1 No-Brainer Dividend ETF to Buy Right Now for Passive Income

The stock market narrative continues to center around tech, semiconductor, and artificial intelligence (AI) stocks. That's fair given recent returns and the sheer amount of money going into AI development. But it also overshadows the fact that a number of other non-tech themes are beating the S&P 500 (SNPINDEX: ^GSPC) this year.

Value stocks, quality stocks, and dividend stocks (especially high yielders) have all outperformed the Vanguard S&P 500 ETF (NYSEMKT: VOO) so far in 2026. A lot of that outperformance came in the first quarter of the year when the "Magnificent Seven" stocks started to fall out of favor. But these groups have all maintained a high level of resilience even during more volatile periods recently.

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The dividend ETF category is especially interesting. The more defensive nature of these stocks hasn't been in high demand while tech stocks have been rolling. But now that inflationary pressures are building, growth rates are beginning to slow in some areas of the economy, and geopolitical risks threaten to slow economic growth even further, the investment case for dividend stocks is getting stronger.

One dividend ETF I like right now is the iShares Core Dividend Growth ETF (NYSEMKT: DGRO). By combining elements of quality, dividend history, and yield tilting into its selection strategy and methodology, it hits many areas that are in the market's favor right now.

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DGRO: Quality + dividend growth + yield

This ETF tracks the Morningstar US Dividend Growth Index. Eligible companies need to meet the following criteria:

• Must pay a qualified dividend
• Must have at least five years of uninterrupted annual dividend growth
• The earnings payout ratio must be less than 75%

Companies in the top decile based on dividend yield are excluded to avoid yield traps. Qualifying components receive dividend-dollar-weighted allocations, meaning companies that pay higher dividends receive larger allocations in the portfolio.

Individually, the criteria aren't particularly strict. But taken together, they do an effective job of weeding out a lot of the weaker dividend stock candidates.

Overall, the portfolio is well diversified and looks very different from the S&P 500, which is a good thing for reducing volatility. Five sectors receive allocations of at least 10%: financials (21%), healthcare (18%), tech (16%), industrials (12%), and consumer staples (12%).

Why DGRO works today

While tech remains the best-performing S&P 500 sector year to date, there are clear signs of exhaustion.

Most of the Magnificent Seven stocks are down more than 10% from their all-time highs. The VanEck Semiconductor ETF (NASDAQ: SMH) is currently 11% below its high. There are other stocks picking up some of the slack, but investing in tech is no longer a slam dunk.

The focus is turning to stocks from more durable businesses and built on financial strength that reward shareholders consistently. If any of these current macro risks accelerate, the iShares Core Dividend Growth ETF could be well positioned to outperform the broader market.

Financials could do well with interest rates likely to stay higher for longer. Healthcare and consumer staples provide the products and services that will be in demand in any economic environment. Industrials have done well during the infrastructure build-out. And the tech allocation provides exposure to the biggest economic growth driver of the last several years.

It's the kind of balance and strength that can handle whatever comes next. That could become incredibly important in the near term. The iShares Core Dividend Growth ETF is one of the best options to deliver it.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard High Dividend Yield ETF, Vanguard S&P 500 ETF, and Vanguard Value ETF. The Motley Fool has a disclosure policy.