPI 0.54%) has a similar story to the Schwab fund in that it had strong performance followed by lots of inflows despite recent subpar returns. However, its portfolio of quality, low-volatility stocks topped with a covered call strategy could prove to be an interesting high-yield play once again.

Of course, that makes it more of a high-income vehicle with substantially less upside potential. But covered call strategies — when an ETF sells call options and also own the underlying shares — tend to perform best during lower volatility environments. Since there is a chance stocks could move either way in the coming year, covered call strategies could finally hit that sweet spot again.

The JPMorgan fund is always likely to be a laggard during a strong bull market, but it’s looking as if that could begin to change. A mixed macro picture and an eventual rotation out of growth stocks make this fund an intriguing option.