As volatility returns to the U.S. stock market, investors are taking another look at dividend-paying stocks. Compared with technology companies whose valuations depend heavily on future earnings growth, businesses that generate consistent cash flow and regularly return capital to shareholders may offer an alternative for investors seeking income and greater portfolio diversification.
Recent ETF performance and fund flows suggest that dividend strategies are attracting renewed attention. As of late October 2026, the Schwab US Dividend Equity ETF (SCHD) had recorded notable inflows, while dividend-focused ETFs had gained traction amid concerns about the returns on artificial intelligence infrastructure spending.
That does not necessarily mean investors are abandoning technology stocks. Instead, the shift raises a broader question: As growth stocks face valuation pressures and uncertainty over AI monetization increases, what role can dividend ETFs play in an investment portfolio?
Three funds offer different approaches to the strategy: SCHD, which emphasizes dividend quality and corporate fundamentals; the iShares Core High Dividend ETF (HDV), which focuses on higher-yielding stocks that meet financial-health criteria; and the JPMorgan Equity Premium Income ETF (JEPI), which combines equity investments with an options strategy to generate monthly income.
Although all three funds can appeal to income-oriented investors, their investment approaches, sources of returns and risk profiles differ considerably.
Why Are Investors Paying More Attention to Dividend ETFs?
1. Uncertainty Over AI Returns Is Increasing
The AI boom has driven substantial investment into semiconductor companies, cloud computing providers and large technology platforms. As companies continue to spend heavily on data centers, chips and computing infrastructure, investors are increasingly focused on whether those investments will generate sufficient revenue and profits.
If AI adoption takes longer than expected to translate into earnings, or if capital spending grows faster than the resulting profits, highly valued technology stocks could face further pressure.
By contrast, mature companies with established businesses and relatively predictable cash flows may appeal to investors seeking to reduce their exposure to high-growth stocks.
However, a high dividend yield does not automatically indicate a safe investment. A company's yield can rise simply because its share price has fallen. If earnings deteriorate, the company may eventually cut its dividend. Investors therefore need to assess the sustainability of a company's distributions rather than focusing solely on the headline yield.
2. Interest Rates Influence the Relative Appeal of Dividend Stocks
Interest rates are another important factor in the performance of dividend ETFs.
When U.S. Treasury yields are elevated, investors can earn interest from government bonds without taking on equity-market risk. When bond yields decline, dividend-paying stocks may become relatively more attractive, particularly if companies continue to generate reliable cash flow.
U.S. Treasury yields eased in October, providing a potential tailwind for income-oriented assets. According to market analysis published by Zacks, the 10-year Treasury yield declined from around 5.31% in early October to approximately 4.99% on Oct. 27.
Nevertheless, dividend stocks are not substitutes for Treasury bonds in every respect. Corporate dividends are not guaranteed, and stock prices can fluctuate significantly. If inflation accelerates or interest rates rise again, dividend-paying equities could also come under pressure.
3. Investors Are Looking to Diversify Beyond Growth Stocks
Dividend ETFs can also help investors diversify their exposure across investment styles and industries.
Some growth-oriented funds are heavily concentrated in large technology companies. Dividend strategies, depending on their screening methodologies, may allocate more capital to mature businesses in sectors such as energy, health care, consumer staples and financials.
Such diversification can reduce reliance on a single investment theme, although it does not eliminate market risk. The sector weights of individual dividend ETFs vary considerably, and their performance will depend on the underlying holdings.
For investors concerned about the concentration of U.S. equity indexes in large technology companies, dividend ETFs may offer a way to balance growth-oriented holdings with businesses that emphasize cash generation and shareholder distributions.
Three Dividend ETFs to Watch
SCHD, HDV and JEPI are three prominent options for investors seeking income from U.S. equities. However, they represent different investment strategies: dividend quality, high-dividend stock selection and option-based income generation.
1. SCHD: A Focus on Dividend Quality and Long-Term Returns
The Schwab U.S. Dividend Equity ETF, or SCHD, launched in 2011 and tracks the Dow Jones U.S. Dividend 100 Index.
Rather than selecting stocks solely on the basis of dividend yield, the fund uses a screening methodology that considers factors associated with dividend quality and corporate fundamentals, including cash flow, return on equity and dividend growth.
The objective is to provide exposure to established dividend-paying businesses while retaining the potential for long-term capital appreciation.
Portfolio composition
As of Oct. 27, 2026, SCHD had approximately $107.9 billion in assets and held 102 securities. Its annual expense ratio was 0.06%.
Its major holdings have included companies such as:
Texas Instruments (TXN): A semiconductor company focused on analog and embedded processing products.
Chevron (CVX) and ConocoPhillips (COP): Energy companies whose earnings are influenced by commodity prices and industry conditions.
Procter & Gamble (PG), Coca-Cola (KO) and PepsiCo (PEP): Consumer businesses with established brands and shareholder-return programs.
UnitedHealth Group (UNH) and Amgen (AMGN): Health care companies exposed to different areas of the medical and pharmaceutical markets.
Qualcomm (QCOM): A semiconductor and wireless technology company.
