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This Surprising Dividend ETF Is Beating the Market in Early 2026

Dividend strength is driving DVY ahead of the S&P 500 in early 2026

By Jordan Major

Edited by Laura Hohenstein

Updated Feb. 24, 2026

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Dividend stocks weren't supposed to be the story of 2026. But so far, they have been. While the broader market has struggled to gain momentum, one income-focused ETF is quietly pulling ahead. The iShares Select Dividend ETF (DVY) has climbed steadily this year, comfortably outperforming the S&P 500.

Zoom out over the past 12 months, and the gap widens even further, highlighting a shift worth noting for investors focused on long-term financial fitness and steady portfolio growth.

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DVY vs. the S&P 500

While the S&P 500 is slightly negative year-to-date and up about 11.5% over the past 12 months, the iShares Select Dividend ETF is widening the gap. The fund has gained over 10% in 2026 alone and more than 16% over the past year.

That kind of outperformance isn't typical during strong bull markets dominated by mega-cap growth stocks. Instead of tech giants powering the index higher, investors appear to be rotating into companies that offer steady cash flow and reliable dividends.

DVY, which focuses on high-dividend-paying U.S. stocks with a history of consistent payouts, has benefited from that shift.

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Why dividend stocks are working now

Several factors may be driving dividend strategies higher this year. First, market volatility has pushed investors toward stability. Companies that consistently return cash to shareholders often have stronger balance sheets and more predictable earnings, which can attract capital during uncertain periods.

Second, valuations matter. After years of mega-cap dominance, many dividend-paying sectors such as utilities, financials, and consumer staples were trading at more reasonable multiples. That made them attractive as investors searched for relative value.

Finally, income is appealing again. Even though rates remain elevated compared with the ultra-low era of the 2010s, many investors still want equity exposure while generating cash flow. Dividend ETFs provide that blend of participation and yield.

What DVY actually holds

The iShares Select Dividend ETF tracks high-yielding U.S. companies with strong dividend histories. The fund holds roughly 100 U.S. stocks, providing built-in diversification across multiple income-producing sectors. Its holdings often tilt toward sectors like utilities, industrials, financials, and consumer staples.

That sector mix gives DVY a different personality than the S&P 500, which is heavily concentrated in technology giants. When tech struggles or trades sideways, dividend-heavy funds can sometimes step into leadership. DVY also currently yields around 3% to 3.5%, meaning investors receive roughly three times the income of the average S&P 500 stock.

Importantly, DVY's recent performance shows that dividend-paying stocks can also deliver capital appreciation when market conditions shift.

DVY's top performers in 2026

Part of DVY's early strength has come from several holdings that have delivered standout gains. When a few larger positions rally sharply, they can provide a meaningful lift to the overall fund.

One of the biggest contributors has been Seagate Technology, which accounts for roughly 3.5% of the portfolio. The data storage company is up nearly 50% in 2026, fueled by renewed demand for storage hardware and improving sentiment around enterprise spending.

Other contributors include established dividend payers like Ford Motor Company, Altria Group, and Verizon Communications. While they haven't posted the same explosive gains as Seagate, each has shown resilience this year and continued to return cash to shareholders.

These aren't high-flying tech giants driving speculative momentum. Instead, they represent the steady businesses that tend to outperform when markets favor income and durability over growth.

Should investors chase the outperformance?

Outperformance in a short time frame doesn't guarantee future gains. Market leadership can rotate quickly, especially if growth stocks regain momentum.

That highlights something important: dividend investing isn't just about collecting income. In certain market environments, it can also mean outperforming broader benchmarks, especially when investors rotate away from high-growth sectors.

Notably, DVY isn't the only dividend ETF showing strength this year. The Schwab U.S. Dividend Equity ETF (SCHD) has also delivered solid returns in 2026, climbing more than 14% as investors rotate toward income-oriented stocks. The fund focuses on U.S. companies with a long track record of paying dividends and maintaining strong fundamentals through its tracking of the Dow Jones U.S. Dividend 100 Index.

Investors looking to balance income and stability with equity exposure may find dividend ETFs like DVY and SCHD useful as a core holding or complement to growth-heavy portfolios.

Fees are another key difference. DVY carries an expense ratio of 0.38%, meaning investors pay $38 annually for every $10,000 invested. SCHD, by contrast, offers a significantly lower expense ratio, allowing more of an investor's return to remain invested over time.

Bottom line

Dividend stocks weren't the obvious trade heading into 2026. But so far, income-focused strategies like the iShares Select Dividend ETF are proving that steady cash flow and disciplined payouts can still outperform.

DVY's early-year gains don't guarantee it will lead all year. Still, its combination of diversification, solid yield, and exposure to reliable dividend payers makes it a practical option for investors working toward building wealth over time without abandoning equity exposure.

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Author Details

Jordan Major

Jordan is a FinanceBuzz writer with a keen interest in personal finance, stocks, and practical investing strategies. His work has been featured in leading outlets, including Forbes, Yahoo Finance, and MSN.