AI Panel
What AI agents think about this news
The panel discussed the risks and benefits of dividend ETFs, with a focus on the distinction between dividend growers and high yielders. They agreed that while dividend growers have historically outperformed, high yielders can trap investors in value stocks and sectors sensitive to interest rate changes. The panel also highlighted the risk of sector concentration in high-dividend ETFs, particularly in Financials and Energy, which could underperform in an AI-driven growth regime.
Risk: Sector concentration in high-dividend ETFs, particularly in Financials and Energy, which could underperform in an AI-driven growth regime.
Opportunity: The opportunity to invest in dividend growers, which have historically outperformed, and to find quality dividend-paying stocks with diversified sector allocations.
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Key Points
If you don't yet appreciate the power of dividends for long-term wealth-building, take a gander at this table:
| Dividend-Paying Status Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. <a href="https://api.fool.com/infotron/infotrack/click?apikey=35527423-a535-4519-a07f-20014582e03e&impression=7276c635-2c32-4114-a8d0-1335422a1a6b&url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fa-sa-ai-boom-nvidias%3Faid%3D10891%26source%3Disaediica0000068%26ftm_cam%3Dsa-ai-boom%26ftm_veh%3Dtop_incontent_pitch_feed_partner%26ftm_pit%3D18906&utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">Continue »</a> | Average Annual Total Return, 1973-2025 | | --- | --- | | Dividend growers and initiators | 10.22% | | Dividend payers | 9.20% | | No change in dividend policy | 6.87% | | Dividend non-payers | 4.21% | | Dividend shrinkers and eliminators | (0.96%) | | Equal-weighted S&P 500 index | 7.74% |
Data source: Ned Davis Research and Hartford Funds.
Image source: Getty Images.
Reasons to love dividends
Those numbers alone might be enough to have you looking for great dividend investments. If not, consider:
- Dividend-paying stocks tend to be less volatile, as they have income that's reliable enough to support a commitment to dividend payments.
- During economic downturns, healthy and growing <a href="https://www.fool.com/investing/stock-market/types-of-stocks/dividend-stocks/dividend-reinvestment/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">dividend-paying stocks</a> will tend to keep paying you.
- Such companies tend to increase their payouts over time, too -- often annually -- helping you keep up with inflation.
- Dividends can generate a lot of income -- to help support you in retirement or to invest in additional shares of stock. For instance, if your $500,000 portfolio has an overall dividend yield of, say, 4%, you can expect $20,000 in annual income -- and you can expect that sum to increase over time, too. If you're retired, that's a lot of extra income to help pay the bills, and if you're many years from retiring, that $20,000 can buy a lot more stock -- perhaps in more dividend-paying companies.
- Retiring with a lot of dividend payers in your portfolio means that shaving off shares of stock for income won't be as necessary.
12 attractive dividend ETFs
So what are some great dividend investments? Well, you can certainly seek <a href="https://www.fool.com/investing/2026/05/10/stock-market-crash-the-best-dividend-stocks-to-buy/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">solid dividend-paying stocks</a>. But I'd like to suggest checking out some dividend-focused <a href="https://www.fool.com/investing/how-to-invest/etfs/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">exchange-traded funds (ETFs)</a>. Here are 12 to consider, including an S&P 500 index fund.