These holdings illustrate that SCHD does not completely avoid technology stocks. Instead, its methodology can include technology companies that meet its dividend and fundamental criteria, while generally providing a different exposure from growth-focused funds.
As of the same reporting date, consumer staples, health care and energy accounted for approximately 19.7%, 18.4% and 16.4% of SCHD's portfolio, respectively. Information technology represented about 12.4%.
This sector mix can provide diversification away from portfolios dominated by large technology companies. However, energy stocks remain sensitive to commodity prices, consumer companies face changing demand conditions, and health care businesses are exposed to regulatory and industry-specific risks.
Advantages and risks
One of SCHD's main advantages is its low cost. At an annual expense ratio of 0.06%, an investment of $10,000 would incur approximately $6 in annual fund expenses, assuming the investment value remained unchanged.
Its fundamental screening methodology also helps distinguish it from strategies that simply select stocks with the highest dividend yields. For long-term investors seeking a combination of dividend income and capital appreciation, this approach may be appealing.
However, SCHD does not guarantee positive returns or uninterrupted dividend growth. Its performance depends on the share prices, earnings and dividend policies of its underlying holdings. It may also lag the S&P 500 when large technology stocks lead the market higher.
Best suited for: Investors seeking a relatively low-cost, long-term allocation to U.S. dividend-paying companies, with an emphasis on corporate fundamentals and total returns.
2. HDV: Targeting Higher Dividend Yields
The iShares Core High Dividend ETF, or HDV, was launched in 2011 and tracks the Morningstar Dividend Yield Focus Index.
The fund focuses on U.S. companies with relatively high dividend yields while applying additional screens related to financial health and dividend quality. It is therefore not simply a portfolio of the stocks with the highest headline yields.
Compared with SCHD, HDV places a more direct emphasis on higher-yielding companies, although its financial-health criteria are intended to help screen out some businesses with potentially unsustainable dividends.
Portfolio composition
HDV's portfolio has typically leaned toward established large-cap companies, particularly in energy, consumer staples and health care.
Representative holdings have included:
Exxon Mobil (XOM) and Chevron (CVX): Integrated energy companies with earnings exposed to oil and gas prices.
Johnson & Johnson (JNJ), AbbVie (ABBV) and Merck (MRK): Health care and pharmaceutical businesses with different product portfolios and patent risks.
Procter & Gamble (PG), Coca-Cola (KO) and PepsiCo (PEP): Consumer staples companies with established brands and recurring demand for many of their products.
These businesses can generate substantial operating cash flow and return a portion of their earnings to shareholders. Nevertheless, their financial performance is not immune to economic cycles, commodity-price swings, regulatory changes or company-specific challenges.
As of Sept. 10, 2026, HDV had approximately $15.35 billion in assets and an annual expense ratio of 0.08%. The fund makes monthly distributions. At that time, its 30-day SEC yield was 3.42%, while its trailing 12-month distribution yield was 3.07%.
These two yield measures use different calculation methodologies and should not be treated as interchangeable. They also reflect figures from September rather than a common October reporting date, so they should not be used to rank HDV directly against funds with yield figures measured at different times.
Advantages and risks
HDV may appeal to investors who prioritize current dividend income and want exposure to established U.S. companies. Its 0.08% expense ratio is also relatively low.
However, high dividend yields can sometimes signal underlying problems. A company's yield rises when its share price declines, assuming its dividend remains unchanged. If the market is anticipating weaker earnings or a potential dividend cut, the higher yield may reflect greater risk rather than a better investment opportunity.
For this reason, investors should examine the cash flow supporting a company's dividend, its debt levels, sector exposure and ability to maintain shareholder distributions through different economic conditions.
Best suited for: Investors seeking exposure to higher-yielding U.S. stocks who prioritize current dividend income and understand the risks associated with sector concentration and changes in corporate earnings.
3. JEPI: Generating Income Through an Options Strategy
The JPMorgan Equity Premium Income ETF, or JEPI, takes a different approach from traditional dividend ETFs.
Launched in 2020 and managed by J.P. Morgan Asset Management, the fund invests in U.S. large-cap stocks and uses equity-linked notes associated with an options strategy to seek monthly income while maintaining some potential for capital appreciation.
As of Oct. 5, 2026, JEPI had approximately $45.4 billion in assets and held 138 securities. Its annual expense ratio was 0.35%. As of Sept. 30, its 30-day SEC yield was 7.45%, while its trailing 12-month distribution yield was approximately 8.02% as of Oct. 5.
These figures suggest that JEPI's cash distributions can be substantially higher than those of traditional dividend ETFs. However, the fund's sources of income are also more complex.
Where does JEPI's income come from?
JEPI's income primarily comes from two sources.
First, it earns dividends from the stocks held in its portfolio.
Second, it uses an options-related strategy to generate additional income. Through equity-linked notes associated with selling out-of-the-money call options on the S&P 500 Index, the fund receives option premiums that can contribute to its distributions.
This distinction is important. JEPI should not be viewed simply as a high-dividend stock fund. Its distributions depend not only on the dividends paid by portfolio companies but also on the results of its options-related strategy.
Why is JEPI's distribution yield relatively high?
