The Best Dividend Funds
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Dividend stocks are the Dolly Parton of investing: Everyone seems to like them.
Many retirees rely (at least somewhat) on the regular income that dividend stocks generate. Nonretirees, meanwhile, enjoy “getting paid to wait”—collecting regular income from quarterly dividends while holding on for stock price appreciation.
Looking back at 2024, the returns of the Morningstar Dividend Yield Focus Index (a collection of quality stocks with stable dividends) and the broad-based Morningstar US Market Index ran neck and neck for much of the year. So far in 2025, they’re on divergent paths, with the Dividend Focus Yield Index up 6.06% versus negative 4.17% for the US market index for the year to date through March 14, 2025.
Reports Morningstar’s chief US market strategist David Sekera: “In our 2025 US Market Outlook, we noted that undervalued value stocks, especially those that pay relatively high dividends, looked especially attractive to us. While the Morningstar US Market has retreated 6.24% through March 13, the Morningstar Dividend Leaders Index has risen 5.95%. We continue to see attractive investment opportunities among value stocks that provide solid dividend yields.”
Sekera notes that as much as the broad market has sold off, it has dropped from trading at a premium to now trading at a slight discount. “If the broad market were to fall much further from here, that could provide investors an opportunity to swap out of dividend stocks and back into the broad market, which has a higher exposure to growth stocks,” he adds.
Read more: 12 Undervalued Stocks that Just Raised Dividends
16 Best Dividend ETFs and Mutual Funds
Investors interested in getting exposure to dividend stocks through a managed product can pick among many dividend exchange-traded funds and mutual funds.
These mutual funds and ETFs focus on US dividend stocks and had at least one share class that earned top Morningstar Medalist Ratings of Silver or Gold with 100% analyst coverage as of March 14, 2025.
- Capital Group Dividend Value ETF CGDV
- Columbia Dividend Income CDDRX
- Fidelity High Dividend ETF FDVV
- Franklin U.S. Low Volatility High Dividend ETF LVHD
- Schwab U.S. Dividend Equity ETF SCHD
- SPDR S&P Dividend ETF SDY
- T. Rowe Price Dividend Growth PRDGX
- T. Rowe Price Dividend Growth ETF TDVG
- Vanguard Dividend Appreciation ETF VIG
- Vanguard Dividend Appreciation Index VDADX
- Vanguard Dividend Growth VDIGX
- Vanguard High Dividend Yield ETF VYM
- Vanguard High Dividend Yield Index VHYAX
- WisdomTree US LargeCap Dividend ETF DLN
- WisdomTree US MidCap Dividend ETF DON
- WisdomTree US SmallCap Dividend ETF DES
High-Dividend Stocks Versus Dividend-Growth Stocks
Most funds on our list of the best dividend ETFs and mutual funds take one of two approaches to investing.
The first group invests in high-dividend stocks. High-dividend stocks typically come from more mature businesses that choose to pay out profits rather than reinvest them. Investors will often find these companies in the financials, energy, utilities, and industrials sectors. High-dividend stocks come with tantalizing yields but carry some risk. Most notably, high-dividend stocks in economically sensitive sectors may be vulnerable during an economic slowdown. Moreover, high-yielding stocks can face interest-rate risk: When rates trend up, investors may swap high-income-producing stocks for bonds.
The second group of names on our list of the best dividend ETFs and mutual funds focuses on dividend-growth stocks. Dividend-growth stocks don’t usually boast robust yields like high-dividend stocks do, but they come from companies that are usually financially healthy and that have raised their dividends over time. As such, dividend-growth stocks generally exhibit some resilience during market downturns and economic slowdowns.
When researching dividend-stock mutual funds and ETFs, be sure to understand which approach the fund takes. You can find this information in a Morningstar fund or ETF report on Morningstar.com. Look under the Fund Analysis tab.
Do Investors Need Dividend ETFs or Mutual Funds?
Dividend-paying companies are often larger firms whose stocks are popular holdings among large-cap mutual funds and ETFs. As a result, investors who own large-cap funds may already hold a sizable position in dividend stocks. For example, Vanguard Dividend Appreciation and T. Rowe Price Dividend Growth both count Microsoft MSFT and Apple AAPL as top three holdings.
That doesn’t mean investors shouldn’t add a dividend fund to their portfolios if they already have exposure to large-company stocks. However, investors should be aware of what adding a dividend-stock fund may do to the complexion of their current portfolio mix.
