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Key Points
Dividend ETFs may not be as exciting as tech or artificial intelligence (AI) stocks, but they have a long history of delivering strong risk-adjusted returns.
The Schwab U.S. Dividend Equity ETF (SCHD) and the iShares Core High Dividend ETF (HDV) combine quality and yield in their selection processes.
The Vanguard Dividend Appreciation ETF (VIG) is a dividend growth play. The Schwab International Dividend Equity ETF (SCHY) applies SCHD's strategy to foreign stocks.
The Fed looks as if it's going to hold interest rates relatively steady for the rest of 2026, with a possibility of a rate hike before year-end. June inflation dropped sharply reflecting significantly lower oil prices from a couple months ago.GDP growth is slowing, but is expected to stay positive for at least the next couple of quarters.
That's a satisfactory environment for equities, but maybe not one that's bullish for tech and growth stocks. Dividend stocks might be the next big opportunity given their balance sheet strength and durability through challenging market environments.
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These four dividend ETFs aren't just built for the current economic landscape. They're set up to reward shareholders for years ahead.
1. Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is your "all-in-one" dividend ETF solution. Its stock selection process looks for balance sheet health, a history of dividend growth, and a higher yield. Focusing on these factors helps safeguard against the risk of any troubled stock slipping through.
This dividend ETF is about as close as you can get to a core portfolio holding. The portfolio's high-quality, defensive nature is its selling point. It probably won't beat the S&P 500 when tech is leading the way, although 2026 has been the exception. It's built to withstand challenging market environments while still taking advantage of the better ones.
2. Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is your pure dividend growth play, but it comes with a twist. Stocks with a 10-plus year dividend growth streak can qualify, but the final portfolio is weighted by market capitalization. Right now, that means three major mega-cap tech stocks -- Microsoft, Apple, and Broadcom -- are the largest positions. This may be a dividend ETF, but it's got a growth lean as well.
That makes this ETF a bit unique in the dividend ETF space. Most investors shopping here are looking for yield and financial strength. It doesn't really have a big yield (just 1.5% currently), but it does have financial health. Plus, its overweighting in growth stocks makes it a solid pairing with other more traditional dividend funds.
3. iShares Core High Dividend ETF
The iShares Core High Dividend ETF (NYSEMKT: HDV) is a high-yield fund at its core, but its use of a pair of Morningstar quality screens helps mitigate some risk. Investing in dividend stocks based on their yields alone can be dangerous. This ETF's selection strategy helps ensure the companies selected can sustainably maintain those yields.
I've always believed that any high-yield strategy should be paired with either a quality or dividend growth screen to help avoid yield traps. Morningstar's "distance to default" and "economic moat" ratings aren't as easy to interpret as a return on equity (ROE) number, but the companies that score highly in those metrics are exactly the types of stocks that should be held for the long term.
4. Schwab International Dividend Equity ETF
If you like the Schwab U.S. Dividend Equity ETF, then the Schwab International Dividend Equity ETF (NYSEMKT: SCHY) should be on your radar, too. It uses essentially the same targeting strategy as SCHD, but looks for stocks from both non-U.S. developed and emerging markets instead.
Despite strong returns over the past 18 months, international investing remains unattractive to many investors. Home bias and strong returns from tech and artificial intelligence (AI) stocks aren't exactly motivating folks to look elsewhere for opportunities. But foreign stocks historically have had multi-year stretches of beating the S&P 500. This would be a great way to play that trend.
All of these ETFs can be used individually or collectively in a portfolio. There's enough distinction between their investment strategies, and their portfolios are different enough that they can reduce risk without sacrificing return potential. This is especially the case for the Vanguard Dividend Appreciation ETF.
Whether you're focused on short-term defensive positioning or long-term capital growth, all four of these dividend ETFs are worth considering.
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David Dierking has positions in Apple, Schwab U.S. Dividend Equity ETF, and Vanguard Dividend Appreciation ETF. The Motley Fool has positions in and recommends Apple, Broadcom, Microsoft, and Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.
