Investor strategies focusing on sustainable, durable dividends, rather than chasing high payouts, have delivered attractive yield with less risk over the past decade, according to new insights from Morningstar Indexes.
The Morningstar Developed Markets Large Cap Dividend Leaders Screened Select Index— developed by Morningstar to systematically balance attractive yields with dividend durability and ESG considerations and now underlying a new ETF from VanEck—gained nearly 5% during the first four months of 2025 while global trade uncertainty weighed on markets. This compares to a 9.4% decline for its parent benchmark.
Focusing on higher-quality dividends can help investors reduce exposure to companies at risk of cutting dividends. The index’s June 2025 reconstitution reinforced its quality focus: 17 constituents were replaced, with more than half removed for failing dividend payout or growth screens. Financial services saw the most turnover, including the removal of Swedbank AB despite its high yield of 8.36%, due to concerns over payout sustainability.
Alex Bryan, Director of Product Management, Equity Indexes – Morningstar Indexes:
“Narrowly focusing on yield without considering fundamentals can lead to high risk and poor total returns. Our Dividend Leaders Screened Select Index seeks to mitigate risk by combining yield with dividend payout and growth screens, as well as ESG criteria. This approach has delivered resilience and higher income through volatile markets and reduced exposure to companies that subsequently cut their dividends."
Dmitrii Ponomarev, ETF Product Manager, VanEck:
"In today’s uncertain environment, investors need income strategies that can weather market cycles. By leveraging an index that prioritizes dividend durability and risk controls, we can offer clients exposure to companies with stronger fundamentals and consistent payouts—without sacrificing yield."
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