Key Points
The iShares Core High Dividend ETF (NYSEMKT: HDV) isn’t as large or as popular as other dividend ETFs. As a result, many investors have likely missed that the fund is outperforming the S&P 500 this year. While that broad market index was up a strong 9% through the first half of the year, HDV is up more than 15%.
Here’s a closer look at this top ETF and what has driven its quiet outperformance so far this year.
High-quality, high-yielding dividend stocks
The iShares Core High Dividend ETF is a passively managed fund that tracks an index of high-yielding U.S. dividend stocks (Morningstar Dividend Yield Focus Index). That index doesn’t just screen companies based on their dividend yield. It also applies additional financial quality screens, including having a wide economic moat (sustainable competitive advantage) and a high distance to default (strong financial health). The index selects the highest-yielding stocks from those that pass its quality screens. It weights stocks in proportion to the dividends they pay.
The net result is an ETF that currently holds 75 stocks. The iShares Core High Dividend ETF has a 2.9% dividend yield based on its current price and dividend payments over the last 12 months. That’s nearly three times higher than the S&P 500’s current dividend yield of 1.1%.
The ETF’s top five holdings are:
- ExxonMobil: 7.1% weighing in the ETF.
- AbbVie (NYSE: ABBV): 6.6%
- Chevron: 5.4%
- Verizon: 5.1%
- Home Depot: 4.9%
While two of its top three holdings are energy stocks, the fund’s overall allocation to the energy sector is 12.2% (third-largest sector). Consumer staples 24.5% and healthcare (23.9%) are its largest sectors.
What’s driving the strong performance in 2026?
The fund’s relatively high exposure to the energy sector has helped drive its outperformance this year. The Iran war initially drove up oil prices, fueling a rally in oil stocks. For example, shares of ExxonMobil and Chevron are up 14% and 11%, respectively, this year, outperforming the S&P 500.
However, oil isn’t the only factor driving HDV’s quiet outperformance this year. The fund has also benefited from its high exposure to healthcare stocks, notably AbbVie and Merck (NYSE: MRK), the latter of which is its 9th-largest holding at 4.1%. Shares of AbbVie have gained more than 14% while Merck has rallied over 23%. AbbVie reported a 12.4% increase in first-quarter revenue, driven by the strength of its immunology (up 16.4%) and neuroscience portfolios (up 26%). AbbVie also took a step to deepen its immunology portfolio by recently agreeing to acquire Apogee Therapeutics for $10.9 billion. Meanwhile, Merck reported 5% sales growth in the first quarter, driven by a 12% increase in Keytruda sales. The company also strengthened its oncology pipeline by acquiring Terns Pharmaceutical for $6.7 billion.
High-yielding dividend stocks can also yield higher returns
Many investors view high-yielding dividend stocks as lower-returning investments. However, that’s not always the case. High-quality, high-yielding dividend stocks can often deliver high total returns as they grow their earnings and payouts. HDV’s focus on high-quality dividend stocks such as Exxon, Chevron, AbbVie, and Merck has paid off this year as they’ve helped the fund quietly outperform the S&P 500. With more income and growth ahead, the iShares Core High Dividend ETF should continue to quietly deliver strong returns (it has delivered more than 10% annualized returns over the last one-, three-, and five-year periods as well as since its inception in 2011).
Should you buy stock in iShares Trust – iShares Core High Dividend ETF right now?
Before you buy stock in iShares Trust – iShares Core High Dividend ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Trust – iShares Core High Dividend ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $418,761!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,195,804!*
Now, it’s worth noting Stock Advisor’s total average return is 918% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Matt DiLallo has positions in Chevron, Home Depot, and Verizon Communications. The Motley Fool has positions in and recommends AbbVie, Chevron, Home Depot, and Merck. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
