By Ian Salisbury
AI is everywhere these days and dividend exchange-traded funds are no exception.
With 2026 nearly at the halfway mark, a number of dividend funds have delivered standout returns. While the S&P 500 has enjoyed a year-to-date price return of 9.1%, there are no fewer than 15 dividend ETFs that are up more than 18%, essentially doubling the S&P 500's gains, according to data company VettaFi.
That's somewhat surprising considering companies that commit to regular cash payouts for investors tend to be less volatile than the market. As it happens, a number of the top-performing dividend funds are big beneficiaries of the AI bonanza that is driving excitement in the broader market too.
There is nothing inherently wrong with that, but it raises the prospect that dividend stocks, often seen as a defensive play, could get caught up in an AI selloff. Investors will get their latest read on the tech trade Wednesday when memory chip-maker Micron Technology reports earnings for its May quarter. Expectations are high, with Wall Street forecasts calling for a profit increase of nearly 1,000%.
Which dividend ETFs have been riding highest? The top performer, according to VettaFi, is the WisdomTree Emerging Markets Quality Dividend Growth Fund, which has seen shares surge 35%.
Other top performers have an international bent too. The FlexShares Morningstar Emerging Markets Factor Tilt Index Fund and the Invesco S&P International Developed High Quality ETF are both up 26%.
All three represent huge bets on semiconductor manufacturing. The WisdomTree fund, for instance, has more than 25% of its assets invested in its top two holdings: Taiwan Semiconductor Manufacturing and Samsung Electronics.
A similar pattern holds with some funds that target U.S. dividend stocks, such as the First Trust NASDAQ Technology Dividend Index Fund, up 22%, and the ProShares Technology Dividend Aristocrats ETF, up 21%.
To be sure, investors who bought those funds should be aware of their tech exposure -- it's in both funds' names. But it's still worth looking under the hood to make sure you understand just what you are getting. The First Trust fund, for instance, has 38% invested in semiconductors and semiconductor equipment and another 19% in software -- a total of 57% in two of the most potentially volatile tech subsectors.
Fortunately, investors looking for a more traditional dividend approach still have plenty of options. The Schwab U.S. Dividend Equity ETF, one of the market's largest dividend funds with $100 billion in assets, has also had a strong year, up 17%.
Its two top holdings are chip companies Qualcomm and Texas Instruments. (Texas Instruments, long associated with calculators in consumers' minds, has become an AI play because it makes chips that manage electricity usage, which are expected to be in high demand as data centers expand.)
All the same, tech stocks do not make up an overwhelming share of the fund's portfolio -- they account for 18% of its holdings, compared with 38% for the S&P 500.
Instead, its biggest overweights are energy, healthcare and consumer defensive. While energy stocks could prove volatile -- thanks to the unpredictable political situation in the Middle East -- healthcare and consumer defensive stocks are among the few corners of the market relatively untouched by AI.
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.
(END) Dow Jones Newswires
June 22, 2026 15:16 ET (19:16 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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