Why I'm Loading Up on These 3 High-Dividend ETFs for Passive Income

Growth and tech may have been the market leaders of the past few years, but that's no longer the case in 2026.

The market is experiencing a major rotation that's seeing previously unloved areas of the market, including small caps, energy, and materials stocks, turn into leaders. Investors who have maintained diversification throughout the current cycle are finally being rewarded.

Dividend stocks and ETFs are another group that's doing well. They've benefited from current outperformance in value stocks and those backed by healthy balance sheets -- two factors that dividend portfolios tend to overweight. With 3%-4% yields readily attainable, dividend ETFs are looking like one of the year's early winners.

Not all high-dividend ETFs are built the same, though. Here are three worth loading up on in 2026.

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1. Schwab U.S. Dividend Equity ETF

I'll be the first to admit that I didn't like the Schwab U.S. Dividend Equity ETF's (NYSEMKT: SCHD) prospects heading into the new year. With the artificial intelligence (AI) trade still in full focus, the economy still on a healthy growth trajectory, and investors showing little interest in shifting away from large-cap growth, it looked like the fund's portfolio would be swimming upstream.

But the market rotation that's occurred over the past several weeks (so far) has proven me wrong. The fund's focus on quality fundamentals, stable dividend growth, and above-average yield has been in favor again, and it's made the Dividend Equity ETF one of the top year-to-date performers in the U.S. dividend ETF category.

This fund has always had a solid strategy, and it produced very strong results for the first nine years of its life. The current 3.7% yield and 0.06% expense ratio are very attractive features. These factors alone make it a solid candidate to buy almost anytime as part of a long-term portfolio plan.

That strategy, however, was very out of favor over the past three years, and that'll happen from time to time. But if investors really are pivoting away from growth and tech, the Schwab U.S. Dividend Equity ETF looks like an excellent buy.

2. Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) is a pretty standard high-dividend equity strategy. It simply starts with a large universe of dividend-paying stocks, forecasts their dividend yields over the next 12 months, and selects the top half of yields for the final portfolio. It's not a robust strategy, but it's one that works if you're simply looking for a higher yield.

And sometimes that "plain vanilla" approach is all you need. I'm not the biggest fan of strategies that select stocks based on yield and nothing else, but I also think it has been able to accomplish what it wanted to accomplish.

One of this fund's big advantages is its diversity. Even though a 13% allocation to tech makes it the second-largest sector holding, a total of seven sectors have allocations of 8% or more. That makes it uniquely positioned to take advantage of the current rotation away from growth.

The current 2.5% yield of the Vanguard High Dividend Yield ETF isn't as high as you'll find in some other high-yield equity ETFs, but it's set up nicely if the current rotation sticks.

3. SPDR Portfolio S&P 500 High Dividend ETF

The SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) is as pure a high-yield play as you'll find. Its strategy is simple: It selects the 80 highest-yielding securities from the S&P 500 (SNPINDEX: ^GSPC). To provide some semblance of diversification and risk control, it equal-weights the final portfolio instead of yield-weighting it.

That concentrated focus on yield can make the fund more sensitive to interest rate changes. Real estate (21%), financials (17%), consumer staples (16%), and utilities (13%) are the top sector holdings, and all have higher degrees of rate sensitivity.

That adds another risk consideration, but it could also work in the fund's favor. The Federal Reserve is currently expected to lower rates multiple times in 2026. While that's not a guarantee and may or may not have an impact on equity prices, it creates a potential tailwind that could make the SPDR S&P 500 High Dividend ETF an outperformer.

The 4.5% yield is about as high as you'll find among diversified U.S. equity ETFs, and the 0.07% expense ratio makes it one of the cheapest.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.