Morningstar: The Best High-Dividend ETFs for Passive Income
- Dividend funds have grown in popularity over the last 15 years.
- But option income products are now taking some market share away from dividend ETFs.
High-dividend exchange-traded funds offer investors income and diversification at a low cost, but not all funds are created equal.
In a recent report, Morningstar named its top dividend funds for gaining passive income in 2025, including products from Capital Group, Fidelity Investments, Vanguard and more.
The firm’s picks all earn top ratings (either a gold or silver ranking) from Morningstar analysts and offer trailing yields higher than that of the market as of July 17.
The ‘Best of Breed’
The research firm named its 13 top funds, but Daniel Sotiroff, senior manager research analyst for Morningstar, narrowed the list down to what he called the “best of breed” in a statement to etf.com.
For investors looking for high yield, Sotiroff pointed to the Vanguard High Dividend Yield ETF (VYM) followed by the Schwab U.S. Dividend Equity ETF (SCHD).
“The yield on those is not going to be the highest when you look at these dividend ETFs, but that's kind of important,” Sotiroff said. “Those two strike a nice balance between yield and the risks they're taking on.”
If you’re looking for dividend growth, the Vanguard Dividend Appreciation ETF (VIG) is Morningstar’s top pick. It’s not a high-yield ETF since the yield will be closer to the market, but “you're getting a lot of companies that have very stable profits—they're very highly profitable and, at the same time, they pay out dividends regularly and they're increasing their dividends over long periods of time.”
And for investors looking for actively managed funds, the Capital Group Dividend Value ETF (CGDV) is at the top of the list.
“It takes pretty good measures to control the risks that it's taking while also giving you a little bit higher yield,” Sotiroff said.
Morningstar’s Other Top Picks
The other funds included on Morningstar’s list include:
- Fidelity High Dividend ETF (FDVV)
- Franklin U.S. Low Volatility High Dividend ETF (LVHD)
- Schwab International Dividend Equity ETF (SCHY)
- SPDR S&P Dividend ETF (SDY)
- Vanguard International Dividend Appreciation ETF (VIGI)
- Vanguard International High Dividend Yield Index ETF (VYMI)
- WisdomTree U.S. LargeCap Dividend ETF (DLN)
- WisdomTree U.S. MidCap Dividend ETF (DON)
- WisdomTree U.S. SmallCap Dividend ETF (DES)
The Appeal of Dividend ETFs
Dividend funds have grown in popularity over the last 15 years thanks to a subset of investors who are just looking for income as well as the zero-interest-rate environment, Sotiroff said.
“A lot of people historically counted on bonds and bond funds to provide that income, and when you're at a zero-interest-rate policy, you're not really going to get that out of a bond fund anymore,” he added. “So dividend funds kind of filled that spot.”
While the funds named here are still popular, the ETF ecosystem is also seeing a rise in option income products—which offer higher yields—and are taking some market share away from dividend ETFs.
