Every investor is naturally drawn to a flashy dividend yield. It stands out instantly on a brokerage screen and creates the impression of strong income potential.
But lasting wealth is rarely built on what looks impressive at first glance.
In dividend investing, consistent payout growth is often far more powerful than a one-time high yield. A steadily rising stream of income compounds quietly over time. As dividends increase and are reinvested, the effect becomes both meaningful and sustainable.
One fund continues to attract attention from investors seeking long-term passive income: the iShares Core Dividend Growth ETF. The fund has emerged as a compelling option for disciplined buy-and-hold investors focused on dividend growth rather than yield chasing.
Why This ETF Is Different From Most Dividend Funds
Many dividend ETFs build portfolios around long dividend increase streaks. Some indexes require companies to raise payouts for 10 years, others demand 20 years, and the well-known Dividend Aristocrats index requires at least 25 consecutive years of increases.
The iShares Core Dividend Growth ETF follows a different approach. The $38.37 billion fund tracks the Morningstar U.S. Dividend Growth Index. Instead of focusing solely on dividend history, the index emphasizes quality, financial strength, and lower volatility alongside dividend growth potential.
The goal is simple: combine strong companies with the ability to grow payouts sustainably over time.
The results stand out.
For the 10 years ended Jan. 31, 2026, only two dividend ETFs outperformed this fund, a notable achievement in an increasingly crowded income-investing landscape.
It Even Outperformed the Dividend Aristocrats
Many investors favor funds tracking the S&P 500 Dividend Aristocrats index, which requires 25 consecutive years of dividend increases. Interestingly, the iShares Core Dividend Growth ETF shares more than 50 holdings with one competing Aristocrats ETF. Yet over the past decade, the iShares fund delivered stronger total returns.
This highlights an important lesson:
a long dividend streak matters — but pairing dividend growth with quality screens and risk control can produce superior outcomes.
A Sector Mix Designed for Rising Income
The ETF’s sector allocation reveals how it pursues sustainable income growth.
Healthcare, consumer staples, and industrial companies together represent roughly 43% of the portfolio, sectors historically known for dependable dividend expansion.
Financial services hold the largest weighting. This is especially relevant today, as improving bank balance sheets increase the likelihood of passing Federal Reserve stress tests — allowing institutions to return more capital through dividends and share buybacks. Technology represents the third-largest allocation, signaling an important shift. Dividend growth is no longer limited to traditional defensive sectors.
In 2024, technology companies recorded one of the fastest compound annual growth rates in dividend increases, trailing only healthcare and financials.
Risk-Adjusted Performance That Stands Out
Income investors often worry about sacrificing growth in exchange for stability. However, the iShares Core Dividend Growth ETF has demonstrated strong risk-adjusted performance.
Over the past decade, the fund produced a Sharpe Ratio higher than the Russell 1000 Value Index. In practical terms, investors received better returns relative to the risk taken compared with that broad value benchmark.
For long-term investors, smoother returns combined with growing income can be a powerful advantage.
The Trade-Off Investors Should Understand
No investment strategy is perfect.
Dividend-focused ETFs may lag during bull markets dominated by non-dividend-paying growth stocks. When speculative growth leads market rallies, income strategies can temporarily underperform. However, for investors prioritizing rising income and long-term compounding, this trade-off is often acceptable.
The combination of financial exposure, expanding technology dividends, and stable healthcare and consumer holdings positions the fund for continued payout growth.
Low Costs That Preserve More Returns
Fees matter — especially over decades. The ETF carries an annual expense ratio of 0.08%, equal to just $8 per year on a $10,000 investment. Over long investment horizons, low costs help preserve both dividend income and capital appreciation.
A Buy-and-Hold Strategy Built for Lifetime Income
Long-term passive income rarely comes from chasing the highest yield available. Instead, it comes from owning companies capable of steadily increasing payouts year after year.
With:
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$38.37 billion in assets
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A disciplined quality-focused methodology
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Strong decade-long performance
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Sector exposure aligned with dividend growth trends
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And ultra-low costs
The iShares Core Dividend Growth ETF checks many of the boxes income investors seek.
For investors building portfolios designed to generate rising cash flow over decades, the fund offers a systematic approach to dividend growth investing — where compounding income ultimately matters more than headline yield.
