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Best-Performing Dividend ETFs of 1H

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The first half of 2025 has witnessed massive market turbulence, largely driven by the new Trump administration’s aggressive trade policies. After hitting a record high on Feb. 19, the S&P 500 tumbled sharply, nearing bear market territory by April 8. However, markets rebounded strongly in recent weeks.

SPDR S&P 500 ETF Trust SPY has gained about 1.7% in the first half, SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) has lost about 0.5%, the Nasdaq-100 ETF Invesco QQQ Trust, Series 1 (QQQ - Free Report) has added about 3.3% and iShares Russell 2000 ETF (IWM - Free Report) has retreated about 5.3% (as of June 20, 2025).

Inside U.S. Bond Market Pressure

The U.S. long-term bond market faced pressure in the early phase of 1H, along with equities. Fears of China's treasury selling, inflation risks amid trade war, chances of a less-dovish Fed, and basis trade unwind hit the bond market in early April (read: ETFs to Play Amid Long-Term Yields' Best Week Since 1982).

Moody's has also downgraded the U.S. sovereign credit rating by one notch, citing concerns over the country’s ballooning $36-trillion debt burden. This move, following similar actions by Fitch in 2023 and S&P in 2011, raised alarm among investors about the nation's long-term fiscal sustainability (read: ETF Strategies to Follow on Moody's Downgrade of U.S. Debt).

Tech-Fueled Rally After April Low

The market bottomed on April 8, but optimism over trade negotiations, strong corporate earnings, easing inflation and AI momentum triggered a sharp rebound. Technology stocks, especially the "Magnificent Seven," led the rally, making it the fastest S&P 500 recovery since 1982 (read: S&P 500 Turns Green in 2025: ETFs to Buy on Upbeat Prospects).

Economic Indicators Show Resilience

Economic data reflects a stable growth outlook. Consumer sentiment rose in June for the first time in six months, indicating easing concerns over inflation and tariffs. The job market remained strong, with 139,000 new jobs added in May and unemployment steady at 4.2%.

Inflation trends continue to improve. May’s Consumer Price Index rose just 0.1% year over year, bringing the annual rate to 2.4%. Core inflation remained flat at 2.8%, with monthly core prices rising only 0.1%, undercutting expectations.

Geopolitical Risks and Policy Uncertainty Linger

Despite recent optimism, investor sentiment remains fragile. The Israel-Iran conflict reignited geopolitical fears, and uncertainty around Trump’s trade direction and interest rate policy continues to rattle markets. In late June, the United States also attacked Iran’s nuclear infrastructure, triggering fears of large-scale unrest in the Middle East.

Defensive assets like gold and silver have seen renewed interest amid this backdrop. SPDR Gold Trust (GLD - Free Report) has surged 26.4% so far this year (as of June 20, 2025), while iShares Silver Trust (SLV - Free Report) has advanced 21.5%. However, President Trump announced a ceasefire between Israel and Iran on June 23. The fragile ceasefire between Israel and Iran has appeared to hold, at the time of writing. 

Navigating Volatile Markets With Dividend ETFs

In such a volatile market, dividend ETFs normally come to the rescue. The hunt for dividends in the equity market is always on, irrespective of how it is behaving. If investors are mired in a web of equity market uncertainty, global growth worries and geopolitical crisis, the lure for dividend investing increases further. Note that SPDR S&P Dividend ETF (SDY - Free Report) (up 2%) topped SPY so far this year (as of June 20, 2025).

Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering hefty current income, stocks with dividend growth point to quality investing, a prerequisite to making money in this volatile environment.

Against this backdrop, below we highlight a few of the dividend ETFs that have topped the S&P 500 so far this year (as of June 20, 2025). International dividend ETFs showed strength this time around.

Winning ETFs in Focus

First Trust STOXX European Select Dividend Index Fund (FDD - Free Report) – Up 37.2%

Global X MSCI SuperDividend EAFE ETF (EFAS - Free Report) – Up 30.9%

iShares International Select Dividend ETF (IDV - Free Report) – Up 26.5%

WisdomTree International High Dividend Fund (DTH - Free Report) – Up 23.3%

WisdomTree Europe SmallCap Dividend Fund (DFE - Free Report) – Up 22.8%

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