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These 2 Dividend ETFs Could Shine if Rate Cuts Hit Again in 2026
By Jordan Chussler. Originally Published: 2/16/2026.
Key Points
- Interest rate cuts and Kevin Warsh’s potential "dovish" Fed leadership are driving income investors away from bonds toward high-yield equities.
- Popular ETFs like JEPI and SPYI offer massive yields but often lack the long-term share price growth found in other dividend-focused funds.
- The SCHD and the VIG provide reliable income and capital appreciation, with both outperforming the S&P 500 so far in 2026.
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With the Federal Reserve having enacted a rate-cutting cycle in each of the past two years—and the market pricing in the likelihood of additional cuts later in 2026, according to CME Group’s FedWatch Tool—income investors are likely to continue turning to equities to generate a sizable yield.
The Fed’s benchmark—the effective federal funds rate—is currently 3.64%, its lowest point since fall 2022. If President Trump’s next Fed chair nominee, Kevin Warsh, proves dovish on rates, that could spell further pressure for fixed-income investors.
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For investors looking to get ahead of potential rate cuts, dividend-growth exchange-traded funds (ETFs) can play a pivotal role in producing reliable—and growing—income that helps offset persistent inflation and complements a broader dividend portfolio of individual stocks.
Not All Dividend ETFs Are Created Equal
Income investors are likely familiar with funds such as the JPMorgan Equity Premium Income ETF (NYSEARCA: JEPI) and the NEOS S&P 500 High Income ETF (BATS: SPYI). Both ETFs have grown popular among income-focused portfolios for their high yields and monthly distributions.
The JEPI currently yields 8.02%, or $4.73 per share annually, while the SPYI currently yields an eye-catching 11.79%, or $6.15 per share annually.
But both funds fall short for investors prioritizing dividend growth and long-term share appreciation. Since its inception in May 2020, JEPI has largely traded in a range between $50 and $63.19. Similarly, SPYI’s shares have traded between $43.59 and $52.68 since the ETF launched in September 2022.
For investors seeking dependable dividend growth alongside appreciation potential, the Schwab US Dividend Equity ETF (NYSEARCA: SCHD) and the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG) are compelling alternatives.
Both funds focus on stable and growing cash flow, which tends to translate to lower volatility. Since their debuts, SCHD and VIG have delivered strong long-term returns: more than 269% for SCHD and nearly 353% for VIG since their market launches in October 2011 and April 2006, respectively.
Here’s a breakdown of each ETF and how they appeal to yield-focused investors.
SCHD: A Basket of Defensive Sector Stocks With Strong Track Records
SCHD is one of Charles Schwab’s flagship ETFs and is designed to give investors exposure to high-quality U.S. companies with a history of paying dividends. The fund tracks the Dow Jones U.S. Dividend 100 Index, which comprises 100 high-dividend U.S. companies.
In recent years, SCHD has delivered consistent revenue and earnings growth driven by its high-dividend holdings that mirror its benchmark. So far in 2026, SCHD has posted a year-to-date (YTD) gain of more than 13% versus the S&P 500’s loss of 0.37%.
That outperformance has been supported by a portfolio that benefited from investors’ flight to safety. While tech stocks—software names in particular—have continued to sell off, SCHD’s sector exposures have rewarded shareholders.
The fund’s largest allocation is to energy (20.3%), the top-performing sector this year, followed by consumer staples (18.5%), health care (15.5%), and consumer discretionary (10.4%). Technology rounds out the top five but accounts for only 10.2% of the ETF’s weight—a key reason for SCHD’s strong start to the year.
As a sign of investor confidence, the fund’s short interest stands at 0.17% of the float. Meanwhile, institutional investors have added $11.65 billion to SCHD over the past 12 months, compared with outflows of $4.75 billion.
Performance aside, the dividend remains a primary draw. SCHD currently yields 3.32%, or $1.04 per share annually.
VIG: Dividend Growth With a Side of Tech Exposure
While defensive sectors have led the market higher in early 2026, tech has lagged. For income investors who also expect a rebound in that corner of the market, VIG could be an appealing option.
With a sizable allocation to technology (25.5%), Vanguard’s dividend appreciation fund has gained just over 2% YTD. However, with two Magnificent Seven stocks and Broadcom (NASDAQ: AVGO) among its top five holdings, VIG stands to recover ground if tech regains momentum.
