https://www.morningstar.com/funds/5-dividend-funds-thriving-2026
5 Dividend Funds Thriving in 2026
Many equity-income portfolios beat the market
The first half of 2026 brought good news for equity-income investors: The typical dividend-oriented strategy finally outperformed the US broad stock market. After trailing the S&P 500 in eight of the 10 calendar years from 2016 to 2025, the average dividend-oriented strategy beat the index’s 10.2% rise by more than half a percentage point in 2026 through June 30.
*Dividend strategies have enjoyed some tailwinds this year. *
The AI dread simultaneously spurred investors to turn to halo stocks, so-called for their heavy asset, low obsolescence business models that rely on physical infrastructure to produce physical products that AI cannot replace. Such firms often pay solid dividends and have been left behind by the past decade’s booming growth market.
Then in the second quarter, companies involved in building AI infrastructure led, while the Magnificent Seven stocks—Alphabet GOOG, Amazon.com AMZN, Apple AAPL, Meta Platforms META, Microsoft MSFT, Nvidia NVDA, and Tesla TSLA—and halo stocks lagged. Many chip stocks, including dividend-payers like Broadcom AVGO and Texas Instruments TI soared. Smaller-cap stocks also surged, which helped because dividend fund portfolios have recently tended to have lower average market caps than the broad market.
The result was six months of significant reversals. The previously hot Russell 1000 Growth Index gained just 5.3% in the period, while the Russell 1000 Value Index jumped 15.9%. More dramatically, the small-cap Russell 2000 Index leapt 22.6%, more than double the large-cap Russell 1000’s 10.3%. In the past decade, the value index had only topped the growth benchmark in just two calendar years, and small-caps hadn’t beaten large caps in any year since 2016.
A blip in the AI stock/magnificent 7 returns? Or has the worm turned?