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Top Dividend ETFs for 2025: Balancing Yield and Quality

Dividend-paying exchange-traded funds (ETFs) remain a go-to for investors seeking steady income, especially in volatile markets. High-quality dividend ETFs deliver income and resilience across market conditions, making them a compelling choice for investors.

In this article, we’ll look at top dividend ETFs, identified by MorningStar.

Types of Dividend ETFs

Morningstar categorizes dividend ETFs into three main strategies:

• Dividend-Income Funds: Prioritize high yield, targeting companies with strong current payouts. These can carry higher risk if the companies’ financial health is weak.

• Dividend-Growth Funds: Focus on companies that consistently increase dividends, signaling profitability and growth.

• Hybrid Funds: Blend income and growth, balancing yield with quality metrics like payout ratios, free cash flow, and return on equity.

Top Dividend ETFs for 2025

Here are five standout dividend ETFs from Morningstar’s 2025 list, with performance data as of May 2, 2025, and key metrics reflecting their yield, expense ratios, and quality focus.

1. Vanguard Dividend Appreciation ETF (VIG)

• Strategy: Dividend-growth

• Morningstar Rating: Gold medalist, three stars

• 30-Day SEC Yield: 1.73%

• Expense Ratio: 0.05%

• Performance: Down 2% year-to-date; current price at $193.02, up from $190.18 the previous day.

Tracks companies with at least 10 years of consecutive dividend increases, emphasizing stability over high yield. This ETF has a “higher upside and a more favorable outlook” despite lower yield.

VIG’s low expense ratio and focus on quality make it ideal for long-term investors.

Also, it screens for consistent dividend growth, ensuring financially sound companies.

2. Fidelity High Dividend ETF (FDVV)

• Strategy: Dividend-income

• Morningstar Rating: Silver medalist, five stars

• 30-Day SEC Yield: 3.22%

• Expense Ratio: 0.16%

• Performance: Down nearly 3% year-to-date.

Leans value-oriented, prioritizing high yield while incorporating payout ratio and dividend growth for financial health. We must mention that this ETF sacrifices some capital appreciation for income, making it suitable for income-focused investors.

Also, balances yield with metrics like payout sustainability and growth potential.

3. Schwab US Dividend Equity ETF (SCHD)

• Strategy: Hybrid (yield and quality)

• Morningstar Rating: Gold medalist, four stars

• 30-Day SEC Yield: 3.94%

• Expense Ratio: 0.06%

• Performance: Down 5% year-to-date; current price at $26.06, up from $25.71 the previous day.

This ETF is a standout for balancing yield and quality, SCHD screens for dividend-paying stocks with strong free-cash-flow-to-debt ratios, dividend growth, and return on equity. Analysts praises its “excellent” track record and middle-ground approach.

Furthermore, it emphasizes financial health through cash flow, debt, and equity returns.

4. WisdomTree U.S. LargeCap Dividend ETF (DLN)

• Strategy: Dividend-income with quality focus

• Morningstar Rating: Silver medalist, five stars

• 30-Day SEC Yield: 2.25%

• Expense Ratio: 0.28%

• Performance: Down less than 1% year-to-date.

This ETF targets large-cap dividend payers, filtering out riskier high-yield stocks and overweighting those with strong quality and momentum. We cannot neglect its disciplined approach to risk management.

Moreover, it prioritizes quality and momentum, reducing exposure to volatile high-yield names.

5. SPDR S&P Dividend ETF (SDY)

• Strategy: Dividend-growth

• Morningstar Rating: Silver medalist, four stars

• 30-Day SEC Yield: 2.65%

• Expense Ratio: 0.35%

• Performance: Down less than 1% year-to-date.

Known as the “portfolio of dividend die hards,” SDY requires 20 consecutive years of dividend payments, inherently filtering out lower-quality companies. Its strict criteria serves as a proxy for quality. Plus, long dividend track record ensures stability and reliability.

Looking at the market

The market’s recent volatility, driven by tariff policy changes, underscores the appeal of dividend ETFs.

While the S&P 500’s nine-day rally signals short-term optimism, the year-to-date declines in these ETFs (ranging from 1% to 5%) reflect broader challenges. However, their defensive nature and income generation make them resilient.

For instance, VIG’s price rose from $190.18 to $193.02 in a single day, and SCHD climbed from $25.71 to $26.06, showing stability amid fluctuations.

Conclusion

These top-rated dividend ETFs for 2025 offer diverse strategies for income-seeking investors, from VIG’s growth focus to SCHD’s balanced approach. Their shared emphasis on quality — through metrics like dividend growth, payout ratios, and financial health — mitigates risks associated with high-yield strategies.

These funds provide a “nice middle-ground” for investors navigating uncertain markets, delivering income and resilience in equal measure.

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