Investors who buy dividend-focused high-yield ETFs generally want reliable income from a diversified basket of large-cap U.S. stocks. A common approach is to mechanically own the 80 highest-yielding names in the S&P 500, equal-weighted. Such funds have gathered billions in assets because a payout north of 4% from familiar blue chips is useful in retirement portfolios. The problem is baked into that rulebook: a stock qualifies because its yield is high, and a yield can be high for two very different reasons. One is that the price fell for a good reason.
A different Invesco product applies an additional screen to address that objection, and it has outperformed both the high-yield benchmark and the broader market this year.
The Yield Trap Problem in a Screen Built on Yield Alone
A pure-yield methodology treats a 7% yield from a distressed regional bank the same as a 4% yield from a company that has raised its dividend every year for two decades. Cuts occur when the underlying business cannot support the payout, and index rebalances only catch that after the damage is done. A holder who bought for income can end up owning tomorrow’s dividend cutters today.
Applying a dividend-growth screen before the yield screen changes the resulting portfolio.
PEY Applies a 10-Year Growth Filter Before Yield Enters the Equation
Invesco High Yield Equity Dividend Achievers ETF (NASDAQ:PEY) starts with the NASDAQ US Dividend Achievers 50 Index. A company only qualifies if it has increased its regular dividend for at least 10 consecutive years. PEY then selects the 50 highest-yielding names from that pre-screened pool and weights them by yield. The screen prioritizes payout history before yield ranking.
The fund carries an expense ratio of 0.04% and a current dividend yield of 4.11%, paid monthly, with a recent distribution of $0.38705 per share on a July 20, 2026 ex-dividend date. Net assets stood at $1.07 billion as of April 30, 2026.
The 2026 Performance Gap Between PEY and the S&P 500
Year to date through August 6, 2026, PEY is up 24.68% against 12.71% for the S&P 500 over the same stretch, roughly double the index, and that performance comes on top of a monthly income stream. Over one year, the fund has returned 26.05%. The 10-year total return of 139.37% trails the S&P’s 252.47%, which is consistent with dividend growth screens tending to lag in tech-led bull markets and to lead when quality and cash flow are rewarded.
The Names Behind the Yield
The 10-year screen produces a portfolio anchored in companies with documented payout records. Verizon (NYSE:VZ | VZ Price Prediction) recently paid its 19th consecutive annual increase, with the quarterly dividend at $0.7075. Altria has delivered 60 consecutive increases across 56 years, most recently to $1.06 per quarter. Johnson & Johnson (NYSE:JNJ) marked its 64th consecutive year of dividend growth with a 3.1% raise to $1.34 per quarter.
McDonald’s (NYSE:MCD) lifted its dividend to $1.86 per quarter in late 2025, and Philip Morris International raised its payout to $1.47, up from $1.35, extending its 10-plus-year streak. These are businesses a pure yield-ranked methodology can drop the moment their yield falls below the top-80 threshold, regardless of dividend record.
Where the Swap Costs Something
Concentration is a defining feature of PEY, with names like Insperity and Robert Half sitting alongside the mega caps. Sector weights lean heavily toward financials, utilities, and consumer staples, with almost no exposure to the Magnificent Seven names that have been driving the broader index. In a growth-led year, that positioning tends to lag the broader market. In a rotation year like 2026, it contributes to outperformance.
The fund is also smaller than the largest high-yield peers, which means somewhat wider bid-ask spreads for large orders.
Tax Considerations When Reallocating Between the Two
Within a Roth IRA or a traditional IRA, selling one ETF to buy another does not trigger a taxable event. In a taxable brokerage account, long-term gains on a high-yield ETF position held for years may generate a tax bill that offsets a single year of yield or performance differential. Directing new contributions and reinvested dividends into a different fund is one approach that avoids realizing gains on existing shares.
What This Means for a Yield-Focused Portfolio
A pure yield-ranked S&P 500 fund functions as a mechanical screen for the highest yields within the index. PEY covers most of the same investor needs at a lower expense ratio, with a growth filter that has produced both higher total returns and a monthly income stream from companies with multi-decade payout records. Whether the swap makes sense depends on account type, tax basis, and how much sector concentration a portfolio can absorb.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks