The stock market has had a great start to 2026, and its upward trend has continued so far. However, it doesn’t mean that the rally will keep going. There’s a risk of AI bubble collapse, a slow labor market, and geopolitical issues that could impact the stock market.
Investors should never try to time the market but remain alert about the fact that the market could crash at any time. Fortunately, there are a number of exchange-traded funds (ETFs) that can help balance risk and rewards. If the market were to crash, an ETF could protect you from major losses. They’re highly diversified, carry a low cost and also offer a possibility of returns. Here are three dividend ETFs that can protect you against market crashes and ensure safety in 2026.
Vanguard Consumer Staples ETF
While Vanguard has several ETFs worth buying, the Vanguard Consumer Staples Index Fund ETF (NYSEARCA:VDC) is one of the top choices when it comes to market uncertainty. The defensive sectors usually remain strong during times of uncertainty since people continue to buy household items and food irrespective of the state of the economy.
Additionally, utility companies provide services like gas and electricity, which continue to remain strong in various market cycles. The Vanguard Consumer Staples ETF focuses solely on these sectors, making it a strong buy for when the market crashes.
The fund has a yield of 2.13% and an expense ratio of 0.09%. It holds 105 stocks and has the highest allocation in the consumer staples sector (31.30%), followed by soft drinks and nonalcoholic beverages (17.60%) and household products (15.80%). Its main holdings include strong dividend payers such as Walmart, Costco, Procter & Gamble, Coca-Cola, and PepsiCo. The fund has the highest allocation in Walmart at 15% and Costco at 11.82%.
VDC pays quarterly dividends and has recently paid a dividend of $1.22. It has generated a cumulative 3-year return of 27.51% and a 5-year return of 53.24%. The fund has gained 7.11% in the past year and is exchanging hands for $238.20. VDC isn’t 100% risk-free; it still has a downside risk if the stocks are plummeting, but the investment in the defensive sector helps reduce the risk.
Vanguard Dividend Appreciation ETF
Another excellent fund by Vanguard, the Vanguard Dividend Appreciation Index Fund ETF (NYSEARCA:VIG) invests in companies that have a history of growing dividends each year for the past 10 years. These are companies that have strong financials and have shown impressive performances. The fund has generated solid returns and given steady passive income to investors.
VIG has a yield of 1.55% and an expense ratio of 0.04%. It has outperformed the S&P 500 by a significant margin since the beginning of 2026. The fund invests in about 300 stocks and excludes real estate investment trusts (REITs). This ensures you get to own cash-rich, well-established companies that can handle the market ups and downs.
VIG can bring peace of mind and ensure that you enjoy income even if the market crashes. It invests mainly in the technology sector (25.90%), followed by financials (21.50%) and healthcare (16.30%). By investing 16% of the funds in healthcare, VIG adds defensive stocks to the portfolio. It shouldn’t come as a surprise that VIG’s biggest holdings are a combination of the Magnificent Seven and top dividend stocks such as Apple, Broadcom, Microsoft, JPMorgan Chase, Exxon Mobil, Eli Lilly, and Walmart.
VIG has generated a cumulative 1-year return of 12.69% and a 3-year return of 51.47%. It is a fund built to withstand the market challenges, and while the yield wouldn’t excite income investors, it can bring stability and certainty to the portfolio.
Invesco S&P 500 High Dividend Low Volatility ETF
The Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD) invests in 50 stocks that are known for high dividend and low volatility. This helps navigate through a turbulent market and offers a yield of 4.38%. The ETF avoids value traps by excluding the companies with high yields and high volatility. It picks the 100 S&P stocks with the lowest trailing 12-month volatility and a high yield, then invests in the 50 highest-yielding stocks that were least turbulent in the past year. The ETF has an expense ratio of 0.30%.
SPHD has $3.41 billion in assets under management, and its highest allocation lies in real estate (21.86%), followed by consumer staples (16.50%) and utilities (14.05%). The fund’s top 10 holdings include strong dividend payers such as Verizon Communications, Pfizer Inc., Altria Group, Conagra Brands, Healthpeak Properties, Realty Income, and Kraft Heinz Co. The real estate sector is a hedge against inflation, while the holdings in consumer staples, utilities, and the healthcare industry are a part of the defensive sectors.
SPHD has generated a 1-year return of 7.57%, a 3-year return of 7.78%, and a 5-year return of 9.88%. SPHD has gained 4.33% in the past year and is exchanging hands for $52.47. The ETF could see an upside in the near future.
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