The Best Dividend ETF to Buy Now for Passive Income

Barely more than two months into 2026, signs of a sector rotation are emerging. As of March 5, consumer discretionary and technology, which are homes to an array of growth stocks, are in the red year to date and are two of the worst-performing sectors in the S&P 500.

On the other hand, energy, industrials, and materials, all of which are value destinations, are three of the top-performing sectors. Defensive sectors, which can exhibit value traits, such as consumer staples and utilities, are getting in the act, too.

The current market environment is inviting for this dividend ETF. Image source: Getty Images.

All of that is good news for dividend-income investors because defensive and value sectors often offer yields above those of their growth counterparts and the broader market. Dividend durability and the value resurgence are also highlighting high-dividend exchange-traded funds such as the WisdomTree U.S. High Dividend Fund (NYSEMKT: DHS).

When value matters, DHS shines

Value investing isn't a get-rich-quick methodology. Its biggest rewards accrue over long holding periods, but with that in mind, the WisdomTree ETF deserves credit for trouncing rivals tracking the Russell 1000 and S&P 500 value indexes since the start of 2026.

DHS data by YCharts

Investors should consider why the $1.43 billion ETF is beating some of its rivals. Some of that outperformance boils down to the fact that the now-lagging communication services and technology investors that led much of this bull market now call traditional value indexes home. Believe it or not, some "Magnificent Seven" stocks are prominently displayed in old-guard value gauges such as the S&P 500 Value Index.

This dividend ETF avoids that pitfall by emphasizing payouts. In fact, its underlying index weights components by projected payouts for the coming year. That's a nifty forward-looking methodology and one that can benefit investors at a time when high-dividend value stocks are in favor.

This ETF features other important differentiating factors. It may seem beneficial that some traditional value indexes now feature larger-than-expected weights to tech stocks, but that only benefits investors when tech equities are thriving. The WisdomTree fund sets itself apart not only by featuring light tech exposure (2.56% of the portfolio), but also by allocating above-market weight to legitimate defensive and value sectors. For example, financial services, consumer staples, healthcare, and energy names combine for 64% of the fund's roster.

Drilling down on the dividend

Obviously, dividends are this ETF's selling point for many investors, so it's worth examining how the fund's payouts are generated. As noted above, its index attempts to forecast a company's dividend in the year ahead, which can help steer investors away from yield traps.

That doesn't mean this dividend ETF skimps on yield. Its 30-day SEC yield of 3.45% is more than triple the 1.04% found on a basic S&P 500 ETF. Additionally, this ETF is littered with reliable dividend growers, including many whose payout-increase streaks are measured in years, if not decades.

Another perk is the monthly, not quarterly, dividend, which may be appealing to investors seeking steadier income streams. The WisdomTree ETF charges 0.38% per year, or $38 on a $10,000 investment.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.