These are Morningstar's top-rated dividend ETFs in 2025

CNBC

02-05-2025

Investors seeking income have several high-quality options in dividend-paying exchange-traded funds, according to Morningstar. People often turn to dividend stocks during times of volatility, thanks to their defensive nature. While the market has had a tumultuous month since President Donald Trump announced his sweeping new tariff policy, stocks have lately been moving higher . On Friday, the S & P 500 was on track for its ninth consecutive day of gains, its longest winning streak since November 2004. Still, good dividend ETFs can work in all market environments, said Ryan Jackson, senior analyst for passive strategies at Morningstar. "The ability to … stay competitive during rallies, but hold up better during drawdowns, I think is something that a lot of investors find attractive, especially when you mix in the income that they're throwing off," he said. The financial services firm recently compiled a list of its-top rated dividend ETFs in 2025. They all earned medalist ratings of gold or silver and offer trailing yields higher than the market, as of April 28. Here are some that made the cut. The list includes various strategies. There are dividend-income funds, dividend-growth funds and combinations of the two, Jackson pointed out. The first holds companies that prioritize the yield. Those have the potential to be a little riskier if the businesses aren't necessarily healthy but continue to pay income, he noted. Dividend-growth funds focus on companies that aim to grow their dividends year after year. Those tend to be businesses that are profitable and growing, he said. "The one thing that unites them, despite their different styles, is the fact that, yes, they are targeting dividends and targeting yield, but they have — whether it's explicit or implicit — some sort of quality component to make sure you're not dipping into really high-risk companies, because that's the big concern with dividend and yield strategies," Jackson said. For instance, the Vanguard Dividend Appreciation ETF tracks dividend growers that have increased payouts for at least 10 consecutive years. It has a gold medalist and three-star rating from Morningstar. The fund has a 1.73% 30-day SEC yield and 0.05% expense ratio. "You're making the trade off there — perhaps a little bit less yield, but higher upside and a more favorable outlook," Jackson said. VIG 1Y mountain Vanguard Dividend Appreciation ETF one-year performance The ETF is down more than 2% year to date. The Fidelity High Dividend ETF is rated silver and boasts five stars from Morningstar. It has a 30-day SEC yield of 3.22% and an expense ratio of 0.16%. The ETF is a little more value oriented, perhaps at the expense of some capital appreciation, Jackson noted. Still, while the Fidelity High Dividend ETF focuses on yield, it incorporates payout ratio and dividend growth — both signs of financial health — into stock selection. The fund has lost nearly 3% so far this year. The Schwab US Dividend Equity ETF is another Morningstar gold medalist. It is rated four stars by the fund researcher, has a 3.94% 30-day SEC yield and a 0.06% expense ratio. "It's an excellent fund," Jackson said. "This is a good example of something that is balancing yield and quality." SCHD 1Y mountain Schwab US Dividend Equity ETF one-year performance The managers screen for dividend-paying stocks that clear a certain threshold in yield, but then also measure them by their free-cash-flow-to-debt ratio, dividend growth and return on equity, Jackson said. Those that score well in those categories tend to be healthy, high-quality stocks. "Balancing that feature with the yield component makes it a really nice middle-ground dividend ETF option," he said. "It has a pretty good track record attached to it as well." The ETF is down 5% year to date. The WisdomTree U.S. LargeCap Dividend ETF targets dividend payers, removes some riskier high-yield names, and then increases the weight of those that score really well in quality and momentum characteristics, Jackson said. The ETF has a silver medalist rating and five stars from Morningstar. It has a 2.25% 30-day SEC yield, a 0.28% expense ratio and has lost less than 1% so far this year. Lastly, the SPDR S & P Dividend ETF is rated four stars with a silver medal from Morningstar. It has a 30-day SEC yield of 2.65% and a 0.35% expense ratio. "It's the portfolio of dividend die hards," Jackson said. It is the strictest of the dividend ETFs because it requires 20 consecutive years of paying out dividends, he explained. "While there is no profitability component built into the process explicitly, just by virtue of requiring 20 years of dividends, you're filtering out a lot of the lower-quality companies that haven't built up that track record yet," he said. The ETF is down less than 1% year to date.