Option premiums can increase when market volatility rises, all else being equal, potentially creating more income for an option-selling strategy. Actual results, however, depend on option pricing, implied volatility, strike prices, portfolio positioning and market movements.
Higher volatility does not automatically translate into better investment returns for JEPI. Nor does a high trailing distribution yield guarantee that future distributions will remain at the same level.
Investors should also distinguish between the 30-day SEC yield and the trailing 12-month distribution yield. These measures use different methodologies, and neither should be interpreted as a guaranteed return.
Advantages and risks
JEPI's main attraction is its emphasis on monthly cash distributions. Its combination of stock selection and an options-related strategy is designed to provide income while seeking lower volatility than the broader equity market.
However, the strategy involves trade-offs. Selling call options can limit participation in strong market rallies, meaning JEPI may underperform the S&P 500 when stocks rise sharply. At the same time, option premiums cannot eliminate losses during a sustained market decline.
Its 0.35% expense ratio is higher than those of SCHD and HDV, reflecting a more complex, actively managed investment approach.
Best suited for: Investors who prioritize current cash distributions, understand the risks of options-based strategies and are willing to trade some upside potential for an income-oriented investment approach.
How Do SCHD, HDV and JEPI Compare?
Feature | SCHD | HDV | JEPI |
|---|---|---|---|
Core strategy | Dividend quality and fundamental screening | Higher-yielding stocks with financial-health screens | Large-cap stocks combined with an options-income strategy |
Primary income source | Stock dividends | Stock dividends | Stock dividends and options-related income |
Annual expense ratio | 0.06% | 0.08% | 0.35% |
Distribution frequency | Generally quarterly | Monthly | Monthly |
Main investment objective | Dividend quality and long-term total returns | Current dividend income | Current income with some capital appreciation potential |
Key limitation | May lag when growth stocks lead the market | High yields can come with sector or fundamental risks | Upside may be limited, and distributions can fluctuate |
Sources: Official fund materials from Schwab, BlackRock and J.P. Morgan Asset Management. Expense ratios, assets, holdings and yields are based on the reporting dates cited above and may change over time.
The main differences among these ETFs extend beyond their headline yields. They reflect three distinct approaches to generating returns.
SCHD and HDV primarily rely on stock dividends and changes in share prices. Their performance depends on the earnings, valuations and dividend policies of their underlying companies. Although their methodologies overlap, differences in screening criteria and sector weights can produce different results.
JEPI, by contrast, places greater emphasis on current cash distributions and uses an options-related strategy to alter the portfolio's return profile. Its distribution yield should not be compared directly with the dividend yields of SCHD and HDV without considering the different sources of income.
For investors, the choice depends on whether the priority is long-term dividend quality, higher-yielding stocks or monthly income from an options-based strategy.
Which Dividend ETF Could Hold Up Better During a Tech Sell-Off?
No single ETF is likely to outperform in every market environment. The relative performance of SCHD, HDV and JEPI depends on the reasons behind a market decline, changes in interest rates, sector performance and investors' preferences for income versus capital appreciation.
If technology stocks fall because of concerns about elevated valuations or the profitability of AI investments, while earnings at mature companies remain relatively stable, SCHD and HDV could benefit from a shift toward value-oriented and dividend-paying stocks.
JEPI may continue to generate option-related income when market volatility rises, although its results will depend on the options market and the performance of its equity holdings. During a sharp rally, its upside may be constrained. During a prolonged sell-off, its net asset value can still decline.
Higher interest rates could also weigh on dividend stocks by making bonds more competitive as income-generating assets. Meanwhile, pressure on specific sectors, such as energy or health care, could hurt the performance of traditional dividend ETFs.
Investors should therefore look beyond short-term performance and headline yields. A more meaningful comparison would examine total returns, volatility, maximum drawdowns, sector allocations and distribution policies over consistent periods.
Conclusion: Dividend ETFs Can Diversify a Portfolio, but They Are Not Guaranteed Safe Havens
Renewed interest in dividend ETFs reflects investors' desire to reassess portfolio risk as technology stocks become more volatile and the market places greater emphasis on earnings quality and cash flow.
SCHD, HDV and JEPI offer three different approaches. SCHD emphasizes dividend quality and corporate fundamentals; HDV focuses on higher-yielding stocks that meet financial-health criteria; and JEPI combines equity investments with an options-related strategy to seek higher current income.
For long-term investors, SCHD's low cost and quality-oriented screening may be attractive. HDV offers an alternative for those who prioritize higher-dividend stocks, while JEPI may appeal to investors seeking monthly distributions and who are comfortable with the trade-offs associated with options-based income strategies.
None of these funds guarantees principal protection or outperformance during a technology sell-off. Rather than abandoning growth stocks entirely in favor of dividend strategies, investors may benefit from considering how different assets fit together within a diversified portfolio.
When the market shifts its focus from growth expectations toward earnings quality and cash generation, the value of dividend ETFs lies not only in the income they distribute but also in their potential role in building a more balanced portfolio aligned with an investor's objectives and risk tolerance.
This article is for informational purposes only and does not constitute investment advice.
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