Are there dividend-paying index funds?

Yes, there are several dividend-paying index funds for investors who prioritize steady income over high growth. They come in both mutual fund and ETF form.

Do Vanguard index funds pay dividends?

A number of well-regarded Vanguard index funds pay dividends, including the Vanguard High Dividend Yield ETF and the Vanguard Dividend Appreciation ETF.

Are dividend index funds risky?

The level of risk associated with a dividend index fund depends on its holdings. Most fund providers also include a simple visual risk scale based on historical volatility, which can give you a quick sense of how much the fund’s price has fluctuated.

Which dividend fund is best?

The best dividend funds depend on your risk tolerance. A great all-around candidate is the Schwab U.S. Dividend Equity ETF, which features a low 0.06% expense ratio, a decent tax-efficient yield, and stringent index criteria.

Does an S&P 500 index fund pay dividends?

Yes, most S&P 500 index funds pay dividends, but they are not as high as those from pure-play dividend index funds.

Do ETF index funds pay dividends?

Most index funds structured as ETFs will pay dividends, although the amount and frequency can vary greatly.

Do I pay taxes on dividends?

Yes. Dividend payments are typically taxable in the year they’re received, unless held in a tax-sheltered account like a Roth IRA. In a taxable account, dividends are classified as either qualified or nonqualified. Qualified dividends (generally from U.S. corporations) are taxed at a lower rate, while nonqualified dividends, such as those from certain REITs or foreign companies, are taxed at your regular income rate.

What is the best monthly dividend income ETF?

Not many dividend ETFs pay monthly, but the Invesco S&P 500 High Dividend Low Volatility ETF (NYSEMKT: SPHD) is a solid option. It focuses on high-yield, lower-volatility U.S. stocks, offering steady income and reduced market swings. For investors who prioritize total return and long-term compounding, the WisdomTree U.S. Quality Dividend Growth Fund (NASDAQ: DGRW) is another strong pick.

6 Best Dividend Index Funds to Buy in 2026

Consider dividend index funds that pay a solid dividend and offer a high probability of price appreciation.

By Tony Dong – Updated Jul 9, 2026 at 6:56 PM EST | Fact-checked by Frank Bass

Key Points

Dividend index funds offer passive income and diversification through tracked benchmarks of dividend-paying stocks.
Different dividend index funds feature varies yields, risks, and fees, catering to diverse investor needs.
Investing in dividend index funds can be done via brokerage accounts, with a focus on long-term, tax-efficient growth.

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A graphic listing three key considerations when looking for dividend index funds: dividend yield, expense ratio, and risk level. — Image source: The Motley Fool.

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6 Top dividend index funds to buy in 2026

Here are six dividend index funds (in no particular order) with relatively low expense ratios but varying dividend yields and risk levels.

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Ticker Information Table
Dividend yield
2.87%
2.07%
3.25%
2.27%
1.51%
1.93%

Data as of Jul 15, 2026. Showing 6 of 6 total entries.

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1. iShares Core High Dividend ETF

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NYSEMKT: HDV

iShares Trust - iShares Core High Dividend ETF

Today's Change

(0.35%) $0.10

Current Price

$27.65

Key Data Points

AUM

$14B

Dividend Yield

11.68%

Expense Ratio

0.08%

Top Holdings

XOM

7.53%

ABBV

6.27%

CVX

5.84%

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The iShares Core High Dividend ETF (HDV +0.35%) is benchmarked to the Morningstar Dividend Yield Focus Index. It holds about 75 U.S. high-yielding dividend stocks screened for financial soundness, with overweights in the energy, consumer staples, and healthcare sectors. This ETF charges a 0.08% expense ratio and pays a 3.14% 30-day SEC yield as of June 30, 2026.

