This Dividend ETF Is Up 12% in 2026 and Still Paying Retirees Well, but With a Catch

By Trey Thoelcke Published Apr 14, 9:35AM EDT

Quick Read

First Trust Morningstar Dividend Leaders Index Fund (FDL) had a strong start to 2026.
Here is a closer look at what is driving the returns, as well as what the ETF is missing.
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This Dividend ETF Is Up 12% in 2026 and Still Paying Retirees Well, but With a Catch — © Bet_Noire / iStock via Getty Images

First Trust Morningstar Dividend Leaders Index Fund (NYSEARCA: FDL) is up 12.3% year-to-date, moving from about $44 to nearly $50. That is a strong start to 2026 for a fund built around steady dividend payers, and it outpaces the comparable iShares Select Dividend ETF (NYSEARCA: DVY), which is up 8.0% over the same period. The one-year return is even more striking at 26.2%. But a closer look at what is driving those returns, and what the fund is missing, tells a more complicated story.

Energy Did the Heavy Lifting

Our January thesis leaned on energy as a catalyst, and it delivered. Oil prices surged from around $57 per barrel in early January to over $114 by early April, a run that lifted this ETF’s largest holdings. Energy is the fund’s top sector at 28.6% of the portfolio, anchored by Exxon Mobil at 11% and Chevron at 9%. Those two positions alone represent nearly 20% of the fund, and both benefited directly from the commodity rally. Venezuela-related supply constraints contributed to the tightening market that drove prices higher, validating the original energy thesis.

The Income Picture Is Solid but Uneven

The fund pays quarterly, and the most recent distribution was $0.4005 per share, paid March 31, 2026. That sits on the lower end of the recent range, which has run from roughly $0.36 to $0.55 over the past several years. The trailing yield is 3.7%, which compares reasonably well against the 10-year Treasury yield of 4.3%. Retirees who bought earlier in the year at lower prices are earning a higher effective yield on cost, which is how dividend investing is supposed to work. The fund’s expense ratio is just 0.4%, keeping costs from eating into distributions.

Dividend amounts fluctuate quarter to quarter because the fund passes through what its holdings actually pay, rather than targeting a fixed payout. That variability is worth understanding before relying on this ETF for predictable monthly income.

The Catch: Almost No Technology Exposure

Seeking Alpha recently downgraded the fund to Hold, citing the fund’s near-total absence from the technology sector. Information technology represents just 1% of the portfolio, while sectors like healthcare (17.1%), consumer staples (14.2%), and financials (14.2%) dominate alongside energy. In a market where technology drives a large share of index returns, this fund structurally cannot keep pace with broad-market benchmarks during tech-led rallies. The fund’s methodology screens for dividend consistency and yield, which filters out most large-cap tech names that either pay no dividend or pay tiny ones.

Short interest jumped 49% in February to 383,551 shares, following a 165% surge in December. The fund rallied through both spikes, which suggests the bearish positioning was not well-timed. Yet elevated short interest does reflect skepticism about how long the energy-driven outperformance can last.

Is This Still the Right Fund for Income-Focused Retirees?

The Q1 2026 volatility spike, with the CBOE Volatility Index (VIX) reaching nearly 31 in late March before settling back to around 19, reinforced the appeal of income-generating, defensive equity funds. Institutional buyers, including LPL Financial, Morgan Stanley, and Raymond James, added to positions during this period, which carries some signal.

For a retiree who wants quarterly income, low costs, and exposure to dividend-paying stalwarts in energy, healthcare, and consumer staples, the First Trust Morningstar Dividend Leaders Index Fund still fits the original profile. The fund has $7.3 billion in assets and a 20-year track record dating to March 2006. The five-year return of 87% is genuine. The catch is that anyone expecting growth comparable to a broad index will be disappointed. This fund is an income tool, and it works best when used as one.

About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.