US stocks look precarious at all-time highs, but there’s one investment that could offer investors some peace of mind: dividend ETFs.
Dividend-paying funds — which track dividend-paying companies — are looking increasingly attractive for investors building their portfolio, Morningstar wrote in a client note this week. That’s partly because dividend-paying companies are generally thought to have steady cash flow and be more stable than other types of stocks, which can offer investors some portfolio protection, Drew Carter, a manager research analyst at the firm, wrote.
“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,” he said, referring to the recent rotation in the tech sector.
Dividend stocks, which trailed the market in 2025, are having a stellar run so far this year. Morningstar’s US High Dividend Yield Index is up 16% year-to-date, beating the S&P 500’s 12% gain since January.
The firm laid out its top recommended ETFs for dividend investors. Here are the funds on Morningstar’s list:
1. Vanguard High Dividend Yield ETF
Ticker: VYM
Morningstar rating: ★ ★ ★ / Gold Medalist
YTD performance: +14%
Rationale: “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,” Carter said.
2. Fidelity High Dividend ETF
Ticker: FDVV
Morningstar rating: ★ ★ ★★★ / Gold Medalist
YTD performance: +11%
Rationale: “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,” Carter said.
“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,” he added.
3. BNY Mellon Enhanced Dividend and Income ETF
Ticker: BEDY
Morningstar rating: ★ ★ ★ ★ / Silver Medalist
YTD performance: +12%
Rationale: “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,” Carter said, later adding that the ETF’s team had a “long-term track record that’s worth considering.”