Until then, the ETF’s exposure to financials (21.9%), health care (16.6%), and industrials (10.4%)—the market’s fourth-best performing sector YTD—helps offset technology’s weakness.
The fund currently yields 1.57%, or $3.55 per share annually. Short interest is 0.04%, lower than SCHD’s, and institutional buyers have injected $15.66 billion into VIG over the past year versus outflows of $10.5 billion.
3 High-Growth Unknowns in Photonics That Are Vital for AI
Reported by Nathan Reiff. Posted: 2/14/2026.
Key Points
- Three photonics companies have grown by at least 20% year-to-date, highlighting the potential for this technology to continue to play a pivotal role in AI applications.
- Lumentum and Coherent are pure-play photonics names that are on a rapid growth trajectory, though investors may hesitate based on valuation concerns.
- MKS Instruments offers a variety of components, tools, and services including some in the photonics space and could represent a more diversified approach.
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Photonics uses light—photons—to perform tasks traditionally handled by electronic systems, including data transmission, laser manufacturing, and a range of medical and consumer applications. The technology's potential is broad and new use cases keep emerging, but photonics remains relatively unknown to most outside the sector, making it an intriguing area for investors hunting fresh tech opportunities.
An essential question for any tech investor in 2026 is how target companies will interact with and benefit from AI applications. Fortunately, one of photonics' chief advantages—ultrafast data transmission—directly addresses a critical need in the AI ecosystem.
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Although the three companies below are fairly large—together representing about $43 billion in market value—they remain little known outside this niche corner of tech. Each could play a meaningful role in advancing AI infrastructure, making them potentially valuable to informed investors.
Vital AI Partner Thrives on High Demand, But Valuation Is a Concern
Lumentum Holdings Inc. (NASDAQ: LITE) makes lasers, optical modules, and related systems for telecommunications and data center applications. Shares are up about 45% year-to-date (YTD), driven by a strong Q2 fiscal 2026 earnings report for the period ended Dec. 27, 2025.
Revenue rose nearly two-thirds year-over-year (YOY) to more than $665 million, and the company's optical circuit switch business built a backlog of roughly $400 million by quarter's end.
Despite manufacturing and backend bottlenecks that Lumentum still needs to navigate, data center demand suggests the firm can sustain rapid growth. Lumentum has guided to a revenue midpoint of $805 million for the current quarter, which would represent about an 85% increase YOY.
The company's cloud transceiver and ultra-high-power laser businesses are accelerating as it becomes more deeply embedded in AI infrastructure.
Analysts are generally bullish, assigning a Moderate Buy rating overall. The consensus price target, however, is roughly 21% below the current trading price, which raises questions about near-term upside. On the other hand, analysts forecast a dramatic jump in earnings to $2.03 from just $0.03, which could help justify the premium valuation if achieved.
Coherent's Performance Is Impressive, Despite Lagging Some Peers
Laser and photonics equipment maker Coherent Inc. (NYSE: COHR) has gained about 20% YTD, making it an early winner in 2026. The company's Q2 fiscal 2026 results, covering the period ended Dec. 31, 2025, beat analyst expectations for both earnings and revenue, driven by robust transceiver demand. Coherent is scaling production while reducing net leverage, positioning it to meet growing customer needs more sustainably.
Still, Coherent faces intense competition from Lumentum and others and has so far lagged some peers in margin expansion and revenue growth.
Heavy reliance on its transceiver business could be a vulnerability if competitive pressures intensify and other product lines don't mature. Like Lumentum, Coherent's rapid growth raises valuation concerns for some investors. Nevertheless, the company holds a strong position in a high-growth market and benefits from analyst support, with expectations for roughly 34% earnings growth this year.
Diversifying Beyond Pure-Play Photonics May Be A Strong Play
MKS Instruments Inc. (NASDAQ: MKSI) is not a pure-play photonics firm; it also sells pressure and flow instruments, optical metrology tools, and other components used in semiconductor and related manufacturing.
That diversity may be an advantage: MKSI is the best performer of the three so far, returning about 48% YTD. While Q4 2025 results were still pending at the time of the last update, the company raised its guidance for both revenue and gross margin for the period and has been improving its debt profile by refinancing credit facilities.
Its most recent quarter faced headwinds from tariffs and a higher equipment mix, but analysts remain optimistic about MKSI shares. With projected earnings growth of about 24% in 2026, MKS Instruments could continue to extend its rally.
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