Passive Income Playbook for 2026: The High-Dividend ETFs Investors Are Betting On
As investors search for reliable passive income in 2026, high-dividend exchange-traded funds (ETFs) are taking centre stage. Rather than picking individual dividend stocks, many investors are turning to dividend ETFs for steady income, diversification, and lower costs—all wrapped into a single investment.
Morningstar’s latest review highlights a group of high-quality, high-dividend ETFs that are expected to deliver strong long-term performance while paying consistent income.
Why dividend ETFs are gaining attention
Dividend ETFs appeal to income-focused investors for several reasons:
• They provide instant diversification across dozens or even hundreds of dividend-paying companies.
• They are typically low-cost, helping investors keep more of their returns.
• They are easy to buy and sell, making them suitable for both new and experienced investors.
• They reduce the risk of relying on a single company’s dividend.
Rather than chasing the highest yield, Morningstar focused on ETFs with sustainable dividends, strong governance, and competitive fees.
How Morningstar selected the best dividend ETFs
The ETFs on the list were chosen using two strict criteria:
1. Only ETFs with Gold or Silver Morningstar Medalist Ratings, backed by full analyst coverage, were included. These ratings signal strong confidence in long-term performance.
2. Each ETF had to offer a higher dividend yield than the S&P 500 as of late January 2026.
The result is a carefully curated list of 13 high-dividend ETFs designed for investors seeking dependable income without excessive risk.
A wide mix of strategies and markets
Although all the ETFs focus on dividends, they follow very different strategies:
• US-focused dividend ETFs dominate the list, reflecting the depth and stability of American dividend-paying companies.
• International dividend ETFs feature strongly, offering access to higher yields available in non-US markets.
• Some ETFs emphasise dividend yield, while others prioritise dividend growth, targeting companies that consistently increase payouts.
• A few funds are actively managed, but most track carefully designed dividend indexes.
This diversity means investors can tailor their income strategy to match their risk tolerance and time horizon.
Standout themes among the top ETFs
Several patterns stand out across the list:
• Quality matters more than yield: ETFs that screen for profitability, cash flow strength, and long dividend histories are favoured over those simply chasing high yields.
• Global exposure boosts income: International dividend ETFs often offer higher yields than US-only funds.
• Monthly income options exist—but are rare: Only a handful of ETFs pay dividends monthly; most pay quarterly.
• Value tilt is common: Many dividend ETFs lean toward value stocks, which tend to be more mature, stable, and cash-generative.
Best options depending on investor goals
Different ETFs shine depending on what an investor wants:
• For monthly income: WisdomTree’s US Large-Cap, Mid-Cap, and Small-Cap Dividend ETFs stand out.
• For the highest yields: Vanguard International High Dividend Yield ETF and Schwab US Dividend Equity ETF lead the pack.
• For global diversification: JPMorgan Dividend Leaders ETF blends US and international dividend stocks.
• For long-term dividend growth: Vanguard Dividend Appreciation ETF focuses on companies with long histories of increasing dividends.
Important tax considerations
High-dividend ETFs are generally less tax-efficient than growth-focused funds. Investors typically pay taxes on dividends received, and international dividend ETFs may also be subject to foreign withholding taxes. This makes tax planning an important part of any income strategy.
Key takeaway for investors
High-dividend ETFs remain one of the simplest and most effective ways to generate passive income in 2026—but success depends on choosing quality over headline yield.
Funds that combine sustainable dividends, strong balance sheets, and disciplined portfolio construction are better positioned to deliver consistent income and long-term growth.
For income-focused investors, the message is clear: dividends still work—but only when they’re built on solid fundamentals.
As investors search for reliable passive income in 2026, high-dividend exchange-traded funds (ETFs) are taking centre stage. Rather than picking individual dividend stocks, many investors are turning to dividend ETFs for steady income, diversification, and lower costs—all wrapped into a single investment.
Morningstar’s latest review highlights a group of high-quality, high-dividend ETFs that are expected to deliver strong long-term performance while paying consistent income.
Why dividend ETFs are gaining attention
Dividend ETFs appeal to income-focused investors for several reasons:
• They provide instant diversification across dozens or even hundreds of dividend-paying companies.
• They are typically low-cost, helping investors keep more of their returns.
• They are easy to buy and sell, making them suitable for both new and experienced investors.
• They reduce the risk of relying on a single company’s dividend.
Rather than chasing the highest yield, Morningstar focused on ETFs with sustainable dividends, strong governance, and competitive fees.
How Morningstar selected the best dividend ETFs
The ETFs on the list were chosen using two strict criteria:
1. Only ETFs with Gold or Silver Morningstar Medalist Ratings, backed by full analyst coverage, were included. These ratings signal strong confidence in long-term performance.
2. Each ETF had to offer a higher dividend yield than the S&P 500 as of late January 2026.
The result is a carefully curated list of 13 high-dividend ETFs designed for investors seeking dependable income without excessive risk.
A wide mix of strategies and markets
Although all the ETFs focus on dividends, they follow very different strategies:
• US-focused dividend ETFs dominate the list, reflecting the depth and stability of American dividend-paying companies.
• International dividend ETFs feature strongly, offering access to higher yields available in non-US markets.
• Some ETFs emphasise dividend yield, while others prioritise dividend growth, targeting companies that consistently increase payouts.
• A few funds are actively managed, but most track carefully designed dividend indexes.
This diversity means investors can tailor their income strategy to match their risk tolerance and time horizon.
Standout themes among the top ETFs
Several patterns stand out across the list:
• Quality matters more than yield: ETFs that screen for profitability, cash flow strength, and long dividend histories are favoured over those simply chasing high yields.
• Global exposure boosts income: International dividend ETFs often offer higher yields than US-only funds.
• Monthly income options exist—but are rare: Only a handful of ETFs pay dividends monthly; most pay quarterly.
• Value tilt is common: Many dividend ETFs lean toward value stocks, which tend to be more mature, stable, and cash-generative.
Best options depending on investor goals
Different ETFs shine depending on what an investor wants:
• For monthly income: WisdomTree’s US Large-Cap, Mid-Cap, and Small-Cap Dividend ETFs stand out.
• For the highest yields: Vanguard International High Dividend Yield ETF and Schwab US Dividend Equity ETF lead the pack.
• For global diversification: JPMorgan Dividend Leaders ETF blends US and international dividend stocks.
• For long-term dividend growth: Vanguard Dividend Appreciation ETF focuses on companies with long histories of increasing dividends.
Important tax considerations
High-dividend ETFs are generally less tax-efficient than growth-focused funds. Investors typically pay taxes on dividends received, and international dividend ETFs may also be subject to foreign withholding taxes. This makes tax planning an important part of any income strategy.
Key takeaway for investors
High-dividend ETFs remain one of the simplest and most effective ways to generate passive income in 2026—but success depends on choosing quality over headline yield.
Funds that combine sustainable dividends, strong balance sheets, and disciplined portfolio construction are better positioned to deliver consistent income and long-term growth.
For income-focused investors, the message is clear: dividends still work—but only when they’re built on solid fundamentals.