By Ian Salisbury

In today's rocky market, dividend funds can hold a lot of appeal.

Companies that pay regular dividends tend to be financially healthy -- generating steady cash they can pay out to shareholders. Meanwhile those payouts can be reinvested or serve as a great source of passive income, especially in a world of comparatively low bond yields.

To that end, fund researcher Morningstar recently compiled a list of 13 of its favorite dividend exchange-traded funds, each of which earns top marks based on the firm's criteria, like fees and fund governance. The funds also all boast trailing 12-month yields that beat the S&P 500's 1.2%.

Looking at Morningstar's list, a few things jump out.

While paying dividends tends to be associated with conservative investing, it doesn't necessarily mean a big sacrifice in terms of performance, at least in the current market environment. Several funds on the list have come close to matching, or even beat, the S&P 500's 15% total return over the past 12 months.

Capital Group Dividend Value ETF, the top-performing U.S.-focused fund, with a 20% return over the past 12 months, counts among its top holdings technology highfliers like Microsoft, Broadcom, and Nvidia.

When it comes to yield, investors can also find attractive payout rates -- but that isn't a given, with a number of funds offering yields below 2%. It's no wonder, considering the S&P 500's overall yield is the lowest its been in decades, at just 1.2%.

Still, investors primarily interested income can turn to funds like Schwab U.S. Dividend Equity ETF, with a 3.9% yield, or Vanguard International High Dividend Yield Index ETF, yielding 4.2%.

Considering that 10-year Treasury notes yield just a smidgen more -- 4.4% -- a payout of around 4% on a stock fund, with upside in a bull market, could be an attractive proposition.

Here is the full list of Morningstar's favorite dividend ETFs:

Capital Group Dividend Value (CGDV) Yield: 1.5%

12-month trailing total return: 20%

Fidelity High Dividend $(FDVV)$ Yield: 3.2%

12-month trailing total return: 14%

Franklin U.S. Low Volatility High Dividend $(LVHD)$ Yield: 3.5%

12-month trailing total return: 14%

Schwab International Dividend Equity (SCHY ) Yield: 3.9%

12-month trailing total return: 17%

Schwab U.S. Dividend Equity $(SCHD)$ Yield: 3.9%

12-month trailing total return: 4.5%

SPDR S&P Dividend $(SDY.UK)$ Yield: 2.6%

12-month trailing total return: 8.8%

Vanguard Dividend Appreciation $(VIG.AU)$ Yield: 1.7%

12-month trailing total return:

Vanguard High Dividend Yield $(VYM)$ Yield: 2.7%

12-month trailing total return: 11%

Vanguard International Dividend Appreciation $(VIGI)$ Yield: 1.8%

12-month trailing total return: 7.9%

Vanguard International High Dividend Yield Index $(VYMI)$ Yield: 4.2%

12-month trailing total return: 20%

WisdomTree U.S. LargeCap Dividend $(DLN.UK)$ Yield: 2%

12-month trailing total return: 14%

WisdomTree U.S. MidCap Dividend $(DON)$ Yield: 2.4%

12-month trailing total return: 7.4%

WisdomTree U.S. SmallCap Dividend $(DES.AU)$ Yield: 3%

12-month trailing total return: -0.8%

Source: Morningstar

Note: Yields represent trailing 12-month dividend yields.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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July 23, 2025 13:41 ET (17:41 GMT)

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