| ETF | Recent Yield | 5-Year Avg. Annual Return | 10-Year Avg. Annual Return | 15-Year Avg. Annual Return | | --- | --- | --- | --- | --- | | iShares Preferred & Income Securities ETF (PFF) | 5.65% | 2.04% | 3.58% | 4.43% | | State Street SPDR Portfolio S&P 500 High Dividend ETF (SPYD) | 4.23% | 7.12% | 8.71% | N/A | | Vanguard Real Estate ETF (VNQ) | 3.62% | 3.77% | 5.43% | 7.26% | | Vanguard International High Dividend Yield Index Fund ETF (VYMI) | 3.47% | 12.82% | 10.80% | N/A | | Schwab U.S. Dividend Equity ETF (SCHD) | 3.29% | 15.07% | 8.22% | 12.70% | | Fidelity High Dividend ETF (FDVV) | 2.81% | 13.31% | N/A | N/A | | Vanguard Energy Index ETF (VDE) | 2.32% | 21.67% | 9.64% | 5.89% | | Vanguard High Dividend Yield ETF (VYM) | 2.24% | 11.16% | 11.75% | 11.91% | | iShares Core Dividend Growth ETF (DGRO) | 2.00% | 10.18% | 13.20% | N/A | | Vanguard Total World Stock ETF (VT) | 1.67% | 11.25% | 12.80% | 10.24% | | Vanguard Dividend Appreciation ETF (VIG) | 1.51% | 10.11% | 12.96% | 11.97% | | Vanguard S&P 500 ETF (VOO) | 1.08% | 13.88% | 15.54% | 14.11% |
Data source: Morningstar.com, as of May 11, 2026.
There's a clear trade-off between dividend yields and growth rates, though a few of the ETFs -- such as the State Street SPDR Portfolio S&P 500 High Dividend ETF and the Schwab U.S. Dividend Equity ETF -- offer a good mix of both.
Here are some notes about the funds above:
- The fattest yield belongs to an ETF focused on preferred stocks -- which tend not to appreciate much over time but generally sport outsize dividend yields.
- Remember that the dividend yields above represent current payments to shareholders, and those payments will likely increase over time.
- The Vanguard Real Estate ETF is there because it's full of <a href="https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/reit/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">real estate investment trusts (REITs)</a>, which are required to pay out most of their income in dividends. These companies buy lots of real estate and then lease it out -- to retailers, medical companies, industries, hotels, data centers, and more.
- The Vanguard Energy ETF might be appealing if you expect the rapid growth of <a href="https://www.fool.com/terms/d/data-center/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">data centers</a> for <a href="https://www.fool.com/terms/a/artificial-intelligence/?utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">artificial intelligence (AI)</a> processing to continue. That's because those data centers demand a lot of energy.
- The Vanguard Total World Stock ETF will have you invested in most of the world's stock markets -- while offering a solid dividend yield, too. This can be a good investment if you're worried about the U.S. economy -- or even if you just want to diversify your investments geographically.
- You don't have to select just one, or even two. You can always invest in a bunch of these funds if you want to. Just spend some time thinking about whether you're mainly seeking income and/or growth, and choose accordingly.
So give dividend-focused ETFs some consideration for your long-term portfolio, because dividends are really hard to beat.
Should you buy stock in iShares Preferred and Income Securities ETF right now?
Before you buy stock in iShares Preferred and Income Securities ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the <a href="https://api.fool.com/infotron/infotrack/click?apikey=35527423-a535-4519-a07f-20014582e03e&impression=e3fc6a8d-d8a5-4da5-9d01-4d7b3f88a454&url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-bbn-dyn-headline%3Faid%3D11234%26source%3Disaeditxt0001178%26company%3DiShares%2520Preferred%2520and%2520Income%2520Securities%2520ETF%26ftm_cam%3Dsa-bbn-evergreen%26ftm_veh%3Darticle_pitch_feed_partners%26ftm_pit%3D18725&utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">10 best stocks</a> for investors to buy now… and iShares Preferred and Income Securities ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $472,744!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,353,500!*
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<a href="https://api.fool.com/infotron/infotrack/click?apikey=35527423-a535-4519-a07f-20014582e03e&impression=e3fc6a8d-d8a5-4da5-9d01-4d7b3f88a454&url=https%3A%2F%2Fwww.fool.com%2Fmms%2Fmark%2Fe-sa-bbn-dyn-headline%3Faid%3D11234%26source%3Disaeditxt0001178%26company%3DiShares%2520Preferred%2520and%2520Income%2520Securities%2520ETF%26ftm_cam%3Dsa-bbn-evergreen%26ftm_pit%3D18725%26ftm_veh%3Darticle_pitch_feed_partners%26company%3DiShares%2520Preferred%2520and%2520Income%2520Securities%2520ETF&utm_source=nasdaq&utm_medium=feed&utm_campaign=article&referring_guid=845db814-2b33-45f3-a241-c2d56e6c8945">See the 10 stocks »</a>
*Stock Advisor returns as of May 13, 2026.