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2. ProShares S&P 500 Dividend Aristocrats ETF

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NYSEMKT: NOBL

ProShares S&P 500 Dividend Aristocrats ETF

Today's Change

(-0.57%) $-0.32

Current Price

$55.98

Key Data Points

AUM

$12B

Dividend Yield

3.62%

Expense Ratio

0.35%

Top Holdings

WST

1.82%

BEN

1.70%

ADP

1.69%

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The ProShares S&P 500 Dividend Aristocrats® ETF (NOBL -0.57%) tracks the performance of Dividend Aristocrats® -- S&P 500 members that have increased their dividends annually for at least 25 consecutive years. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC.) The index is equal-weighted and consists of 69 companies. The ETF charged a 0.35% expense ratio and paid a 2.59% dividend yield as of March 31, 2026.

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3. Schwab U.S. Dividend Equity ETF

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NYSEMKT: SCHD

Schwab U.S. Dividend Equity ETF

Today's Change

(0.37%) $0.12

Current Price

$32.32

Key Data Points

AUM

$98B

Dividend Yield

3.24%

Expense Ratio

0.06%

Top Holdings

UNH

4.51%

4.32%

4.22%

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The Schwab U.S. Dividend Equity ETF (SCHD +0.37%) seeks to track the total return of the Dow Jones U.S. Dividend 100 index. This benchmark uses a composite score that screens for at least 10 years of dividend payments, along with a composite metric that assesses free cash flow to total debt, return on equity, dividend yield, and five-year dividend growth rate. This ETF charged a 0.03% expense ratio and paid a 3.28% 30-day SEC yield in July 2026.

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4. Vanguard High Dividend Yield ETF

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NYSEMKT: VYM

Vanguard High Dividend Yield ETF

Today's Change

(-0.04%) $-0.06

Current Price

$160.12

Key Data Points

AUM

$96B

Dividend Yield

2.27%

Expense Ratio

0.04%

Top Holdings

AVGO

8.52%

JPM

3.15%

XOM

2.53%

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The Vanguard High Dividend Yield ETF (VYM -0.05%) tracks the performance of the FTSE High Dividend Yield Index, which selects a market-cap-weighted portfolio including 55% of the highest-yielding stocks on a forward-looking basis from a broader universe of U.S. equities. However, it excludes real estate investment trusts (REITs) to maintain tax efficiency (qualified dividends). VYM charged a 0.04% expense ratio and paid a 2.25% 30-day SEC yield in July 2026.

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5. Vanguard Dividend Appreciation ETF

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NYSEMKT: VIG

Vanguard Dividend Appreciation ETF

Today's Change

(0.03%) $0.06

Current Price

$237.36

Key Data Points

AUM

$128B

Dividend Yield

1.51%

Expense Ratio

0.04%

Top Holdings

AVGO

5.42%

AAPL

4.58%

MSFT

4.28%

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The opposite of the Vanguard High Dividend Yield ETF, the Vanguard Dividend Appreciation ETF (VIG +0.03%) tracks the S&P U.S. Dividend Growers Index. It screens potential holdings for at least 10 consecutive years of dividend growth, excludes the top 25% by yield to ensure quality, and omits REITs. Holdings are market cap-weighted with a 4% limit. VIG charged a 0.04% expense ratio and paid a 1.52% 30-day SEC yield in June 2026.

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6. iShares Core Dividend Growth ETF

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NYSEMKT: DGRO

iShares Trust - iShares Core Dividend Growth ETF

Today's Change

(0.16%) $0.12

Current Price

$76.64

Key Data Points

AUM

$42B

Dividend Yield

1.93%

Expense Ratio

0.08%

Top Holdings

JNJ

3.12%

JPM

3.04%

AAPL

2.97%

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The iShares Core Dividend Growth ETF (DGRO +0.16%) also targets dividend growth stocks through the Morningstar US Dividend Growth Index. By doing so, the iShares Core Dividend Growth ETF requires five consecutive years of dividend growth, a positive consensus earnings forecast, and a payout ratio of less than 75%. It also omits the top 10% of the highest-yielding stocks and REITs to avoid yield traps and preserve tax efficiency. DGRO charged a 0.08% expense ratio and paid a 1.97% 30-day SEC yield as of June 30, 2026.

