With just a month until 2026, it’s apparent dividend-focused ETFs will lag the S&P 500 on an annual basis. That’s likely the result of investors’ ongoing enthusiasm for mega-cap technology stocks – a group not known for big yields.
After all, two members of the magnificent seven don’t pay dividends and Nvidia (NVDA) features a paltry payout. Those are just a few examples, but they confirm that the mega-cap growth investment thesis is a capital appreciation venture. To be fair to dividend ETFs, many are poised to generate positive annual showings this year. That group includes the ALPS O’Shares U.S. Quality Dividend ETF (OUSA).
To its credit, OUSA is poised to deliver less annualized volatility this year than the S&P 500 and the ETF, which turned 10 years old in July, sports a dividend yield of just 1.37%, implying ample room for payout growth while confirming it’s not home to a bunch of yield traps that could eventually become dividend offenders. It’s also worth noting that in aggregate, there’s $1 trillion allocated to various funds, including ETFs, that use some form of dividend screening methodology.
OUSA Can Pick up the Pace in 2026
OUSA is heading for a solid though market-lagging performance in 2025. Understanding the latter point isn’t difficult. Blame it on the artificial intelligence (AI) trade.
“When you invest for dividends, you tend to have less exposure to technology stocks than the broad market,” noted Morningstar’s Dan Lefkovitz. “Broad US equity market now is very, very heavily weighted to technology stocks, especially AI stocks. Just neglecting Nvidia NVDA would be a massive detractor to any portfolio on a relative basis. It’s past $5 trillion in market cap. So I really blame AI.”
OUSA allocates about 23% of its portfolio to tech stocks, which is towards the higher end of tech weights seen in the domestic dividend ETF category. That implies some leverage to the AI trade while confirming the ETF’s quality profile.
Another point in favor of OUSA and one that makes the ETF relevant today and for 2026 is that its roster is comprised of companies that are displaying commitments to steadily boosting payouts – an attractive trait at a time when many corporations are leaning more into share buybacks over dividends.
“2025 is going to be the fifth straight year in which more money is being spent on share repurchases by companies than dividends. About a trillion dollars this year in buybacks and about $750 billion in dividend payments,” added Lefkovitz.
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Originally published on ETF Trends
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