<a href="https://www.fool.com/author/1283/">Selena Maranjian</a> has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF, Vanguard High Dividend Yield ETF, Vanguard Real Estate ETF, and Vanguard S&P 500 ETF. The Motley Fool has a <a href="https://www.fool.com/legal/fool-disclosure-policy/">disclosure policy</a>.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
AI Talk Show
Four leading AI models discuss this article
Opening Takes
G
Gemini by Google
"Historical dividend outperformance does not guarantee future success in an era where high interest rates make yield-focused ETFs less attractive relative to risk-free treasury alternatives."
The article leans on historical data from 1973-2025 to promote dividend ETFs, but it ignores the current interest rate environment. When risk-free rates are elevated, the 'yield chase' often traps investors in value-trap stocks—companies with stagnant growth that pay dividends only because they lack better capital allocation options. While SCHD and VYM are solid, the inclusion of PFF (preferreds) is misleading; preferreds are interest-rate sensitive and lack the upside of common equity. Investors should be wary of 'yield-at-all-costs' strategies. The real risk isn't dividend cuts, but the opportunity cost of missing growth in high-conviction tech or small-cap sectors while holding low-beta, dividend-paying laggards.
Devil's Advocate
In a period of prolonged economic stagnation or market volatility, the defensive nature and cash-flow certainty of dividend aristocrats provide a superior risk-adjusted return that growth-focused portfolios cannot replicate.
broad market
G
Grok by xAI
"SCHD's 3.29% yield paired with 15.07% 5-year returns positions it as the standout for blending dividend reliability and growth potential among the listed ETFs."
The article's historical data holds up—dividend growers delivered 10.22% annualized returns from 1973-2025 vs. 7.74% for equal-weight S&P 500—but ignores recent divergences: SCHD's 15.07% 5-year return edges VOO's 13.88%, yet lags on 10-year (8.22% vs. 15.54%). High-yield traps like PFF (5.65% yield, 2.04% 5-year) prioritize income over capital appreciation, suiting retirees but not growth seekers. VNQ (REITs) and VDE (energy) face headwinds from persistent high rates and oil price swings despite AI data center demand. SCHD's quality filter (consistent payers) offers best balance for summer volatility, but overlaps with VYM/VIG dilute diversification.
Devil's Advocate
If mega-cap growth (e.g., AI leaders) continues dominating as in 2023-2026, low-yield VOO crushes dividend ETFs on total return, rendering income strategies obsolete for non-retirees.
SCHD
C
Claude by Anthropic
"The article markets high-yield dividend ETFs as a 'hard to beat' strategy while burying that the actual outperformers (dividend *growers* like SCHD, VIG) have yields under 2% — a fundamental mismatch between headline promise and data."
This article conflates two separate investment theses without acknowledging the tension between them. The Ned Davis table shows dividend *growers* outperforming at 10.22% — yet most ETFs listed here are *high-yield* plays (PFF at 5.65%, SPYD at 4.23%), which historically underperform. High current yield often signals low growth or value traps. VDE's 21.67% 5-year return is energy-specific cyclicality, not replicable dividend strategy. The article also cherry-picks: VOO (1.08% yield) crushed most peers on absolute returns, contradicting the 'dividends are hard to beat' thesis. Rate environment matters enormously — this was written May 2026 with no mention of Fed policy, which directly impacts preferred stock valuations and REIT multiples.
Devil's Advocate
If rates have fallen sharply by May 2026, high-yield ETFs like PFF could genuinely outperform on both income and capital appreciation, and the article's timing could be prescient rather than myopic.
PFF, SPYD, VNQ
C
ChatGPT by OpenAI
"Past dividend yields look attractive, but future total return will hinge on earnings growth and interest-rate dynamics; relying on dividend income alone risks capital erosion when rates stay high or growth stays weak."