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How to buy dividend index funds

Open your brokerage account: Log in to your brokerage account where you handle your investments. If you don't have one yet, take a look at our favorite brokers and trading platformsto find the right one for you.
Search for the ETF: Enter the ticker into the search bar to bring up the ETF's trading page.
Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this ETF.
Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

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Benefits and risks of dividend index funds

Benefits

Steady income: Dividend ETFs provide regular cash distributions, making them attractive for retirees and other investors seeking ongoing cash flow from their portfolios.
Diversification: Instead of relying on a handful of dividend stocks, these ETFs spread investments across dozens or even hundreds of companies, reducing company-specific risk.
Value exposure: Many high-dividend strategies naturally tilt toward value stocks because dividend yield rises as share prices become cheaper relative to the cash payout.
Quality tilt: Dividend growth ETFs tend to favor companies with strong balance sheets, consistent earnings, and a history of increasing payouts, characteristics often associated with higher-quality businesses.
Low-cost passive investing: Most dividend index ETFs charge modest expense ratios and provide a simple, hands-off way to build an income-focused equity portfolio.

Risks

Dividend cuts: Dividends are never guaranteed. Companies can reduce or eliminate their payouts during recessions, periods of financial stress, or industry downturns.
Yield traps: The highest-yielding stocks are not always the best investments. An unusually high dividend yield can sometimes signal deteriorating business fundamentals rather than an attractive opportunity.
Interest rate sensitivity: Rising interest rates can make bonds and other fixed-income investments more attractive, reducing demand for dividend-paying stocks and pressuring their valuations.
Potential to lag growth stocks: Dividend ETFs may underperform during prolonged bull markets driven by fast-growing sectors such as technology, where companies often reinvest profits rather than pay dividends.
Tax drag: Even qualified dividends create taxable income in brokerage accounts, which can reduce after-tax returns compared with strategies focused primarily on capital appreciation.

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Methodology: How these dividend index funds were chosen

We prioritized dividend index funds with low expense ratios, substantial assets under management, strong trading liquidity, and long operating histories. Lower fees help preserve more of an investor's total return, while larger, established ETFs generally offer tighter bid-ask spreads and a lower risk of fund closure.

Beyond cost, the primary consideration was methodology. Rather than simply chasing the highest dividend yields, we favored ETFs that balance current income with dividend quality and long-term growth potential. That includes strategies emphasizing sustainable payout ratios, consistent dividend growth, strong profitability, and shareholder-friendly capital allocation. In our view, a sensible dividend strategy should seek to maximize total return, not just headline yield.

Finally, we considered tax efficiency. Passive index ETFs typically have low portfolio turnover, which can reduce taxable capital gains distributions. We also gave preference to funds whose portfolios primarily consist of qualified dividend-paying U.S. companies, making them more tax-efficient than many higher-yielding income strategies over the long run.

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The bottom line on dividend index funds

The stock market can be volatile in the short term. So, it's important to keep in mind that dividend index funds are meant to be held for the long run.

First, the longer you hold your index funds, the better performance you're likely to see. Longer holding periods allow for more compounding, enabling your money to grow rapidly in later years.

Second, short-term market movements tend to be unreliable for successful investing. As we've seen this year, short-term market swings can be erratic both in direction and magnitude.

However, longer-term investment horizons have reliably trended upward, especially for dividend-paying blue chip stocks.

Finally, longer holding periods also make your portfolio more tax-efficient. If you keep your dividend index funds for longer than a designated holding period, you'll be eligible for qualified dividends, which are taxed at a lower capital gains rate when earned.

If you do choose to allocate a portion of your portfolio to dividend index funds, know that short-term price movements are entirely normal. A long-term focus has historically been a preferable strategy.

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FAQ

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Dividend index funds FAQ

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Tony Dong has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ProShares S&P 500 Dividend Aristocrats ETF, Vanguard Dividend Appreciation ETF, and Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

6 Best Dividend Index Funds to Buy in 2026

Consider dividend index funds that pay a solid dividend and offer a high probability of price appreciation.

Key Points