The Best Dividend ETF for Right Now—and 2026

By Ian Salisbury

Dec 12, 2025

The Schwab US Dividend Equity ETF has lagged far behind the market and the Vanguard Dividend Appreciation ETF this year. (Justin Sullivan/Getty Images)

Key Points

About This Summary

  • The stock market has returned more than 18% this year. Many dividend funds haven’t kept up.
  • The Vanguard Dividend Appreciation ETF is up 16% this year, while the Schwab US Dividend Equity ETF returned 5.3%.
  • Vanguard’s fund focuses on dividend growth, so it invests heavily in tech, while Schwab’s targets companies with strong fundamentals in areas such as consumer staples and energy.

America has a K-shaped economy. The performance of dividend funds is similar.

The stock market has returned more than 18% so far this year, including dividends. The fact that the rally is led by fast-growing tech companies makes it hard for dividend stocks, dedicated to handing cash back to investors, to keep up.

But some have done better than others. Take a look at the $120 billion Vanguard Dividend Appreciation 

VIG  ETF, the market’s largest dividend exchange-traded fund. It’s up 16% this year. By contrast, one of its main rivals, the $72 billion Schwab US Dividend EquitySCHD ETF, has returned just 5.3%.

What gives? The two funds’ approaches to dividends aren’t so different from the current socioeconomic split between two Americas.

One group of people in the U.S. is thriving, with wealth rising like the upper arm of a letter K. It is benefiting from the extraordinary excitement around artificial intelligence that is lifting the prices of tech stocks and swelling the bank accounts of those that own them.

Another segment of U.S. represents the K’s lower arm. The majority of consumers are struggling with tepid wage growth and stubborn inflation.

The realm of dividend funds shows the same kind of divergence. Vanguard Dividend Appreciation focuses on companies that grow their dividends, giving it a tech-first portfolio, with top holdings that include Broadcom, Microsoft, and Apple. 

Schwab U.S. Dividend Equity ETF takes a more traditional approach, targeting stocks with strong fundamentals and sustainable payouts. Its top holdings include companies like Coca-Cola, ConocoPhillips 

COP, and ChevronCVX. It is heavily invested in consumer staples and energy, two sectors that have badly lagged behind the market in 2025.

Schwab U.S. Dividend Equity has some strong points. It yields 3.8%, compared with 1.6% for the Vanguard fund, an important consideration for dividend investors who want income. And its portfolio is arguably undervalued as a result of the market’s obsession with growth. Shares in its portfolio trade at an average of 14 times forward earnings, compared with 21 times for the Vanguard fund.

That means that if the market really is in an artificial-intelligence bubble, and that bubble pops. the ETFs’ fortunes could quickly reverse. The tech stocks that have boosted the Vanguard fund would slide, while companies like Coca-Cola could rise as investors reallocate their cash.

That said, investors in Schwab U.S. Dividend Equity will have to be patient. With stubborn inflation and a weakening job market, consumer stocks don’t seem likely to rebound soon.

And the picture for energy stocks is even gloomier. Oil prices tumbled about 20% in 2025. With oil companies still pumping at a breakneck rate, they look set to fall further in 2026.

The upshot is that as long as the market rally giving the economy its K shape continues, these funds will remain the dividend world’s haves and have-nots.