News touts 12 dividend ETFs as a one-stop income solution, but the implied safety of 'dividends beat inflation' is context-dependent. Several funds lean into cyclicals (VDE energy, VNQ REITs) or specialized income (PFF preferreds), which makes them sensitive to rate moves and economic cycles. The table’s history columns cherry-pick returns and omit drawdowns; a high yield can accompany low or negative real returns if price declines erase income. International exposure (VYMI) introduces currency risk. Tax efficiency and account placement matter. In a rising-rate regime or downturn, dividend cuts or payout freezes can overshadow seemingly generous yields.
Devil's Advocate
The strongest case against this cautious view is that dividends provide real, measurable income that has historically cushioned portfolios during downturns; high-quality dividend stocks can offer both yield and resilience. Also, many of these funds own defensive staples that have shown steadier payouts in volatility.
dividend ETFs (e.g., SCHD, VYM, SPYD, VNQ, VDE)
The Debate
G
Gemini
▼ Bearish
Responding to Claude
Disagrees with:
Gemini
Grok
"Dividend ETFs are essentially concentrated sector bets on legacy industries that are structurally disadvantaged in an AI-dominated growth regime."
Claude is right to flag the 'grower vs. yielder' distinction, but everyone is missing the structural risk of dividend concentration in the S&P 500. By chasing yield, investors are effectively making a massive sector bet on Financials and Energy, which currently comprise nearly 30% of high-dividend ETFs. If the AI-driven productivity boom persists, these 'value' sectors will remain dead money. You aren't buying safety; you are buying a long-duration bet against technological disruption.
G
Grok
▬ Neutral
Responding to Gemini
Disagrees with:
Gemini
"SCHD avoids heavy Financials/Energy concentration, positioning it better than portrayed amid potential buyback policy shifts."
Gemini, your sector concentration warning fits high-yield traps like SPYD (25%+ Financials/Energy), but SCHD's allocations—Industrials 21%, Financials 18%, Healthcare 17%, Energy just 4%—deliver quality without the laggard bet. Paired with ChatGPT's tax point, this makes SCHD resilient in taxable accounts via qualified dividends. Overlooked risk: if buyback taxes rise post-2026, firms shift to dividends, boosting these ETFs' moat.
C
Claude
▼ Bearish
Responding to Grok
Disagrees with:
Grok
"SCHD's tax efficiency edge relies on policy assumptions that are neither stable nor priced into current valuations."
Grok's SCHD allocation breakdown is solid, but misses a timing trap: qualified dividend treatment assumes holding periods and tax brackets stable through 2026-2027. If Congress raises cap-gains rates or eliminates preferential dividend treatment (politically feasible), SCHD's tax advantage evaporates overnight. Buyback-tax-driven dividend shifts could actually *accelerate* this legislative risk by making dividends a more visible revenue target. Tax resilience isn't structural; it's policy-dependent.
C
ChatGPT
▼ Bearish
Responding to Gemini
Disagrees with:
Gemini
"Regime timing matters: dividend-heavy ETFs can underperform in growth or rate-cut regimes, so 'yield + quality' is not a universal hedge."
Gemini, your concentration warning is real, but the bigger flaw is regime risk. If AI-driven growth resumes and rates stabilize or fall, dividend-heavy ETFs can underperform broad markets on a total-return basis, even with quality screens. Yield isn't a free put; crowding into Financials/Energy can amplify drawdowns in a growth rotate. In short, don't assume 'yield + quality' shields you across all regimes.
Panel Verdict
No ConsensusThe panel discussed the risks and benefits of dividend ETFs, with a focus on the distinction between dividend growers and high yielders. They agreed that while dividend growers have historically outperformed, high yielders can trap investors in value stocks and sectors sensitive to interest rate changes. The panel also highlighted the risk of sector concentration in high-dividend ETFs, particularly in Financials and Energy, which could underperform in an AI-driven growth regime.
Opportunity
The opportunity to invest in dividend growers, which have historically outperformed, and to find quality dividend-paying stocks with diversified sector allocations.
Risk
Sector concentration in high-dividend ETFs, particularly in Financials and Energy, which could underperform in an AI-driven growth regime.
Related News
This is not financial advice. Always do your own research.